All things considered, the world’s richest countries have emerged from the global pandemic in better shape than they could have imagined when Covid-19 first appeared just over four years ago.
To be sure, the impact of lockdown and its aftermath has been painful, but the effects on poor countries have been far more severe.
Rich countries were able to rack up budget deficits to pay for furloughs and prevent mass unemployment. Rich countries could print money through quantitative easing schemes without the risk that the financial markets would punish them. Rich-country governments could subsidise energy bills after Russia’s invasion of Ukraine. Poor countries could do none of these things.
In 2015, the international community set itself targets – the sustainable development goals (SDGs) – to be hit by 2030. The first two goals were the elimination of extreme poverty and achieving a world with zero hunger. On current trends, both are going to be spectacularly missed.
About 600 million people will be living under the extreme poverty threshold of $2.15 a day – twice the target level envisaged under the SDGs. Unless progress is accelerated, undernutrition will be around the same in 2030 as it was in 2015. Things were looking grim even before the start of the pandemic. They look a lot bleaker now.
The International Monetary Fund and the World Bank, which hold their spring meetings in Washington this week, are well aware of the problems poor countries face. The Bank warned earlier this year of a wasted decade for low-income nations. Its president, Ajay Banga, said last week: “Many of the world’s poorest countries are facing an intense debt crisis. No one can dispute the seriousness of that.”
Banga, who has been running the Bank for less than a year, wants his organisation to be faster, less bureaucratic, more effective and more efficient – all laudatory aims. More questionable is whether he can use the Bank’s power and financial clout to persuade private capital to provide the trillions of dollars needed to reduce combat and equip poor countries meet the challenge of global heating.
One thing is clear: the private sector will not invest without some pump-priming by the public sector first. Poor-country governments need to spend more on schemes to boost food production, infrastructure, health, education and clean energy programmes, and they will require help from bilateral donors and multilateral organisations in order to do so.
Here there is both bad and good news. The bad news is that we’ve been here before many times, with promises of new money for development made and quickly broken.
When the SDGs were established it was obvious that they would not be met without financial support from bilateral and multilateral donors. The 2015 Addis Ababa action agenda was supposed to provide a blueprint for financing the SDGs, acting as a new global partnership that would be good for people and good for the planet.
Sadly, but all too predictably, the commitments have not been met, and the large funding gaps help explain why targets are set to be missed.
More recently the G20 was supposed to have put in place a comprehensive and speedy mechanism – the Common Framework – to relieve poor countries of their unsustainable debts. The scheme has not delivered on either count: only a handful of countries have participated and progress has been at a glacial pace. Meanwhile, the most heavily indebted countries are spending more on debt payments than they are on poverty and hunger programmes.
Doubtless there will be much talk in Washington this week about the various initiatives western governments are supporting. There will be talk of how not just billions but trillions of dollars of private-sector cash is waiting out there ready to be mobilised and that all that is needed is the catalyst. But it is a time for action not words.
The good news is that Banga has given the Bank a new sense of urgency. He will find a willing partner in Brazil, which holds the presidency of the G20 group of leading developed and developing nations and is pushing for collective action on poverty and hunger.
A forthcoming report* prepared for Brazil by the ODI, a UK-based development thinktank, supports President Luiz Inácio Lula da Silva’s plans for a global alliance to tackle poverty and hunger, and highlights ways that new sources of finance could be found. One idea is to make better use of the multilateral banks, and to cut down on the high transaction costs that accompany small amounts of aid.
A second would link debt relief to anti-poverty programmes. Debt swaps have been used to support marine conservation in several countries, and Brazil wants to extend this approach to hunger and malnutrition. Countries would agree to spend savings granted by creditors for these specific purposes.
A third idea would draw on the experience of the Just Energy Transition Partnerships – intergovernmental partnerships that coordinate financial resources and technical assistance from developed countries to help donor countries phase out fossil fuels – to create similar mechanisms for poverty and hunger.
In 2021 the IMF issued £650bn of special drawing rights – a form of money creation – and divided them up between its member states. The SDRs were not needed by rich nations but would make a real difference to the financial wellbeing of poor countries. The reallocation of SDRs should be accelerated.
All power to Lula. For the first time since Gordon Brown used the 2009 London summit to boost global financial firepower following the near meltdown of the banks, there is the possibility of the G20 actually delivering. He deserves support.
*Financing the fight against poverty and hunger – mobilising resources for a Sustainable Development Goal reset.
