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Ahead of UN General Assembly, no help in sight for developing countries fighting Covid-19 crisis

September 21st, 2021

As the UN General Assembly officially opens on Tuesday, the words from Secretary-General António Guterres last year come to mind, calling on countries to spend 10 percent of their GDP in Covid-19 recovery spending.

Rhetoric apart, the reality is stark. global South countries have only managed to provide stimulus measures equivalent to 3.9 percent of their GDPs, with only 1 percent of GDP going towards helping people impacted by the crisis in terms of increased social protection spending. In contrast, according to the International Monetary Fund (IMF), global North countries spent as much as 27 percent of GDP in terms of stimulus.

And while during the pandemic debt servicing costs in global North countries have actually been reduced, those in the global South rose. To access low-interest loans from the World Bank and the IMF, developing countries are asked to sign on a dotted line promising to cut public expenditure, while loans have mainly gone to the private sector, with little care given to alleviate poverty and growing inequality.

A few months ago, we revealed that a staggering 63 percent of Covid-19 relief funding in seven of eight developing countries analysed had gone to large corporates, while only 22 percent on average went to social protection. But this is not just a problem in developing countries. The IMF also estimates that large firms benefited from over 40 percent of recovery spending measures in all G20 countries, if we add up employment creation, public works and direct support to large companies together.

The Spotlight on Sustainable Development Report 2021 launched last week reveals that the disparity between the global South and North also extends to Covid-19 vaccine access, which in turn has a direct impact on the economy, It highlights that so far 60 percent of people in high-income countries have received at least one dose of the Covid-19 vaccine, but less than 2 percent have done so in low-income countries.  According to UNCTAD, the cumulative of delaying vaccination will, by 2025, amount to $2.3 trillion with the developing world shouldering the bulk of that cost.

Despite the constraints, some countries in the global South are fighting back the looming austerity policies. In South Africa, for instance, a monthly $24 Covid-19 Social Relief of Distress (SRD) Grant was created in May 2020 and reached 5 million eligible recipients by September 2020. The scheme was terminated in April 2021 but due to a public outcry it was reinstated in July 2021 until March 2022.  New debt will be needed to finance this programme, but the IMF issued Special Drawing Rights (SDRs) to increase reserves worth $4.1 billion for South Africa, allowing it to keep funding this indirectly.  Activists hope that the SRD grant will also pave the way towards a Universal Basic Income (UBI) grant for all South Africans facing poverty over time.

Similarly in Colombia, in the SDP Spotlight Report launched last week, a chapter by Sergio Chaparro outlines how measures such as VAT increases on basic goods, or greater taxes on the middle class, without explaining how the wealthier were going to contribute more, unleashed citizen outrage.[1]  The protests reversed the most regressive reforms, and the country went ahead and created a wealth tax, similarly to what was done in Argentina.

But examples such as South Africa and Colombia are exceptions. The reality is that most global South countries find themselves alone fighting the consequences of the crisis brought about the pandemic, which has led to greater inequality and pushing millions into extreme poverty. The UN General Assembly needs to build pressure on G20 and G7 leaders and the IMF, who still hold most power in global economic governance, to ensure that global South countries have enough funds to protect their most vulnerable citizens whilst ensuring that a fair global minimum tax is agreed.  Time is running out, and people in countries across the global South need help before it is too late.

 

[1] Initiative for Human Rights Principles in Fiscal Policy, Organizations in Latin America Call on the Colombian Government to Put an End to Violence Against Protestors

 

Photo by Tomas Eidsvold on Unsplash

 

Written by Matti Kohonen

Director

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