While the ongoing Covid-19 crisis is first and foremost a public health threat, it is also, and increasingly, an economic threat.
Many developing countries face distinct limitations on their ability to mount appropriate stimulus packages for their economies as well as far greater challenges to their economies and societies arising from the COVID-19 crisis than is the case in the industrialized world.
In many developing countries a large-scale lock-down of their economies to flatten the contagion curve of the pandemic is not feasible without risking the prospect of more people dying from hunger than from illness.
The project aims to strengthen diagnostic and policy design capacity of the relevant macroeconomic, fiscal and debt financing authorities in LICs and MICs in order to respond to the COVID-19 pandemic and to ensure a recovery that enables the achievement of the Sustainable Development Goals (SDGs).
To leverage and adapt existing macro-financial analytical tools and policy analysis to create enhanced capability for developing countries to diagnose their financing and liquidity needs arising from the COVID-19, and create enhanced capability to refine and implement sustainable financing, fiscal and other macroeconomic strategies, consistent with averting a prolonged depression in their economies.
The project will be organised through three related and mutually supportive thematic clusters that address key macro-financial, fiscal and debt issues arising from the COVID-19 crisis.
- The first cluster will provide analysis of the COVID-19 pandemic fallout on the macro-financial conditions of developing countries in general, with special attention to LICs and MICs. The main aim of this cluster is to provide diagnostics in order to design responses to the pandemic.
- The second cluster will focus on the sustainable recovery inspite of existing and accumulating debt vulnerabilities of selected beneficiary countries.
This cluster will develop a Sustainable Development Finance Assessment (SDFA) framework which identifies the development finance needs of selected beneficiary countries to achieve the most significant SDGs and how to make this compatible with external financial sustainability and public debt sustainability; discuss current proposals to address unsustainable debt burdens in the wake of the COVID-19 pandemic and provide policy recommendations to alleviate the debt burden facing developing countries, and to support sustainable and responsible lending and borrowing practices and regulatory frameworks based on updated soft law.
- The third cluster will focus on policy recommendations for recovery either for developing countries in general or specifically to the three major developing regions targeted in this project (Africa, Asia-Pacific and Latin American and the Caribbean), with the emphasis on aspects of macroeconomic policy that have come into stark as a consequence of the COVID-19 crisis.
This cluster will assist selected beneficiary countries from Africa, Asia-Pacific and Latin American and the Caribbean to assess the impact of the pandemic on their fiscal needs, and potential space for domestic resource mobilization through changes in taxation policy, with a view to ensuring that economic recovery measures are in line with the social and environmental goals of the 2030 Agenda.
Link to the SDGs:
COVID-19 pandemic will have profound repercussions on development gains, hampering progress in the achievement of the Sustainable Development Goals (SDGs) and the 2030 Development Agenda, as acknowledged in the General Assembly's Resolution on Global Solidarity to fight COVID-19.
Specifically, the project is linked with the following targets of this SDG:
- 17.1: Strengthen domestic resource mobilization, including through international support to developing countries, to improve domestic capacity for tax and other revenue collection.
- 17.3: Mobilize additional financial resources for developing countries from multiple sources
- 17.4: Assist developing countries in attaining long-term debt sustainability through coordinated policies aimed at fostering debt financing, debt relief and debt restructuring, as appropriate, and address the external debt of highly indebted poor countries to reduce debt distress
Moreover, a successful response to and recovery from the COVID-19 pandemic is required for attaining economic growth with decent work and simultaneously reducing inequalities. Therefore, besides SDG 17, the project is primarily linked to SDG 8 (Decent work and economic growth) and 10 (Reduced Inequalities),