If government and other authorities do not take immediate steps to prevent the novel coronavirus pandemic from widening the gap between rich and poor countries, there will be a lost generation, said the head of the International Monetary Fund in what was a stark warning about the larger economic fall outs of the pandemic.
In order to prevent long-time scarring that would roll back anti-poverty efforts of recent decades, it was necessary to give financial support for the most vulnerable countries with immediate effect, said Kristalina Georgieva, the IMF’s managing director.
There could be social and economic upheaval because of greater inequality and the failure to act now will “reverberate around the world”, Georgieva said while writing for the Guardian newspaper.
A “poisonous cocktail” for the 70 countries which are most at risk due to the economic impact of the pandemic is being caused because of a reduction in exports, reduced capital inflows, less tourists and reduced remittances.
“Just as people with weak immune systems are more vulnerable to the virus, so low-income countries with weak fundamentals are more prone to its economic effects. More than half of these countries were already at high risk of – or actually in – debt distress before the crisis began,” Georgieva said.
A call for a four-pronged approach was given by the IMF managing director in her article in gthe newspaper.
These included health being made the priority for governments in order for countries to chalk out a durable exit from the pandemic in which special focus should be given to the elderly and vulnerable. The IMF managing director also suggested that governments also need to ensure ell spending of budgets by focusing on key areas of spending – such as education, and preventing corruption. Speeding up the transition to climate-resilient, low-carbon, digital economies would also ensure laying solid foundations for the future, she opine. And lastly, Georgieva suggested that rich countries should step up support for the poorer ones through measures such as making an increase and not a cut in aid resources in the form of grants, concessional loans and debt relief.
“Make no mistake: without urgent action, we risk deepening the divide – globally – between the rich and poor,” Georgieva said. “The impact will be profound – and not only in low-income countries. It risks reverberating throughout the world with increased inequality leading to economic and social upheaval: a lost generation in the 2020s whose after-effects will be felt for decades to come.”
Since the Covid-19 crisis began earlier this year, help from the IMF has been sought by more than 100 countries. A dorp of nearly 5 per cent in global output in 2020 has been predicted by the Washington-based organization which will be the steepest drop since the Great Depression of the 1930s.
“The IMF estimates the pandemic’s loss to the global economy at around $12 trillion over 2020-21. The poorest countries – with limited resources and constrained capacity – are hit hardest: growth in low-income nations will be at a standstill this year, compared to 5% last year”, Georgieva said.
“The initiative could be extended along with increased participation by commercial creditors,” she said.
(Adapted from TheGuardian.com)