At the beginning of the year, when covid-19 raged in the Chinese city of Wuhan and began to spread throughout the West, I warned that the crisis would most likely affect the majority of developing countries, with long-term consequences for all of us. Unfortunately, that prediction was correct.
As of mid-October, India has almost overtaken the US to become the country with the highest death rate from the disease in the world. The World Bank warns that this year alone, the pandemic could push about 50 million people in Asia and about 30 million in Africa into extreme poverty. If this happens, it will be the first time in more than two decades that the global level of extreme poverty has increased.
The covid-19 crisis has also accelerated other worrying processes that started earlier, including tension between the US and China, increasing protectionism, an economic recovery based on reliance on carbon, which threatens to set the world back in the fight against climate change. All these trends will make it even more difficult to implement the development plan from before the pandemic.
At the global level, the task is to protect vulnerable population groups everywhere. If this is not done, we will end up in a much more dangerous world, and the prospects for a safe recovery of the world economy will be seriously worse.
I know from experience how important the present moment is. Even at the height of the global financial crisis a decade ago, my government remained steadfast in its commitment to increase Australia's foreign aid budget to 0,5% of gross national income (GNI). Unfortunately, that change was delayed and Australia's foreign aid subsequently fell to less than half the target level - the lowest on record.
It should be said that the government of British Prime Minister David Cameron followed the same course in 2013, legally establishing (regardless of the policy of cutting budget expenditures that followed) the target level of foreign aid at 0,7% of GNI. This is exactly the level specified by the "Millennium Development Goals" of the United Nations. And even earlier - at the height of the crisis in April 2009 - my government worked together with the government of British Prime Minister Gordon Brown to try to guarantee that the countries with the largest economies in the world confirm their commitment to achieve the Millennium Goals, regardless of the crisis.
Legislators control the coffers and that's why they have a particularly important role - ensuring that governments don't lose sight of the development agenda as they rush to protect their populations from the dire health and economic implications of this pandemic. The good news is that some governments, especially in Europe, have recognized the importance of increasing foreign aid at this time. The bad news is that the UN Secretary General's call to create a reconstruction fund, in the amount of 2 billion USD, for the world's poorest countries has so far not met with a response, so organizations that fulfill crucially important missions, e.g. The Global Alliance for Vaccines, GAVI (which helps supply vaccines to developing countries), is not getting the support it needs in sufficient quantity. Other development needs that will be critical to dealing with the current crisis, such as water supply and sanitation, are also in desperate need of attention.
Increasing the amount of development aid allocated during a pandemic is not only right. It is a smart strategy to support our own economic recovery. However, the increase in the volume of foreign aid of some countries is apparently compensating for the actions of other countries (primarily the USA) which during this crisis have reduced the aid granted, including to critical institutions such as the World Health Organization.
The problem is that we often see foreign aid as charity, not as a stepping stone on the road to progress. I have been proving this in Australia where the economic recovery will depend on the recovery of Asia as a whole. Australia is highly dependent on regional trade, and international education is Australia's third largest export: one in six students at the country's universities come from countries in the region.
The International Monetary Fund is on the front lines of the fight, softening the impact of the pandemic on the global economy, and especially on the most vulnerable population groups in the world. Relying on the experience of the world financial crisis of a decade ago and more, the IMF has already directed more than 100 billion USD as financial assistance to the most vulnerable countries.
However, there could be more reforms to the international financial system that will put us on the path to a full global recovery. For example, we need to ensure that today's increased support to the IMF is not seen as a one-time injection, but as the start of an effort to provide more resources over the long term. Equally important - the distribution of membership shares at one point in time must be aligned to increase the weight of dynamic developing economies in IMF decision-making.
At the same time, the steps taken by the "Big 40" and the Paris Club are of crucial importance - they enabled more than XNUMX countries of the world to suspend debt payments, which saved them from the difficult choice between paying off debt and saving lives. Now, however, the task of lenders is to provide more systematic debt relief, rather than simply turning on the faucet again as soon as the crisis seems to have passed or when economic recovery or internal interests in their countries demand it.
Whether we emerge from this crisis stronger or weaker will depend on the decisions of governments that affect people in other countries, as well as their decisions that affect people in their own countries. Today more than ever we need governments to act as global citizens.
The author is a member of the External Advisory Group of the IMF; he was the prime minister of Australia
Copyright: Project Syndicate, 2020.
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