From Isaac Anumihe, Abuja
The International Monetary Fund (IMF) has raised alarm over the effects of COVID-19 variants, saying that they can derail economic recovery and wipe out over $4.5 trillion from global Gross Domestic Products (GDP) by 2025.
This was contained in a transcript of the World Economic Outlook update released recently by IMF.
According to the outlook, financial conditions could also tighten abruptly, if there is a sudden reassessment of the monetary policy outlook, especially in the United States.
The IMF indicated that a worsening pandemic and tightening financial conditions would inflict a double blow to emerging markets and developing economies and severely set back their recoveries.
‘Now, moving onto what needs to be done. To start with, multilateral action is needed to ensure rapid worldwide access to vaccines, diagnostics, and therapeutics. Now, this would save countless lives, prevent new variants from emerging, and add trillions of dollars to global economic recovery,’ the report stated.
‘The IMF staff’s proposal to end the pandemic, which was jointly endorsed by the World Health Organisation, the World Bank, and the World Trade Organisation, sets a goal of vaccinating at least 40 per cent of the population, in every country, by the end of this year, and at least 60 per cent by the middle of next year, alongside ensuring adequate diagnostics and therapeutics, at the price of $50 billion.
‘To achieve these targets, at least one billion vaccine doses should be shared in 2021 by countries with surplus vaccines, and vaccine manufacturers should prioritise deliveries to low and lower-middle-income countries. It is important to remove trade restrictions on vaccine inputs and finished vaccines and make additional investment in regional vaccine capacity to ensure sufficient production,’ the outlook, said.
The Fund called on countries to maintain quick access to international liquidity as a matter of urgency to check the spread of the disease.
‘A related priority is to ensure that financially constrained economies maintain access to international liquidity. To ensure this, major central banks should clearly communicate their outlook for monetary policy and ensure that inflation fears do not trigger the rapid tightening of financial conditions. A general allocation of special drawing rights, equivalent to $650 billion, as proposed by the IMF, should be completed quickly, so as to provide liquidity buffers for countries and help them address their essential spending needs.
‘Finally, greater action is needed to ensure that the G20 common framework successfully delivers on debt restructuring for countries where debt is already unsustainable. Now, the other major shared challenge is to reduce carbon emissions and slow the rise in global temperatures to avoid catastrophic health and economic outcomes. This requires a multipronged strategy with carbon pricing as a centrepiece, coupled with green infrastructure push and subsidies for research into green technologies. All of this will be needed to lower carbon dependence. So far, only 18 per cent of recovery spending has been on low carbon activities, and much more will be needed.
‘Policy effort at the national level should continue to be tailored to the stage of the pandemic, first, to escape the acute crisis by prioritising health spending, including for vaccinations and targeted support for affected households and firms, next, to secure the recovery with more emphasis on broader fiscal and monetary support, depending on available space, including remedial measures to reverse the loss in education, and, finally, to invest in the future by advancing long-term goals of boosting productive capacity, accelerating the transition to lower carbon dependence, harnessing the benefits of digitalisation, and ensuring the gains are equitably shared.
‘Fiscal actions should be nested within a credible medium-term fiscal framework to ensure debt remains sustainable. In the case of monetary policy, central banks should avoid prematurely tightening policies, when faced with transitory inflation pressures, but should be prepared to move quickly, if inflation expectations show signs of de-anchoring.
‘The recovery is not assured until the pandemic is beaten back, globally. Concerted, well-directed policy actions at the multilateral and national levels can make the difference between a future where all economies experience durable recoveries or one where divergences intensify, the poor get poorer, and social unrest and geopolitical tensions grow,’ the document, maintained.