Barbados Prime Minister Mia Mottley has called on developing countries to write to the wealthy countries of the world to share their wealth to ease the impact of COVID-19.
Mottley made the call while addressing the Ministers of Finance of the African Union on Monday.
“Our health statistics are relatively good but our economies are devastated. Our governments are relative successful in treating the global pandemics health side, this has served to hide the true economic devastation of COVID from the world,” said Mottley who spoke as Chair World Bank Development Committee.
In her address she highlighted the unequal response to this devastation, highlighting the limited aid granted to eligible countries by the World Bank’s Debt Service Suspension Initiative.
“This initiative really needs to be examined by us, while the advanced economies have added near 11 trillion dollars of new debt relief. The 72 low-income countries eligible for relief under the debt service suspension initiative will be in the vicinity of 11 billion dollars, a thousand times smaller than the 11 trillion of new debt to the advanced economies,” said Mottley who also pointed out that due to the Caribbean and Africa’s colonial past much of the economic structure was already heavily dependent on “trade, travel, and foreign direct investment”.
“This subcommittee of heads of Ministers of Finance must request a meeting with G7 countries and the heads of the multilateral institutions to put forward our proposals,” she said.
Mottley warned that the impact of the pandemic on the economy offered a similar threat to that suffered by Latin America in 1980s when a massive rise in the value of the US dollar left many economies in the region reeling. Mottley said she saw similar parallels given the massive debts several developing countries in the Caribbean and Africa were facing.
“This debt is primarily in US dollars and is set on the basis of US interest rates. In Latin America in the 1980s, there had also been a rapid rise in US Dollar denominated debt held by private creditors. What triggered the crisis on August 12, 1982, was the strengthening of the US dollar amid the 1981 tax cut stimulus,” she said.
“Unless my brothers and sisters, we act fast proportionately and comprehensively a strengthening US dollar and rising US interest rate can be the trigger that turns this health crisis into a debt crisis.”
Mottley called on the advanced economies to lend assistance as she said while the various development banks around the globe were doing what they could, they currently lack the resources to properly aid the developing countries around the world who have by crippled by the pandemic.
“The current resources available to the regional development banks are not size for an economy stopping pandemic. They’re not been size to deal with the climate crisis and how it is impacting us disproportionately particularly those of us between the tropics of Cancer and Capricorn,” said Mottley.
“We call upon the rich countries to pledge half of their new and their unused special drawing rights to recapitalise development banks like the African Development Bank the Inter-American development bank and the World Bank the Asian development banks. They must use this capital to leverage more long-term lending to those heavily impacted by COVID and by the climate crisis to support green, yes, resilient, yes and inclusive development.
“Yes,” said Mottley, who however was wary that such a request could also lead to more debt being incurred by developing nations.
Mottley suggested that there should be some pandemic clauses placed in the loans handed out by the various regional development banks.
“We are in a middle of a pandemic, we should not need to ask, but countries that have suffered double digit declines in GDP last year need genuinely fast dispersing long-term budget support,” she said.
“The development banks and their boards must commit to the timing of their disbursements. One fast way to provide relief while preserving the preferred creditor status is for the IFIs, the multilateral development banks, and the regional development banks, to adopt natural disaster and now pandemic clauses in their lending,” she added.
She noted that there had been flexible arrangements put in place before, using the United Kingdom as an example as it sought to rebuild in the wake of war.
“It is instructive that Britain, when it had finished the war, had it been forced to service its war debt immediately as the war ended. Britain would never have had the luxury of rebuilding its country and resuming its development trajectory. They found a creative way to treat the astronomically high debt that was incurred,” she said.
But Mottley’s concerns extended beyond the perilous fiscal situation facing developing nations in the pandemic, as she also addressed the increased difficulty facing smaller countries in obtaining COVID-19 vaccines.
“Market power is at play here, and I tell you because we are in the middle of it,” said Mottley in her address.
“Some large countries have purchased five times or more vaccines and they need using complex opaque option arrangements that make it hard for vaccine producers to plan and to sell further production so much for transparency,” she said.
She again warned that for proper herd immunity to come to fruition, availability of the vaccines should be worldwide and she called on the various African leaders to battle what could potentially become “vaccine-apartheid.”
“We should require written clearing agreements from those who have ordered more than they need, once those vaccinated exceed the herd immunity threshold.
“They would agree to retain some more modest surplus and asked the producers to produce and deliver the excess at cost to developing countries. And even then we are at the back end of the of the queue,” said Mottley.
“There must be early intervention. The doctrine of necessity is also at play and so if there is no international commitment to provide equitable and affordable vaccines for all. IP restrictions on growing production will become more of an issue and this is not a straightforward issue for any use or any waivers ought to be limited to the issue of vaccines for this crisis.”