A Letter to G20 Finance Ministers
This rather technical letter has been put together by Jamie Drummond and some eminent economists and just sent to the world’s leading finance ministers. It outlines what should be agreed by the Group of 20 Finance Ministers and Central Bank Governors - the world’s money men and women - when they meet virtually this weekend. They will be discussing the crucial matter of financing humanity’s fight against COVID-19 and its huge negative impacts on our shared Global Goals of equality and sustainability.
It is crazy how much money many of the most vulnerable nations and citizens are still spending repaying debts, cash which they should be able to put into health, education and humanitarian needs. It is incredible that we could accelerate our collective global exit from COVID-19 potentially by years, saving millions of lives and trillions of dollars, for the price of just two days of this pandemics impact. And yet our money managers – for that’s what these finances ministers are - have not yet invested that money in our collective future safety, when they are literally sitting on the money. The International Monetary Fund (IMF) and World Bank already have the financial firepower to deal with a lot of these life and death issues. Our finance ministers are the major shareholders in these institutions, and we need to ask them to instruct the IMF and World Bank to use that power. They just need some moral imagination and motivation. That’s where you come in.
There is a way forward. But will Rishi Sunak of the UK or Bruno Le Maire of France or Tito Mboweni of South Africa or Steve Mnuchin of the USA or others around the digital table be able to show the leadership needed on debt, vaccines or investing in educational transformation for the next generation? We need a new financing deal to invest in beating COVID-19, future pandemic prevention, the existentially essential energy transition and the economically essential education sector’s recovery – so that all citizens have access to the tools they need to lead lives of dignity, opportunity and resilience to future risks. Two places you can take action are at ONE.org on debt and 350.org for a wider healthy, just and green recovery.
Dear Finance Minister Mohammed Al-Jadaan,
cc G20 Finance Ministers and Central Bank Governors
G20 Finance Ministers: How to achieve a Healthy, Just and Green Recovery
We the undersigned call upon the G20 Finance Ministers meeting on 18th July to urgently undertake the following steps to deliver a natural and human capital investment plan that is job-rich, future-proof, and environmentally and financially sustainable. The meeting is taking place at a time of profound uncertainty over health and socioeconomic developments but also at a time when there is urgency to act to forestall an even greater future crisis due to climate change, impacts of which are already being felt. We therefore request that this G20 meeting:
- That a priority for the world is to ensure an efficient production and equitable global distribution of vaccines, therapies and diagnostics to frontline workers and vulnerable groups, estimated by the ACT-Accelerator work streams to cost an additional $27bn over the next 12 months – equivalent to approximately 2 days of the global economic cost of this pandemic.
- That a second priority is to stand in solidarity with governments in emerging and developing countries needing assistance to mitigate the social and economic consequences of COVID estimated at approximately 10% of emerging markets GDP. The precise need for fiscal and balance of payments support to individual countries will vary depending on the magnitude of their vulnerability to the multiple commodity price, remittance, tourism, trade and capital flight shocks, as well as the health shock that all countries are facing.
- That a third priority is to focus public investments everywhere, especially in cities, to “build back better” towards a trajectory that can achieve the Sustainable Development Goals - leveraging existing systems and services to work better, using projects that can be implemented fast, are labor intensive, and that have high domestic economic multipliers and co-benefits. This is the case for many projects that contribute to green energy transitions, education and health systems strengthening- which also helps us tackle inequality and protect us from future pandemics.
- To steer the global economy decisively towards sustainability, inclusion and resilience through collective and national action. Therefore we:
The International Financial Institutions, the UN and relevant groups to work out practical counter-cyclical options for increasing the net flow of resources to public and private sector in affected developing countries, including, but not limited to:
- New SDR allocations that could mobilize $500 billion to upwards of $1 trillion;
- SDR reallocations to increase the share of new or existing SDRs that can be used by vulnerable countries;
- Debt standstills through 2021, debt relief programs where warranted, debt transparency and debt for nature swaps;
- A “Liquidity and Sustainability Facility” to provide immediate liquidity and reduce borrowing costs over time for sustainable investments;
- Additional grants/credits to developing countries from agencies that do not participate in debt standstills to maintain positive net flows;
- Substantial expansion of the volume of multilateral development bank activities and financial support including through accelerated capital increases;
- Emergency humanitarian aid including $4.4 billion for famine response identified by UNOCHA.
G20 governments, in cooperation with other national governments where relevant, to commit to a stronger global economy through:
- Support for ideas like a Climate Damages Tax. This could contribute $300 billion per year for global distribution for sustainable transition;
- Tackle illicit financial flows, that amount to between 1 to 1.5% of regional GDP in both Africa and Latin America, or $130 billion per year in these two regions, through greater transparency and exchange of information for tax purposes as well as disclosure of beneficial ownership of assets;
- Strengthen taxation of multinational corporations and the digital economy to avoid profit shifting that costs low income countries around $200 billion per year, through agreeing on a BEPS action plan, including country by country reporting and expanding the automatic exchange of information;
- End all public fossil fuel subsidies in G20 countries, as already agreed, and supporting a transition for LICs/LMICs;
- Implement the Taskforce on Climate Finance Disclosure recommendations and turn them into reporting standards through the work of groups like the IFRS and IOSCO.
- Expand the share of sustainable financing in private asset portfolios towards frontier levels of almost two-thirds reached in Australia and New Zealand;
- Support legal migrants and their families through regulatory efforts to reduce or subsidize remittance costs, and by including migrants in social protection policies;
- Open budgets and contracts so taxpayers and policy-makers can track investments and help ensure results in the fight against gender, racial and all forms of inequality;
- Develop a fully costed and financed global pandemic preparedness plan that will ensure all countries are compliant with the International Health Regulations.
Our Money, Our Health, Our Future: The global financial system built in the 1940s needs a reboot for the present and future challenges of the 21st century. As the situation evolves, other steps may also be needed, and details of proposals need to be negotiated before agreement is reached, but these short-term practical steps on resource mobilization and policy changes take us towards a healthier, safer future - for people and planet.
KY Amoako, African Centre for Economic Transformation
Masood Ahmed, Centre for Global Development, formerly Director at IMF, WB, DFID.
Mimi Alemayehou, Managing Director, Black Rhino Group, former EVP OPIC
Bertrand Badre, CEO & founder of Blue like an Orange Sustainable Capital, former MD/CFO World Bank Group
Amar Bhattacharya, Brookings Institution, former Director Group of 24 Countries
Professor Stefan Dercon, Blavatnik School of Government, University of Oxford, former DFID Chief Economist
Emmanuel Guerin, ED European Climate Foundation, Lecturer Sciences Po/LSE
Dr Homi Kharas, Brookings Institution, former Chief Economist, East Asia, World Bank, High Level Panel on the SDGs
Trevor Manuel, African Union Special Envoy for COVID-19, former South Africa Finance Minister
Professor Mariana Mazzucato, Prof Innovation and Public Value & Founder Institute for Innovation and Public Purpose
Dr Ngozi Okonjo Iweala, Chair GAVI, African Union Special Envoy for COVID-19, former World Bank Managing Director and Nigerian Finance and Economy Minister
Dr Sara Pantuliano, CEO Overseas Development Institute
Maria Ramos, Chair, Banking Association of South Africa,
Dr Vera Songwe , Executive Secretary UN Economic Commission for Africa
Professor Sir Nicholas Stern, Chair of the Grantham Research Institute on Climate Change and the Environment and Professor of Economics and Government at the LSE
Prof Lawrence Summers Charles W. Eliot University Professor and President Emeritus at Harvard University
Guest edited by Jamie Drummond
Photo credit: G20