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The COVID-19 pandemic will exacerbate ongoing global crises well beyond its devasting impact on health and human life. COVID-19 has shut down economies, crippled global trade, eroded financial stability, and undermined essential revenue streams for countries. These additional crises will impact the ability of governments to provide healthcare, education, ensure adequate food supplies and address issues like climate change and employment far beyond the hoped-for end of the immediate pandemic, and will impact the global economy for years.
Helping countries, especially lower income countries, have the financial resources to survive the pandemic and build back better is not only the right thing to do morally, it is the smart thing to do, as the pandemic has shown us how intertwined we all are when it comes to global threats. Donor countries and international financial institutions must implement bilateral and multilateral debt forgiveness to prevent the rest of the global economy from collapsing – with devastating impact for millions who are already struggling — and build back a more just global economy for everyone.
While the financial impact of the COVID19 pandemic has been global, the impact has been hardest in lower income countries, where existing inequities and poverty undermine the ability of countries to handle and respond to the shock of the pandemic. Some studies have indicated the pandemic’s impact will erase 30 years of progress in eradicating poverty. The number of people living in poverty globally could increase from 2018, by between 85–580 million people, depending on the severity of the economic contraction. Regions at risk of the greatest increase in poverty are the Middle East and North Africa, South Asia and Sub-Saharan Africa. Increased poverty will mean increased rates of mortality, undernutrition and malnourishment. This could trigger larger surges of migration as people seek to escape increased food insecurity and conflicts over scarce resources. Needs will outstrip the capacity of most governments to respond as economies struggle. GDP will be slashed, revenue from taxes will fall and remittances from abroad will dry up.
As donor countries struggle with their own recoveries, a study already confirms that international aid flows have already slowed significantly, and whether they can return to pre COVID-19 days is doubtful.
The global community and the United States will need to leverage every tool at their disposal to prevent further global economic collapse, including by implementing robust debt forgiveness. Prior to the COVID-19 pandemic, poor countries were already sinking under billions of dollars of debt, spending a large part of their GDP on servicing that debt. The pandemic has deepened the crisis. Creditor countries can and must commit to cancelling the debt of the world’s poorest countries, scaling up investments in health and social protections, and phasing out fossil fuels, to ensure a just and sustainable recovery from the pandemic.
- The COVID-19 crisis has taught us the lesson that we are only as secure as the most vulnerable of us is. The United States will work to get the global community to cancel multilateral and bilateral debt, so that countries can invest in rebuilding their healthcare systems and their economies, in order to provide social services and ensure the rights and dignity of their people.
- The President and Secretary of State should personally lead the U.S. effort to secure debt cancellation by the G7 and G20 and by the World Bank and IMF of debt owed by the world’s poorest countries for at least the next two years, freeing up resources for countries to respond to the COVID-19 pandemic and facilitate the recovery that will be needed post pandemic.
- The President should work with Congress to robustly support legislation ensuring U.S. support for the Bank and IMF includes strong stipulations for those institutions to enact debt cancellation.
- G20: Rich, powerful states must ensure COVID-19 recovery measures tackle global poverty, inequality, and the climate crisis (available here)
- World Bank: Covid-19 pushes poorer nations ‘from recession to depression’ (available here)
- G7 Calls for More Debt Relief to Confront COVID-19 Crisis (available here)
- Hundreds of World Leaders and Development Groups Call for Debt Cancellation (available here)
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