The worldwide economic crisis brought on by the COVID-19 pandemic disproportionately impacted poor nations, resulting in increased poverty, food insecurity, and income inequality.
Richer countries used unusually huge fiscal and financial assistance programs to buffer their economies from the harshest effects.
- COVID-19 - Fundamental Flaws In The International Financial And Fiscal System Exposed.
- COVID-19 - Economic, Social, And Nutritional Effects Of The Crisis.
- COVID-19 - Fiscal And Financial Crisis Responses.
- COVID-19 - Changes Required To Address The Current International Financial And Fiscal System's (IFFS) Flaws.
Developing nations lacked such capabilities and received little multilateral contingency funding, highlighting fundamental flaws in the international financial and fiscal system (IFFS).
The IFFS will be better suited to serve sustainable development if four reforms are implemented:
(a) an equitable international tax coordination mechanism;
(b) a multilaterally backed sovereign debt workout mechanism;
(c) overhauling policy consistency associated with development finance; and
(d) increasing the use of Special Drawing Rights for development finance.
As with past pandemics, the COVID-19 pandemic and its social and economic consequences have resulted in a sharp drop in economic activity (van Bergeijk, 2021).
However, not all people and nations have been harmed equally.
The epidemic has expanded inequality in high-income nations in Europe and North America, since highly skilled employees and capital owners were much less impacted than other groups.
Developing nations, particularly the most vulnerable portions of their populations, were disproportionately affected, leading to increased poverty, food insecurity, and poor nutrition.
Because industrialized nations had more fiscal freedom, they were able to invest significantly in required health measures, social safety net extension, and economic stimulation, something that most emerging countries were unable to achieve.
Due to the weakening of multilateralism itself (van der Hoeven, 2020) and, more crucially, inherent flaws in the IFFS' ability to function as an international financial and social safety net in a global crisis, the multilateral system has so far failed to come to their financial rescue.
Proposals to reform the existing IFFS emerge with each crisis, but as I have demonstrated, if the key changes had been in place from the start of the pandemic, the global economic ramifications would have been less severe, and much of the increase in global poverty could have been avoided.
To put it another way, they are now more important than ever.
Changes to the IFFS are not acts of charity; they are necessary to return to sustainable and equitable global growth, without which gains for some countries and country groups that now promote a "me first" attitude in health issues and a return to protectionism will not be sustainable in the long run, resulting in lower global growth and a reversal in the upward trend toward achieving the Sustainable Development Goals by 2030.
You may also want to read more analysis about the COVID-19 Pandemic here.
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