Meetings of International
Financial Institutions and G20
Consequences of Unjust World Economic Order on Developing Countries
New hospital set up to deal with COVID-19 in Port-au-Prince, Haiti, with the help of
Cuban
medical brigade.
Sir Ronald Sanders, Ambassador Extraordinary and
Plenipotentiary of Antigua and Barbuda to the United States and
to the Organization of American States as well as non-resident
High Commissioner to Canada, in an article published April 19,
wrote about the plight of the Caribbean countries as a result of
the coronavirus pandemic. All the countries had forecast good
growth rates for 2020 but that has all gone up in smoke. Sanders
explains the situation facing the Caribbean nations and, more
generally, all the countries in the clutches of the
international financial institutions. His article reports on
current meetings of these institutions and the decisions they are
taking which do not favour developing countries.
With significantly reduced revenues and increased
emergency
costs to prevent and contain the coronavirus, many of the
Caribbean countries will find it extremely difficult to pay the
pensions and wages of their public service establishments,
Sanders writes. On April 16, heads of government of the Caribbean
Community (CARICOM) asked the International Financial
Institutions (IFIs), particularly the International Monetary Fund
(IMF) and the World Bank Group (WBG) to access "assistance to
meet the financial challenges arising from the crisis." They all
need both an injection of money to help them meet budgetary costs
over the next nine months at least, and a suspension of debt
service payments to other governments and private lenders from
whom they have borrowed, Sanders explains. He writes:
"But it is clear that the countries that control
the levers of
the global economy, including the decision-making bodies of the
IMF, the WBG, and the Paris Club, have no intention of allowing
suspension of debt owed by middle-income and high-income
Caribbean countries, even though, the criteria is a false
measurement of development and financial capability.
"G20 Finance Ministers -- the representatives of
the world's
richest nations -- meeting on April 15, issued a communiqué
that
was long on words, but short on commitment to deliver on the
needs of any but low-income countries. It is almost as if
countries are being punished for better policies and economic
performance.
"The COVID-19 pandemic has once again highlighted
not only
inequality between nations but, more importantly, the damaging
consequences of an unjust economic order. While rich nations will
suffer unemployment and economic decline, they have all the
resources to recover from these circumstances. Developing
countries -- particularly small developing states -- don't.
"Globally, there is now the prospect of a serious
debt crisis,
and the Caribbean is engulfed in it. If the problem is not
addressed, there will be more than $100 billion in capital
outflows from developing economies. That figure, calculated by
reputable organizations, is nearly five times the level from 2008
when a global recession was started by the failures of major U.S.
banks.
"At the end of the disastrous effects of the
pandemic --
whatever unpredictable shape that takes -- small developing
countries, for the most part, will be left poorer,
highly-indebted and with little fiscal space, after debt
servicing, to return to their growth projections in January 2020.
COVID-19 has created a storm much worse than any brutal hurricane
that the Caribbean has ever suffered.
"The G20 leaders said that they will do 'whatever
it takes' to
stop companies and households in their countries from taking a
heavy loss of income. But despite declaring that 'global action,
solidarity and international cooperation are more than ever
necessary,' they have given no such undertaking to the countries
outside their own nations, except to low-income countries, which,
in the Caribbean is Haiti.
"The United Nations Conference on Trade and
Development
(UNCTAD), on March 30, called for a $2.5 trillion coronavirus
package for developing countries. UNCTAD argued that this figure
matches the sum of 0.7 per cent of their Gross Domestic Product
that developed countries had pledged to deliver over the last ten
years but didn't. Only five of them -- all in Europe -- fulfilled
their undertaking.
"UNCTAD detailed the use of the funds in three
ways: a $1
trillion liquidity injection -- a kind of helicopter money drop
for those being left behind; a debt jubilee for distressed
economies, including an immediate debt standstill on sovereign
debt payments; and a Marshall Plan for health recovery, largely
in the form of grants.
"While every developing country should agitate for
acceptance
of the UNCTAD proposal, it would meet strong resistance from the
most powerful nations. Already, the IMF's board of directors was
restrained by the countries with largest voting rights from
lending to Venezuela and Iran. Further, the defunding of the
World Health Organization (WHO) by the United States because of
its perception that China influenced the organization over the
pandemic, indicate political considerations and not humanitarian
or even financial ones.
"What the response to the COVID-19 pandemic has
demonstrated
again is that the prevailing policies of the IMF and WBG are
unhelpful to the majority of nations of the world, including the
Caribbean, that are classified as middle or high income,
disregarding the many other factors of their underdevelopment and
vulnerabilities. For instance, the IMF/Bank proposals did not
address rescheduling or forgiveness of multilateral debt or debt
owed to private banks.
"Caribbean countries will get loans from the IMF
and WBG after
going through many hoops, but the process will not be swift, and
the conditions will be rough. In these circumstances, Caribbean
governments, the private sector, political parties, and trade
unions need to collaborate on the actions they can jointly take
to weather the gathering storm that has not yet fully formed.
They also must prepare for a long haul."
This article was published in
Volume 50 Number 16 - May 9, 2020
Article Link:
Meetings of International
Financial Institutions and G20: Consequences of Unjust World Economic Order on Developing Countries
Website: www.cpcml.ca
Email: editor@cpcml.ca
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