The COVID-19 crisis is erasing years of progress in developing countries with up to 125 million more people falling into poverty last year.
It is posing a serious risk of prolonged scarring to their economies.
While the economic outlook is improving for OECD and emerging economies, the recovery looks more precarious and much less certain for the majority of developing countries.
Many will not regain pre-crisis GDP levels until 2023 at the earliest and more than thirty are not expected to do so until 2026.
We must act now to make sure the recovery is more even across and within countries.
We welcome the two pillars identified by the Italian Presidency to achieve this goal.
Developing countries lack the necessary funds to recover sustainability objectives. Official Development Assistance has reached record levels in 2020 with US $161 billion, but all other sources of development finance have declined. The annual SDG financing gap in developing countries has increased by at least 50% with the crisis, totalling USD 3.7 trillion per year.
In the short term, financing the vaccine rollout is essential. The steps taken to finance COVAX and donate vaccines are of course commendable with what they are aiming to achieve. However, we need to go further through financing the other pillars of ACT-A to strengthen domestic health systems, support vaccine manufacturing capacities and resilient value chains for medical goods. By current estimates, the bulk of the adult population in advanced economies will have been vaccinated by mid-2022, while for poorer countries, on current indications mass immunisation will stretch until 2024.
Equally important are the G20 commitments to restore and support developing countries’ fiscal space through its debt initiatives and the general SDR allocation, enabling vitally important spending on socioeconomic priorities.
In the medium term, efforts should be focused on scaling up, mobilising and aligning finance towards the SDGs and the Paris agreement, in line with domestic development prioirites and national development strategies. Our work with UNDP on tools such as the Total Official Support for Sustainable Development and the Framework for SDG Aligned Finance can support such efforts. This includes harnessing new sources of finance through innovative instruments, such as sustainability bonds and blended finance.
In this regard, we are happy to support the G20’s endevours with our stocktake report on enhancing green, social and sustainability bonds in developing countries.
We must also ensure that our efforts to reform the international tax architecture benefit developing countries, by supporting domestic resource mobilisation and facilitating the fight against Illicit Financial Flows.
Second, territorial development, intermediary cities and SDG localisation.
In 2020, more than 60% of the urban population live in cities with less than 1 million inhabitants. Informed, evidence-based decision making by local authorities closest to the people will help secure an inclusive recovery.
In this regard, we look forward to supporting the G20 with the proposed Platform on Intermediary Cities and SDG-Localisation and its High-Level Principles on city-to-city partnerships, alongside UN HABITAT.
The OECD will continue to support the G20 on both fronts.