Saturday, August 13, 2022

This is a plan to save poor countries from epidemics

In a global economy defined by extreme forms of inequality, the pandemic has widened the divide. The richest countries in North America and Europe are set for a strong recovery to use their money to save their economies and secure huge stocks of COVID vaccines. Poor countries are largely vulnerable to the continuing ravages of the coronavirus, and are burdened with mounting debt with their resources.

Now, fears that the world could emerge from the pandemic more unequal than ever have prompted substantial efforts to close the gap: nearing completion of a proposal, the International Monetary Fund reserves $650 billion worth of reserves. Funds, essentially creating money that troubled countries can use to buy vaccines, finance health care and pay off debt.

Such a move would provide “potentially the largest capital allocation since the end of World War II”, the UN Development Program administrator, Achim Steiner, announced during a press briefing this week.

But international development experts say only creating new reserves will bring limited benefits to poor countries unless rich nations voluntarily transfer some of their stake to them – a course IMF officials are trying to bring.

The IMF’s executive board is expected to take the proposal forward during a meeting on Friday, before forwarding it for final approval to its board of governors, which includes representatives from the fund’s 190 member states. Officials expect it to be finalized by August.

A renowned infallible institution governed by unique conventions and an unwavering reverence for technical jargon, the International Monetary Fund’s approach involves not money but so-called special drawing rights – reserves that the institution deposits in the accounts of its member countries. Governments can convert these SDRs into regular currency for spending as needed.

Under the rules governing the IMF, member states contribute to the institution’s coffers, their obligations are determined by the size of their economies, and their voting power is commensurate with their payments. The new reserves will be distributed according to this ranking, meaning that the largest economic powers such as the United States will receive the largest tranches.

In the absence of a mechanism for wealthy countries to redirect some of their holdings, 58 high-income countries would hog new reserves worth $438 billion, according to an analysis released Thursday by the United Nations Development Program — two of the total. – More than a third.

In contrast, a group of 82 countries rated as “highly debt-vulnerable” — among them, the two dozen poorest countries on Earth — would receive only $54.5 billion, or about 8 percent of the total. This is only 5 per cent of their total external debt.

Fund officials are working out a plan under which wealthy member countries will transfer some of their reserves to poorer countries to allow for debt reduction and the expansion of poverty-fighting programs.

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IMF Managing Director Kristalina Georgieva said: “We are working to increase the impact of the new allocation.” Speech to the African Development Bank on Wednesday.

She said the fund’s plan would depend on “encouraging the voluntary channeling of certain SDRs” with a target of yielding $100 billion for the “poorest and most vulnerable countries”.

A Treasury official on condition of anonymity said the United States is prepared to provide about a fifth of its allocation, which is worth about $20 billion. The Biden administration is trying to persuade other members of the Group of 7 to contribute equal shares.

Poor countries that take loans from the fund can use the money to expand health care systems or to address climate change in conjunction with existing IMF programs. Trust funds are expected to be a topic of discussion at the Group of 20 finance ministers meeting in Italy next month.

In Washington, the universal nature of the proposed allocation has sparked opposition from Republicans, who argue it will burn the finances of US adversaries such as China, Russia and Iran while doing little to help poor countries.

Republican Senator John Kennedy of Louisiana introduced a bill this month that would block special drawing rights allocations to “perpetrators of genocide and state sponsors of terrorism” without Congressional approval.

The Trump administration opposed the proposal on similar grounds, while the Biden administration has adopted developing countries as a means of aiding them at no cost to taxpayers.

Debt is at the center of concerns about low-income countries, given that many have already entered the pandemic due to severe burdens.

According to UNICEF, in 2019, 25 countries – most of them in Africa and South Asia – were spending more on loan payments to major financial institutions in wealthier countries than on education, health care and aid programs for poor communities. Study.

Zambia has seen its foreign debt payments rise from less than 2 percent of its total government revenue in 2011 to about 34 percent this year. data Tabulated by the Jubilee Loans Campaign, an international advocacy group that argues for loan forgiveness. Over the same period, Pakistan’s foreign debt payments increased from less than 10 percent of government revenue to 35 percent.

The pandemic has dramatically worsened the situation, while at the same time eroding revenue, increasing demand for government services.

As the spread of Covid halted construction in the Persian Gulf and halted cruise ships around the world, migrant workers from Bangladesh to the Philippines sent their communities low wages, depriving them of a vital artery of finance. Malnutrition worsened as workers traveling from India to Kenya lost income due to closed markets and deserted roads.

In short, just as millions of people have become ill with COVID, need extended medical care, and as livelihoods are damaged, governments around the developing world are paying increasing amounts to creditors in financial centers such as New York, London, Frankfurt and are sending. Shanghai.

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Members of the Group of 20 announced a debt relief initiative last year that encouraged creditors to allow borrowing countries to skip some payments. But that plan was only a short-term relief. And private creditors have refused to participate.

Overall, the initiative has provided total debt relief of about $5 billion, according to the world Bank. In contrast, developing countries collectively face $330 billion in debt payments over the next five years alone, according to a recent report. Study by the European Network on Credit and Development.

The most urgent need for poor countries is for Kovid vaccines. Although globally about one in four people have received at least one dose of the COVID-19 vaccine, the figure is less than 1 percent in low-income countries. our world in data Project at Oxford University.

Many vaccines arriving in developing countries have been produced by Chinese manufacturers whose products have yielded disappointing results.

As governments of wealthy countries eroded their finances and manufacturing capacity to capture the vast majority of COVID vaccine stocks, they have also pledged to support COVAX, a multilateral partnership chaired by the World Health Organization which is designed to distribute the dose evenly.

But Kovax has struggled to secure supply in a market dominated by the profit-maximizing pharmaceutical giant. According to, the body has only shipped 88 million doses. Data compiled by UNICEF.

Pfizer has promised 40 million doses to Kovax, less than 2 percent of its global production target. The company has said that it expects sales of its Kovid vaccines to reach $26 billion this year.

Earlier this month, at a summit in England, the leaders of the Group of 7 countries Pledged to donate 870 million doses Vaccines to developing countries mainly through Kovax. But only half of those doses were expected to arrive by the end of the year.

It perpetuated a jarring divide – children under 12 are receiving vaccines in the world’s richest country, the United States, while much of humanity goes without, even some in poorer countries. Frontline medical workers are also included.

The infusion of reserves from the IMF won’t change market stimulus, which has tilted vaccines toward the world’s wealthiest, but it could increase the purchasing power of governments that are now forced to prioritize debt payments.

“How many more waves do we need before the world gets to vaccinate itself before we realize that there is no end to this pandemic?” said Mr. Steiner, United Nations Development Program Administrator. “We’re in the middle of this nightmare right now, and we can act really fast.”

Nation World News Desk
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