The COVID-19 pandemic may trigger a global recession in 2020, according to the International Monetary Fund. (Photo: Reuters)
Accordingly, programmes to postpone debt repayment for poor and developing countries are being facilitated, together with the acceleration of support measures.
Poor and developing countries, including the poorest ones in Africa, have been heavily hurt amid the widespread outbreak of the novel coronavirus disease. A grand global economic downturn is shaping, threatening to "engulf” poor nations. The most vulnerable economies do not have enough resources to cope with the pandemic as they lack adequate health infrastructure. For example, in Africa, a continent which has witnessed many conflicts, violence, poverty, diseases and low educational standards, the risk of failing to control COVID-19 outbreaks could possibly cause many countries to fall into tragedy. Many warnings have been issued about the serious consequences if poor countries are left behind in the current anti-pandemic battle.
The strengthening of debt rescheduling and the provision of credit to support poor and developing countries are being considered as temporary "pain relief therapy”. The International Monetary Fund (IMF) and the World Bank (WB) have called on member countries to offer additional funding to help the poor and the most vulnerable nations. The United Nations (UN) has proposed a global debt agreement, including the establishment of an international agency to monitor "substantial debt relief” to prevent economic disasters in poor countries that are heavily affected by COVID-19. The UN Conference on Trade and Development (UNCTAD) recently appealed to the international community to reduce financial pressure on developing countries. The agency reiterated a US$1 trillion grant to reduce debt for the most vulnerable countries, while setting up an international agency to oversee the programme. UNCTAD also called for a US$2.5 trillion bailout package to promote economic recovery in developing countries.
The IMF, meanwhile, is handling urgent loan applications from nearly half of the 189 member countries, as its emergency assistance capacity has doubled to US$100 billion. The WB has also offered to provide a support package of US$160 billion within the next 15 months to help poor countries in some regions to increase their health resources and revive the economy.
UN Secretary-General Antonio Guterres stressed that the severity of the pandemic requires greater action from countries, especially in the context that many developing countries have been immersed in debt or would soon fall into debt if a global recession occurs. The average debt-to-GDP ratio in Africa increased from 39.5% in 2011 to 61.3% in 2019. Programmes to postpone repayment for the poorest countries are only part of efforts to support the economies, while more drastic measures are still required.
While waiting for the financial package mobilised from rich countries, which are also struggling with the epidemic, poor countries need to quickly improve their health infrastructure and human resources. Instead of "locking the stable when the horse is stolen”, it is recommended that poor countries strengthen their preventive capabilities.
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