The Group of 24 (G24) said that the novel coronavirus (COVID-19) pandemic has increased deficit-to-GDP ratios by 5.5% between 2019 and 2020, and public debt levels by 6.8%, according to Egypt’s Ministry of International Cooperation.
This implies that emerging and developing countries need an estimated $2.5trn to meet their developing needs, according to the International Monetary Fund’s (IMF) forecasts, the ministry added.
Accordingly, the G24 emphasised on the role of multilateral development banks (MDBs) to provide adequate fiscal support and meet growing financing needs of developing economies. This would take place through expanding their lending in the years to come.
This came during the G24 Ministerial Meeting as part of the annual International Monetary Fund (IMF) and World Bank (WBG) meetings, which saw the participation of several high-level representatives from Egypt.
This included Egypt’s Minister of International Cooperation, Rania Al-Mashat; Governor of the Central Bank of Egypt (CBE) and Governor of Egypt at the IMF, Tarek Amer; IMF Director Kristalina Georgieva; and President of the WBG, David Malpass.
In response to the worsening debt crisis, G24 countries called for international institutions to adopt mechanisms to assist in debt restructuring and adapt traditional lending instruments, to meet growing financing needs for development.
To deal with the worsening debt vulnerabilities, the governors stressed on the importance of debt transparency and assisting developing countries to build debt and fiscal management capacity. This would include the likes of an extension of the Debt Service Suspension Initiative (DSSI), which will enable developing countries to manage the pandemic’s impact.
The meeting called for increasing the role of the IMF and the WBG to push for greater private sector participation, and foster creditor coordination and collective action. Additionally, there would need to be greater flexibility in lending policies to support countries undertaking debt restructuring.
During the meeting, the governors also referred to the need to adapt its traditional lending instruments to adequately meet the needs of member countries beyond 2021. This would also require governance reforms to enhance the role and voice of developing countries.
The G24 commended the World Bank Group’s proposed $12bn initiative, which would encourage developing countries to purchase COVID-19 vaccines to treat up to one billion people. They also commended the global initiative to allow developing countries to access the COVID-19 vaccine, and urged developed economies to provide the necessary financial support to ensure equal access to the vaccine by all countries.
Minister Al-Mashat called for an increase in blended financing to support economic recovery and reduce debt burdens, evidenced by the successful example of Egypt’s infrastructure projects. These have been supported through blended financing, helping the country achieve a positive growth rate at a time when all economies are shrinking.
The Global Economic Prospects report, issued by the World Bank during the meetings, predicted that emerging and developing countries will witness a greater than expected contraction due to the pandemic. The economic fallout of the coronavirus pandemic will result in a 3% contraction this year, followed by a return to growth of 5.2% for the next year.
Meanwhile, developed economies are expected to contract by 5.7% this year, before witnessing a growth of 4% in 2021.
The G24 was established in 1971 to help coordinate the positions of developing countries on international monetary and development finance issues.
