‘Unprecedented’ financing needed to halt recession of ‘unparalleled proportions’: Mohammed

2 June 2020

As COVID-19 has halted economic activity and threatens social wellbeing across the globe, the UN Economic and Social Council (ECOSOC) held a wide-ranging policy discussion on Tuesday, exploring financing options to address the pandemic and mobilize the resources needed for a proactive recovery.

“By all measures, we are in a recession of unparalleled proportions”, Deputy Secretary-General Amina J. Mohammed told delegates gathered by webcast for an informal meeting of the Council’s Financing for Development Forum. How to make the financing available to help Governments close the fiscal gaps is “a tough question that demands tailored responses.”

A screeching halt

In developing countries, entire sectors are coming to a sudden stop and supply chains collapsing, she said. Budgets are under strain as Governments struggle to meet the needs of their populations and address growing unemployment.

“Financing on an unprecedented scale is essential to an effective response”, Ms. Mohammed said.

Countries must have the financial means to fight the pandemic, and to invest in recovery. This will require mobilizing domestic and external resources - and in many cases sizable debt relief, based on level of vulnerability, rather than income and accounting for heterogeneous debt situations across countries.

‘Emergency mode’

Ms. Mohammed said the UN was now in “emergency mode”, adjusting its $17.8 billion portfolio to support the COVID-19 response, tailored to each country context.

From the start, the 131 UN country teams have fully mobilized to provide policy and operational support at the national level, she said. Regional economic commissions meanwhile continue to offer analysis to guide policy advice and advocacy on debt and financing issues at the national, subregional and regional levels.

She said the United Nations is also offering targeted funding to help countries analyze all available financing sources, and non-financial means of implementation. There is a particular focus on: global liquidity and financial stability; debt vulnerability and engaging private sector creditors in solutions; the drop in external finance flows for inclusive growth; and stemming illicit financial flows. She recalled last week’s High-level Event on Financing For Development in the Era of COVID-19 and Beyond, where Governments and international organizations had agreed to those priorities. “Our shared challenge is to make progress in these areas by sustaining a collaboration process throughout the year”, she assured.

A true test: Juul

Along similar lines, Council President Mona Juul (Norway) said COVID-19 offers a true test of global solidarity. Countries were already behind on achieving the Sustainable Development Goals (SDGs) prior to the pandemic. “We cannot let those that are less able to deal with this crisis fall further behind.”

She said there are a number of priority areas where progress is urgently needed, most notably on ensuring debt sustainability. A growing number of countries are facing debt distress due to the pandemic’s economic effects. While the G20 decision to freeze debt service payments for the world’s poorest countries will free an estimated $11 billion until the end of 2020, she said eligible countries could have an additional $20 billion in multilateral and commercial debt combined coming due this year.

Tough choices

Even if the standstill is extended to 2021, many countries will have to make difficult choices between servicing their debt, fighting the pandemic and investing in recovery.

More broadly, Ms. Juul said progress must be made on tackling corruption to prevent the diversion of hundreds of billions of dollars. The newly established High-Level Panel on International Financial Accountability, Transparency and Integrity, is now at work on tax issues, corruption and illicit financial flows

Throughout, the Council has provided a platform for actions and policy guidance to tackle the pandemic. “Financing issues are on everybody’s mind,” she said. “We must direct our attention to those whose economies are devastated, and those who do not have the capacity to fight the disease.”

 

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