Remarks by Angel Gurría
08 July 2020 - Paris, France
(As prepared for delivery)
Ministers, Governors, Colleagues,
Because of the COVID crisis, and unlike in 2008/09, ALL sources of financing for development are under stress - even remittances plunged. We estimate private external financing flows to developing countries to drop by USD 700 billion in 2020, a shock which will be concomitant with a fall in tax revenues, by far the largest and most sustainable source of financing in developing countries, at about USD 5 trillion every year.
In this context, let me highlight 3 important requirements going forward:
1) First, according to our estimates, if borrowers and public and private creditors were to participate fully, the G20-sponsored DSSI would result in a suspension of USD 25.3 billion payments for eligible countries in 2020. This is certainly significant, but most likely insufficient: debt restructuring may have to be envisaged. Additionally, international efforts to tackle tax evasion and avoidance in developing countries, including through the G20/OECD BEPS initiative, will remain paramount.
2) Secondly, enhancing the resilience of external private finance will be key.
So far emerging economies, notably those with strong fundamentals, weathered the sudden stop in capital flows relatively well, without resorting to capital controls. Going forward, the challenge for policymakers will be to continue reaping the benefits of private foreign capital while ensuring resilience in times of shock. In this respect, the OECD Code of Capital Movements constitutes a tested, recently modernised, international instrument that provides countries with the flexible tools to manage capital flows, including at times of stress, while sticking to the “holly trinity” of transparency, accountability and proportionality that is key to international co-operation.
3) Finally, having cash is key, but so is spending it well and better.
This means aligning resources to the SDGs and the Paris Agreement and ensuring transparency and integrity in the process. Better alignment could help shift the trillions towards building back our economies better, greener, in a more inclusive and resilient manner. Together with UNDP, under France’s leadership, we are working on a framework for aligning private finance with the SDGs, which we will present in November.
The challenge for developing countries is massive: let’s keep working together, in the G20 and beyond, to help them come out of this crisis stronger.