IATF-FFD principals meeting on the 2021 FFD report on financing the COVID-19 response
09 October 2020
The global pandemic has further endangered achievement of the financing for development commitments by aggravating the “pre-existing economic conditions” facing developing countries. Latest UNCTAD estimates show that the world economy is on track for a loss of $6 trillion in world income in 2020. Dramatic declines in trade, investment, and remittances have choked off external financing to developing countries, putting at risk development progress across the world, not least by exacerbating an unprecedented build-up of unsustainable debts in developing countries, which was already well underway before the crisis hit. The IATF therefore should work together providing evidence and building consensus on the unprecedented steps needed for crisis response and a better recovery from the pandemic.
UNCTAD has played its role in the crisis response, helping to keep trade moving in light of new sanitary restrictions, and helping developing countries adapt their investment policies, and adapt their digital strategies to the new normal post-Covid. We have supported the response by the maritime shipping industry, customs authorities, competition authorities, debt management systems and by supporting MSMEs across the developing world.
We have also led calls across the United Nations for widening the scope for debt relief to meet the extraordinary liquidity challenges imposed by the crisis on developing countries. We are encouraged by the steps taken by the G20 including the Debt Service Suspension Initiative, but we know that more can and should be done. To this end, we have been proud to support the “FFD in the era of Covid-19” process, led by the Friends of SDG Finance chairs, Canada and Jamaica. And we are proud that our analysis of the situation has begun to take on a wider appreciation by the other major stakeholders present today. We believe that the Inter-Agency Task force can play a role continuing this dialogue and building consensus to greater ambitions for the FFD process post-Covid.
As we turn from response to recovery, we believe that a better recovery will also require ambitious reforms to the international financing architecture. That is why we are heartened that the International Monetary Fund has joined our calls for reforming the financing architecture, and we continue to stand by our view that a statutory sovereign debt restructuring mechanism should remain the focus of continuing dialogue to this end.
But Covid-19 is also not the only game-changer affecting financing for development. The pandemic is also an inflection point in the transformation of the global economy accelerating trends underway since the slow recovery from the Global Financial Crisis. Amidst rising economic nationalism, protectionism and trends towards de-globalization, this will pose a greater burden on developing countries trying to meet their financing needs by integration into the global economy.
Looking beyond the pandemic, developing countries will need support in adapting to the transformation in international production towards more re-shoring, regionalization, and resilience.
Developing countries will also need greater support tackling the scourge of illicit financial flows, which our recent EDAR 2020 estimates generate nearly $90 billion in lost financing in Africa alone every year, accounting for nearly half the SDG investment gap in the region.
Developing countries will also need to strengthen their regional collaboration and south-south cooperation in light of the changing financing landscape. Regional initiatives like AfCTA must not only bring regions together but help generate greater financing resources in light of the new normal.
It is my hope that the IATF through its report and through the deliberations of the ECOSOC FFD Forum can help spur action to meet these challenges. It is also my hope that this process can inform the deliberations leading to the UNCTAD 15 Conference scheduled for next year, which will take up these issues with an eye to shaping collective ambitions for transforming trade and development to meet these persistent and emerging challenges in the years to come. Thank you.