United Nations Special Envoy for the 2030 Finance Agenda Mahmoud Mohieldin said that the COVID-19 outbreak is pushing the global economy into a state of recession that requires global cooperation and urgent action in every country.
In a statement on Sunday, Mohieldin said that developing countries need more than $3 trillion as an integrated financial package to overcome this crisis.
He added that the International Monetary Fund (IMF) has reviewed its estimates for global economic growth in 2020 and 2021, and it is becoming clear that the global economy is facing a recession worse than that of 2009.
There is an unprecedented demand for IMF funds for urgent purposes, Mohieldin said, with 80 countries submitting applications for aid to meet their urgent needs in combating COVID-19’s spread and dealing with its consequences.
Mohieldin highlighted that the 45 trillion announced by the G20 to be provided to its members’ economies equals 6 percent of the global GDP. He noted that this equals 10 percent of some countries’ GDP, adding that the US Congress has approved a financial package worth $2 trillion.
He also said that G20 countries account for 85 percent of the global economy, and that the disruption of trade and investment flow due to the COVID-19 outbreak could hurt other countries, especially with the stoppage of workforces, transport, and travel.
Mohieldin asserted that global cooperation is necessary to avoid further aggravating conditions in developing countries, adding that African countries alone need an urgent $150 billion for health assistance and dealing with loan problems.
He added that there are calls for African loan interests to be postponed in 2020, which is worth approximately $45 billion, and for supporting African countries’ economic activities and vital and social services.
“Global economic recession requires accelerating production and promoting stimulation to avoid a depression, taking into account that the 2008 financial crisis procedures are not suitable for the current crisis,” Mohieldin said.
He explained that according to the international data, every country will need about 5 percent worth of its GDP to finance its economic and social support package, which could be provided by rearranging spending priorities in light of the interest rate decline.
Such an action would achieve debt service savings that can be redirected with a special focus on public budget reviews and investment plans.
He also asserted that belt-tightening is not suitable now, but it is time for disciplined spending to boost both the economy and society, with the need to review spending priorities, public debt and the management of serious deficit indices in cooperation with the international governmental associations and economic clusters.
He also suggested purchasing oil products in long term contracts to benefit from the current low prices and working on reducing energy prices for the manufacturing sector and households, as well as expanding the social protection net and cash support.