EDITORIAL: For the second time in the same month the managing director of the International Monetary Fund (IMF), Kristalina Georgieva, has had to warn of a “dangerous divergence” in global growth that is taking place just as vaccination is giving hope of a recovery from the Covid-19 pandemic sometime later this year. That alone ought to be enough to highlight just how uncertain the bigger picture of even the near future is. And unless, rich nations step in right now, according to her, and help poorer ones with stabilising their economies and getting access to sufficient doses of vaccines in time, the least developed of them could be left languishing for years.
As things stand, the wave of relief that the onset of vaccination drive has brought to advanced nations does not extend to the not so well-off ones. In fact these are times of great uncertainty for some of the poorest countries in the world. With governments already stretched thin trying to keep their economies from collapsing – paying back old loans while seeking out new ones all the while, of course – now they must also worry about securing and financing enough vaccines to cover their mostly very large populations. The poorer the countries the larger their populations, after all, in most cases.
It is pretty well known and understood by now that the pandemic has taken a very heavy toll on practically all economies of the world, but it is still shocking that, according to IMF estimates, cumulative per capita income by the end of 2022 will be 22 percent below pre-crisis projections in emerging and developing countries. Pakistan finds itself in this category as well. And while Islamabad has announced an ambitious vaccination programme of its own, there’s only so far such plans can go if there’s precious little in the reserves to finance them with and, even if it is somehow possible to arrange a grant or two for this purpose, even the best planning will bring little rewards if there are not enough doses in the market to bring home. Because the way things are going right now rich countries are spending more than they need to on procuring vaccines and therefore buying more numbers of doses than their entire populations in some cases.
That’s precisely why the IMF MD’s red flag is so instructive and so timely. While all countries rightly look for the fastest and safest route to their own respective recoveries, a situation where a few emerge from the low-production, low-growth trap of the pandemic much faster than all the others will ultimately not be in the best interest of the international economy as a whole. And, as Kristalina very rightly pointed out, the time to act is now. The only thing is that the only way any movement worth speaking of can be made on this front is if countries with extra resources share them with the rest of the world. But so far it doesn’t seem as if these warnings are having the intended effect.
At the end of the day rich countries are only delaying necessary action by not helping poor countries right now. For if they don’t provide financial help and debt relief in time, and also continue to compromise vaccine availability to the developing world, then the spectre of a number of weak countries with large populations and imploding economies would become only too real. And then they would be forced to lend a hand, both in terms of giving new loans and writing off old ones, just to keep unrest, rioting and even famine from breaking out in different parts. So best act now, when there is still time, then have to put out a much bigger fire later.
It’s time, therefore, for the G20 especially to take decisive action. Most of the world’s population lives in the third world, after all, and putting them out of business for the long or even medium term will lead to demand destruction and supply chain bottlenecks on an epic scale. IMF expects global GDP to grow by 5.5 percent this year and 4.2 percent in 2022. But these are only estimates and there’s no telling how strongly they can be skewed to the downside if the “dangerous divergence” is not addressed immediately.
Copyright Business Recorder, 2021
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