Shortly before the Spring Meetings of the World Bank and the International Monetary Fund, we set out how they could be a turning point in addressing the consequences of the pandemic.
Taking stock, the report card is mixed. The meetings exceeded expectations on climate change and delivered as expected on providing near-term liquidity for developing countries. But they fell well short of what is needed to exit from this pandemic and avoid a dangerous divergence in global economic fortunes.
It is scandalous that one year into the worst pandemic in 60 years we still have no credible plan to get everyone out of it. Statements to the effect that ‘no one is safe until everyone is safe’ are painfully true. Yet today they remain just that. The words must become actions.
The World Bank put forward an ambitious plan to incorporate climate change into its work and the IMF committed to step up the focus on climate change into its surveillance, research and operational work.
For near-term financing, the headline was yet another endorsement for the $650 billion allocation of SDRs which should be finalized over the summer. Ideas continued to circulate on how developing countries might benefit from these SDRs, beyond the almost $21 billion that will be allocated directly to low-income countries or the over $230 billion that would go to developing countries as a whole, excluding China.
In terms of their regular financing, the IMF and World Bank remained consistent with messaging on level of commitments and disbursements. The World Bank, which committed $104 billion to developing countries governments by June 2021, is on track to meet this commitment and has disbursed 60 percent of commitments so far. The IMF, which freed up its trillion-dollar lending capacity for the COVID-19 response, has committed $110 billion since March 2020 and disbursed about half of this amount.
As expected, the DSSI – which has deferred $12.5 billion in debt service payments for 46 countries since May 2020 – was extended until the end of 2021
But there was no progress on how to finance the rollout of vaccines to countries in Africa, Asia or Latin America that are now struggling with COVID-19.
Over the past two months, the world has experienced an exponential rise in COVID-19 cases and deaths. The situation in India is horrific. It is not the only country suffering.
This spike can be attributed to a combination of more transmissible variants, ‘lockdown fatigue’, and the lack of access to vaccines and other essential medical supplies.
Vaccines started arriving in more vulnerable countries in February. But the quantities delivered remain extremely low, and only a third of them have been administered.
Put simply, vaccines are useless without effective delivery systems. The COVAX Facility only covers the cost of the purchase of doses and the cost of transportation to a designated port of entry. Donors will not see a return on their financial investment in COVAX if there is no funding available for delivery costs.
And vaccination has to be part of a larger package of measures to contain the spread of the pandemic and preserve functioning health systems. We must mobilize funds to support everything from complex logistics, to security, to building trust with communities – with growing numbers of people hesitant about being vaccinated.
At the same time, we must sustain financing to core humanitarian activities. This cannot be done at the expense of other critical humanitarian needs, particularly routine immunization campaigns.
In terms of setting the stage for a longer-term recovery, there was much greater recognition of the need for sustained higher levels of financing but little in the way of concrete proposals. At a time when financing needs for developing countries are in the order of $2.5 trillion, little discussion occurred on how the international financing system and multilateral development bank (MDB) systems should be scaled up.
The IMF and MDBs will need to step up their own financing and be more effective in mobilizing finance from the private sector. This will entail difficult decisions on their financing model and risk appetite – decisions that can only be taken with active engagement and guidance of their key shareholders. That work still lies ahead.
The latest economic outlook from the IMF shows a dangerous divergence in the recovery paths of low-, middle-, and high-income countries. Coming out of the Spring Meetings, that risk should remain front and center in the minds of global policy makers.