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PM seeks fiscal space for developing nations

PM seeks fiscal space for developing nations

WASHINGTON: Prime Minister Imran Khan urged the international community on Tuesday to create fiscal space for developing nations to help them cope with the adverse effects of the Covid-19 pandemic.

Addressing a meeting of world leaders on the pandemic’s economic impact via video link, the prime minister also emphasised the need to ensure an equitable and affordable distribution of a Covid-19 vaccine once it’s ready.

“Debt relief is one of the quickest ways to create fiscal space for developing countries,” said Mr Khan while recalling that he called for a “global initiative on debt relief” in April this year.

The meeting on “Financing the 2030 Agenda for Sustainable Development in the Era of Covid-19 and Beyond” was jointly convened by UN Secretary-General António Guterres, Prime Minister Justin Trudeau of Canada and Prime Minister Andrew Holness of Jamaica.

The leaders discussed the menu of options resulting from the deliberations of the six discussion groups established following another high-level event on financing for development in the era of Covid-19.

Calls for extension of a debt service suspension initiative by G20 countries for at least another year

The participants agreed that the pandemic was inflicting unparalleled human suffering and controlling the virus was critical to addressing both the health and the economic emergency.

The prime minister informed the meeting that Pakistan’s strategy of “smart lockdowns” had controlled the spread of the virus, but “we are not complacent. No one is safe until everyone is safe”.

Hoping that a vaccine would be available soon, he underlined the need to make it available to all. “Everyone, everywhere, must have equitable and affordable access to the vaccine, as a global public good,” he said.

The meeting acknowledged that the Covid crisis had triggered the worst recession since the 1930s Great Depression and the poorest countries and the poorest people had been hit the hardest.

Pakistan too has injected over $8 billion — 3 per cent of its GDP — to protect the poor and keep the economy running.

Pakistan also initiated discussions on this matter at the UN, and co-led the discussion group on debt vulnerability under the UN initiative.

Welcoming the extensive “Menu of Options” identified by each of the six discussion groups, the prime minister said now was the time to prioritise those actions that could have a significant impact and could be quickly implemented.

He suggested the extension of a debt service suspension initiative by the G20 countries for at least another year. “The request for forbearance under this initiative should not affect the country’s credit rating, since this is due to force majeure, not mismanagement,” he said.

Mr Khan also urged multilateral development banks to participate in the debt suspension initiative.

He proposed several near-term measures that could cover both official and private creditors, including: debt swaps for health, climate and SDGs; debt buy-backs; re-profiling debt; and regional resilience funds.

“Investment in sustainable infrastructure will be key to a resilient economic recovery and realisation of SDGs,” he said. “We should create a UN infrastructure investment facility to mobilise an additional $1.5 trillion annually in the developing countries.”

The International Monetary Fund estimates that developing countries would require an additional $2.5 trillion to recover from Covid-induced contraction.

“Rich countries should support the creation of at least $500 billion in new Special Drawing Rights and reallocation of unutilised SDRs to developing countries,” Mr Khan said.

SDRs or special drawing rights represent a country’s quota in an international financial institution like the IMF.

The prime minister told world leaders that “recovery from the recession, as from the pandemic, must be inclusive and equitable. We must break the shackles of poverty and inequality — within and among nations.”

Published in Dawn, September 30th, 2020

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