“It’s the global economy, stupid!” G7 Finance Ministers risk derailing world recovery if they forget developing countries
Ahead of the G7 Finance Ministers Meeting this Friday, the ONE Campaign warns that insufficient economic support to developing countries could derail a global recovery.
Against the backdrop of growing economic recession, spiralling debts and a liquidity crisis that threatens to undermine many nations’ ability to respond to the pandemic, the anti-poverty organisation urges G7 finance chiefs not to solely focus on their own pandemic response plan, as an uneven recovery will hurt everyone, even the world’s wealthiest countries.
Romilly Greenhill, ONE’s UK Director, said:
“As G7 Finance MInisters look for the best starting point to begin to build back better, they could do well to adopt a modern take on an old adage – it’s the global economy, stupid! They have a choice: either seize this moment and lead the world’s recovery from the pandemic, or let it slip through their fingers and risk lasting economic scars across all economies, rich and poor alike.
“In practice, that means backing an economic lifeline and survival fund in the form of $650 billion in Special Drawing Rights (SDRs*), combined with suspending or restructuring debt repayments that are still denying the world’s most vulnerable countries billions of dollars and undermining their ability to contain the pandemic and its aftershocks. Without these steps, there is a real risk that the global recovery from COVID will be derailed before it has even begun.”
Notes to editors:
- * Special Drawing Rights are a type of international reserve issued by the IMF that can be converted to hard currency. Allocated based on the size of a country’s economy, they are a useful tool to shore up liquidity and address foreign exchange shortages in a global emergency. For instance, in the wake of the 2008 financial crisis, the IMF allocated $250 billion in SDRs, which raised global reserves by 3%, including a raise of low-income countries’ reserves by 19%.are an economic lifeline.
- ONE is calling on the G7 to back the largest injection of public capital in decades – an economic lifeline and survival fund in the form of $650 billion in Special Drawing Rights (SDRs). Further, ONE is also advocating for wealthier countries to donate their unused SDRs to a trust fund that more vulnerable countries can access if needed.
Key Facts for journalists
- Sub-Saharan Africa fell into recession for the first time in 25 years, with economic growth contracting by at least 3% in 2020, the worst on record. For many countries, a return to 2019 economic growth levels will not occur until 2022–24.
- The World Bank and the IMF estimate that Africa is facing external financing needs of about $1.2 trillion for 2020-2023, with roughly half of this expected to be used to service debt.
- COVID-19 is likely to push between 88 and 115 million people into extreme poverty—those living under $1.90-a-day—around the globe, reversing the trends of the past two decades.