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Recovery needs development aid

/ 06:49 AM November 02, 2020

SUNSHINE COAST — The World Bank warns that the COVID-19 pandemic could push around 50 million people in Asia and around 30 million in Africa into extreme poverty this year alone. If so, it will be the first time in more than two decades that the global rate of extreme poverty has increased.

The COVID-19 crisis has also accelerated other concerning shifts that were already underway, including the escalation of tensions between the United States and China, rising protectionism, and a carbon-intensive recovery that threatens to set the world back in the fight against climate change. All of these trends will make the pre-pandemic development agenda even more difficult to achieve.

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At the global level, the challenge is to ensure that vulnerable people everywhere are protected. Failing that, we will be entering a much more dangerous world, and the prospects for a robust global economic recovery will be severely diminished.

As the ones holding the purse strings, legislators have a particularly important role to play in ensuring that governments don’t lose sight of the development agenda as they rush to protect their own populations from the devastating health and economic fallout of this pandemic.

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The good news is that some governments, especially in Europe, have already recognized the importance of increasing their foreign aid at this time. The bad news is that the UN secretary-general’s call for a $2-billion recovery fund for the world’s poorest countries has not yet been met, nor have mission-critical organizations like Gavi, the Vaccine Alliance (which helps to deploy vaccines in developing countries) received anywhere near as much support as they need. And other development needs that will be crucial for resolving the crisis — not least water and sanitation — are crying out for attention.

Increasing development aid during the pandemic is not only the right thing to do. It is also a smart strategy for buttressing our own economic recovery. But foreign-aid increases by some countries obviously have been offset by the actions of others, notably the United States, which has cut its assistance during this crisis, including to critical institutions like the World Health Organization.

The problem is that too often, we see foreign aid as a handout rather than as a stepping-stone to prosperity. I have made this point in Australia, where economic recovery will depend on the broader recovery across Asia. Australia relies heavily on regional trade, and international education has become Australia’s third-largest export: one-sixth of all university students in the country hail from somewhere else in the region.

Under managing director Kristalina Georgieva’s leadership, the International Monetary Fund has been at the forefront of cushioning the pandemic’s blow to the global economy, and especially to the world’s most vulnerable populations. Having learned from the experience of the global financial crisis a decade ago, the IMF has already funneled more than $100 billion in financial assistance to countries in need.

Still, more reforms to the international financial system could be made to put us on the road to a full global recovery. For example, we need to ensure that today’s increased support for the IMF is seen not as a one-off injection, but rather as the start of an effort to provide more resources over the long term. Equally important, at some point the distribution of membership shares must be realigned to increase the weight of dynamic emerging-market economies in the IMF’s decision-making.

At the same time, actions taken by the G20 and groups like the Paris Club are critical, and have already allowed more than 40 countries to suspend debt repayments, sparing them the hard choices between servicing debts and saving lives. But the challenge for lenders now is to figure out how to provide more systemic relief, rather than simply turning the tap back on once the crisis seems to have passed, or once their own economic recovery or domestic interests demand it.

Now more than ever, we need governments to act as global citizens.

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— Project Syndicate

(A longer version of this text was recently published by the Parliamentary Network of the World Bank and International Monetary Fund.)

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Kevin Rudd, a former prime minister of Australia (2007-10, and 2013), is a member of the International Monetary Fund’s External Advisory Group, chair of the United Nation’s Global Partnership on Sanitation and Water for All, and president of the Asia Society Policy Institute.

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TAGS: coronavirus pandemic, COVID-19 pandemic recovery, Kevin Rudd, post pandemic economy, Project Syndicate, World View
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