04 May 2020
While early in the pandemic, developed countries faced the most significant public health impact, it is now developing countries that face the brunt of structural and systemic risk. The World Bank predicts the first annual rise in global poverty since 1998. Africa will be especially hard hit and that will boomerang to the developed economies.
Global solidarity is crucial to meet global challenges to health and prosperity. For much of this year, at the precise moment that we most needed a Keynesian effort of multilateral coordination, the world instead was retreating to national interests.
Finally, in November, the G20 responded with a groundbreaking unified approach to debt restructuring for the world’s poorest countries, which has received broad support. The US is willing to consider extending the agreement to middle-income nations. Vaccine breakthroughs and a political shift in the US create further impetus to expansion.
Africa’s nations will be set back decades and will have their financial capacity obliterated by COVID-19. The UN’s Sustainable Development Goals, already at risk before the pandemic, could now be put beyond reach.
In April, South Africa dropped decades of resistance to the International Monetary Fund, inviting emergency assistance to address COVID-19. While political debate about it continues to rage, the $4.3 billion loan now appears clearly insufficient. The National Treasury estimates the economy will only recover to 2019 levels in 2024. Most other nations in Africa face far worse outcomes.
Multilateral institutions will have to innovate more deeply and international cooperation must move beyond the Bretton Woods institutions. New infrastructure will be needed, a fact underscored by the logistical challenges of a COVID-19 vaccine rollout.
However, given some of the recent political changes in major economies, it is possible that the changed world we see on the other side of this crisis will be one built more firmly on cooperation.