Response and Recovery: Mobilising financial resources for development in the time of COVID-19

The COVID-19 pandemic has created a series of simultaneous and reinforcing shocks that has exposed and exacerbated economic, financial and debt vulnerabilities of low- and middle-income developing countries (LICs and MICs). Mobilizing financial resources for responses to and recovery from the pandemic is essential so that progress towards the Sustainable Development Goals (SDGs) is not undone.

This platform is a resource where member states, experts and the public can access diagnostic tools, policy analysis and recommendations, as well as evaluate the policy responses designed to ensure a recovery aligned with a sustainable development path.

The project Response and Recovery: Mobilising financial resources for development in the time of COVID-19 is co-ordinated by the Debt and Development Finance Branch of UNCTAD and jointly implemented with ECA, ECLAC and ESCAP.

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The project delivers a number of tools, research analysis and policy recommendations, covering 193 countries in the world. This global map gives an overview of 9 workstreams of the project per country.

 
 
 
The designations employed and the presentation of material on this map do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations and/or on the part of the countries mentioned on it, concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. (ST/AI/189/Add.25/Rev.1) The information shown is this map is for information purposes only and should be not be considered as any form of endorsement by the United Nations and does not create any legal rights or obligations for any Member State or any of the organs thereof.
Dotted line represents approximately the Line of Control in Jammu and Kashmir agreed upon by India and Pakistan. The final status of Jammu and Kashmir has not yet been agreed upon by the parties.

 

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Geographic Coverage

Global

Comprehensive assessment of global macroeconomic developments and financial stresses which affect developing countries is necessary for the design of effective domestic policy responses to recover from the COVID-19 crisis and simultaneously achieve the Agenda 2030. The two target country groups of this project – MICs and LICs – are exceptionally vulnerable to the negative outcomes of COVID-19. This cluster will have three workstreams based on toolkits that are not country-specific but global in character.

  • UNCTAD Global Policy Model (GPM) will be extended to an expanded range of developing countries, in particular focusing on the macroeconomic and financial conditions of selected developing countries in Africa, Asia and Latin America. The analysis will include up to 40 countries by Phase 3, and applied to sub-groups of developing countries with similar macroeconomic features. In this way, the 'flexible geographical disaggregation' capability of the GPM will be leveraged.
  • Global Financial Safety Net (GFSN) tracker will provide a real-time tracking of the GFSN that currently includes a large number of increasingly big Regional Financial Agreement (RFAs) in all continents, bilateral currency swaps between central banks, crisis lending by multilateral development banks, bilateral short-term loans, repo agreements, and hedging instruments by central banks. Effectively, the GFSN tracker will identify all relevant sources of liquidity for the most vulnerable countries.
  • Financial Conditions Indicator (FCIs) will provide an assessment of the financial conditions in clusters of developing countries. Key to this new generation of FCI is defining economically meaningful clusters. This indicator has the advantage of being computable at high-frequency (monthly) as well as in real time, synthesizing a wide range of financial variables from various sources and of mixed frequencies (for instance, real interest rates, stock and bond market indices, volatility indices, exchange rates, residential real price index, debt service ratios and capital flows). The FCI tackles the complexity of increasing financial uncertainty and instability by harnessing the richness of information flows in the era of big data and will provide a useful diagnostic tool for countries with data inadequacies.
  • Sustainable Development Finance Assessment (SDFA) framework will identify the development finance needs of selected beneficiary countries to achieve structural transformation through the most significant SDGs and how to make this compatible with external financial sustainability and public debt sustainability. Taking as point of departure the UNCTAD Gap-analysis tool, this framework goes beyond standard Debt Sustainability Analysis because its focus is on the development finance requirements for sustainable development and considers all sources of external financing.
  • Revitalising Soft-Law frameworks will provide recommendations on how to revitalize soft law based on the UNCTAD (2012) Principles of Promoting Responsible Sovereign Lending and Borrowing and the UN Resolution 69/319 to guide responsible sovereign borrowing and lending as well as debt restructuring in a national and international context.

