Recovery from COVID recession: Rich nations must chip in $500b, says PM

ISLAMBAD: Prime Minister Imran Khan Tuesday proposed three major actions to deal with the Covid-19 challenges and the first of them was extension of G-20’s Debt Service Suspension Initiative for at least another year.

“The request for forbearance under this initiative should not affect the country’s credit rating, since this is due to force majeure, not mismanagement. Second, the multilateral development banks should participate in the Debt Suspension Initiative,” he said in his virtual statement at the high level summit “Financing for Development in the Era of Covid-19 and Beyond”.

Third, he continued, other short-term measures, which could cover both official and private creditors include: debt swaps for health, climate and SDGs; debt buy-backs; re-profiling debt; and regional resilience funds. “Debt relief is one of the quickest ways to create fiscal space for developing countries. Therefore, in April, I called for a “Global Initiative on Debt Relief,” he pointed out. Pakistan, he said, subsequently initiated discussions on this matter at the UN, and co-led the Discussion Group on Debt Vulnerability under your Initiative.

“I welcome the extensive “Menu of Options” identified by each of the six Discussion Groups. We must prioritize those actions that can have a significant impact and can be quickly implemented,” he said. Imran noted that investment in sustainable infrastructure would be key to a resilient economic recovery and realization of SDGs.

“We should create a UN Infrastructure Investment Facility to mobilize an additional $1.5 trillion annually in the developing countries.” The IMF estimates that the developing countries would require an additional $2.5 trillion to recover from COVID-induced contraction.

“Rich countries should support creation of at least $500 billion in new Special Drawing Rights and reallocation of unutilized SDRs to developing countries. Recovery from recession, as from the pandemic, must be inclusive and equitable. We must break the shackles of poverty and inequality,” the prime minister noted.

He said the pandemic was inflicting unparalleled human suffering.

“Controlling the virus is critical to addressing both the health and economic emergency. In Pakistan, our strategy of ‘smart lockdowns’ has fortunately controlled the spread of the virus. Yet, we are not complacent. No one is safe until everyone is safe. I hope a vaccine will be available soon. Everyone, everywhere, must have equitable and affordable access to the vaccine, as a global public good,” he said.

The COVID crisis has triggered the worst recession since the 1930s Great Depression. As usual, the poorest countries and the poorest people have been hit the hardest. Despite our financial constraints, we have injected over $8 billion – 3% of our GDP – to protect the poor and keep the economy running,” he said