The economic fallout of COVID-19

Financing economic recovery

As the socioeconomic impacts of the pandemic spread across Asia and the Pacific, finance ministries are continuing their efforts to inject trillions of dollars for emergency health responses and fiscal packages. With continued lockdown measures and restricted borders, economic rebound seems uncertain. Compared to 2019’s economic situation, over the past six months, countries in Asia and the Pacific have been experiencing sharp drops in foreign exchange inflows due to declines in export earnings, remittances, tourism and FDI. This is worrying as policymakers are tackling difficult choices over how to prioritise development spending, while continuing to expand their squeezed fiscal space.

Financing in three key areas

The United Nations is contributing through a global initiative, Financing for Development in the Era of COVID-19 and Beyond, co-convened by Canada and Jamaica, to articulate a comprehensive financing strategy to safeguard the Sustainable Development Goals. Governments are united to ensure that adequate financial resources are available to steer an inclusive, sustainable and resilient post-COVID-19 recovery. In the Asia-Pacific region, several countries have already adopted financing plans in three key areas. They aim to address the challenge of diminished fiscal space and debt vulnerability; to ensure sustainable recovery, consistent with the ambitions of the Paris Agreement and the 2030 Agenda; and to harness the potential of regional cooperation in support of financing for development.

 

The United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) has recently launched its first-ever Regional Conversation Series on Building Back Better. We are joining forces with ministers, decision-makers, private sectors and heads of international agencies to share collective insights on sharing pathways to resilient recovery from health pandemic and economic collapse.

To improve the fiscal space and manage high levels of debt distress, a growing call for extending the debt moratorium under global initiatives like the Debt Service Suspension initiative is timely. Central banks can continue to keep the balance of supporting the economy and maintaining financial stability. This further involves enhancing tax reforms and improving debt management capacities, while using limited fiscal space to invest in priority sectors. Exploring sustainability-oriented bonds and innovative financing instruments options such as debt swaps for SDG investment should be explored further.

In addition to economic considerations, the policy paradigm must mainstream affordable, accessible and green infrastructure standards, while promoting social equality and environmental sustainability principles as enshrined in the Paris Agreement. As we scale up the use of digital technology and innovative applications, the financing support of micro, small and medium-sized enterprises must go hand in hand with these national job-rich recovery strategies.

Regional cooperation

No country can take this agenda forward alone. Regionally coordinated financing policies can restart trade, reorganise supply chains and revitalise sustainable tourism in a safe manner. Across Asia and the Pacific, governments must pool financial resources to create regional investment funds. Strengthening regional cooperation platforms to ensure that all countries receive an equitable number of doses of the vaccine on short notice to everyone everywhere is particularly essential.

Through ESCAP, we can scale these efforts across the region, working closely with our member states, the private sector and innovators to build a collective financing response to mobilise the necessary additional resources. Together, we can chart financing strategies of Asia and the Pacific which can enhance societal well being and economic resilience of future pandemics and crises.

Armida Salsiah Alisjahbana is the UN Under-Secretary-General and Executive Secretary of the UN Economic and Social Commission for Asia and the Pacific

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Printable version | May 15, 2021 5:57:16 AM | https://www.thehindu.com/opinion/op-ed/financing-economic-recovery/article32537267.ece

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