Africa

  • Financial Conditions Indicator (FCI) will provide an assessment of the financial conditions in clusters of developing countries.. On the basis of economically meaningful clusters, the new generation of UNCTAD FCI will provide a useful diagnostic tool for countries with data inadequacies.
  • Developing country capital account management: Capital controls and other measures to regulate capital flows are key elements to stem the massive capital flight from developing countries at the onset of the COVID-19 crisis, hence preventing sharp currency depreciations and declines in domestic asset prices, as well as to avoid a new wave of increasing in external debt. The capital account management measures to regulate capital flows in selected developing countries will be studied and the type of measures needed to confront the disruptive effects of external shocks as the COVID-19 will be analyzed.
  • Tax Policy Framework for African Countries will undertake analytical work on a Tax Policy Framework to guide countries in strengthening tax policy for increased domestic resource mobilization. African countries’ debt-to-GDP ratios grew by about 50 per cent, from 39.5 per cent of GDP in 2011 to 61.3 per cent of GDP in 2019. The surge in debt was due to a number of factors, including rising access to commercial finance by some of the most vulnerable LICs associated with massive global liquidity push factors and the commodity price shocks of 2014 that saw revenues from commodity exports decline significantly. Consequently, Debt-to-GDP ratios were of concern even before the pandemic. Quick and commendable policy responses to combat the COVID-19 crisis have meant that governments increased spending, as revenues declined significantly. This workstream will examine direct and indirect taxation gaps and how these can be exploited to formulate and implement policies to expand fiscal space and domestic resource mobilisation.

Asia Pacific

  • Sustainable Development Finance Assessment (SDFA) framework will identify the development finance needs of selected beneficiary countries to achieve the 2030 Agenda and how to make this compatible with external financial sustainability and public debt sustainability, starting with Pakistan and Sri Lanka.
  • Developing country capital account management: Capital controls and other measures to regulate capital flows are key elements to stem the massive capital flight from developing countries at the onset of the COVID-19 crisis, hence preventing sharp currency depreciations and declines in domestic asset prices, as well as to avoid a new wave of increasing in external debt. The capital account management measures to regulate capital flows in selected developing countries will be studied and the type of measures needed to confront the disruptive effects of external shocks as the COVID-19 will be analyzed.
  • Balanced and inclusive fiscal policy packages to address the needs of the most vulnerable will assist Asian Pacific countries to undertake rapid assessments of the impact of the pandemic to estimate their fiscal needs, including by using the tools developed by UNCTAD GPM model. Next, the policy options will be provided with an analysis of their trade-offs and impacts, particularly to ensure that economic recovery measures are in line with the social and environmental goals of the 2030 Agenda.

Latin America and the Caribbean

  • Innovative financing instruments and initiatives of the FfD agenda will explore policy options developed during the Financing for the Development (FfD) in the Era of COVID-19 and Beyond Initiative (co-convened by Canada, Jamaica and the United Nations) to alleviate the liquidity constraints and debt burdens facing many member States in Latin America and the Caribbean. Among the potential instruments and initiatives being studied in-depth are the regional distribution of Special Drawing Rights (SDRs), state-contingent debt instruments, debt swap initiatives, multilateral funds, and a multilateral credit rating agency.
  • Developing country capital account management: Capital controls and other measures to regulate capital flows are key elements to stem the massive capital flight from developing countries such as happened at the onset of the COVID-19 crisis, with a view to preventing sharp currency depreciations and declines in domestic asset prices, as well as to avoid a new wave of increasing external debt. The capital account management measures to regulate capital flows in selected developing countries will be studied and the type of measures needed to confront the disruptive effects of external shocks as the COVID-19 will be analyzed.
  • Macroprudential agenda will develop a macroprudential policy options document for beneficiary countries in the region. As a region largely comprised of MICs, many Latin American and Caribbean countries lack the fiscal space to effectively respond to the exigencies of the COVID-19 pandemic and have limited access to concessional financing. Although many countries in the region have retained access to international capital markets following a brief reversal in the first half of 2020, debt burdens have increased and risks to financial stability remain. ECLAC will evaluate the use of macroprudential measures to support policy responses and strategies for countries in Latin America and comparative experiences in Africa and Asia. This research will form the basis of the macroprudential policy options document for Latin American and Caribbean Member States.