Global Funding to End the Pandemic By Jeffrey D. Sachs
A new allocation of up to $ 650 billion of IMF reserve assets, special drawing rights, would ensure that governments have the means to tackle the coronavirus pandemic and start on the path to a recovery driven by the investment. We must seize this crucial opportunity to cooperate effectively for the benefit of humanity.
NEW YORK – This week’s spring meetings of the International Monetary Fund and the World Bank offer a historic opportunity for financial cooperation. Major economies, including the United States, the European Union, China and other G20 countries, have already shown their support for a new allocation of 650 billion dollars value of the IMF’s reserve asset, Special Drawing Rights (SDRs), to ensure that governments in low- and middle-income countries have the means to fight the COVID-19 pandemic and engage on track to an investment-led recovery. With leadership, boldness and creativity, this global financial cooperation can help end the pandemic.
Mass vaccination is essential. Less than a year after SARS-CoV-2, the virus that causes COVID-19, was first identified and sequenced, with financial backing from governments – including the US, UK, Germany, Russia, China and India – has enabled several companies to deploy safe and effective vaccines. Wealthy countries that quickly negotiated favorable deals with vaccine manufacturers have so far received most of the doses. But to end the pandemic, all countries must achieve full immunization coverage as soon as possible. In concrete terms, the goal should be at the end of 2022 at the latest.
Such an unprecedented global enterprise requires strong cooperation, including financial support. However, the urgency must be clear to all. As long as COVID-19 persists at high transmission rates around the world, the pandemic will continue to disrupt global production, trade and travel, and will also result in viral mutations that threaten to undermine previously acquired immunity against past infections and vaccinations. Worse yet, on the current trajectory, COVID-19 may well become endemic in many parts of the world, imposing high health and economic costs for years to come. As Secretary of the US Treasury Janet Yellen highlighted this week, all countries therefore share a keen interest in ending the pandemic everywhere.
Governments around the world have created the COVID-19 Tool Accelerator (ACT-A), which includes the COVID-19 Vaccine Global Access (COVAX) facility, the vaccine pillar of ACT-A, to ensure universal control SARS-CoV-2. But while ACT-A and COVAX have established global plans for vaccines, tests and treatments, the plans urgently need to be stepped up for two closely related reasons.
First, the operational objective currently used by COVAX – a minimum of 27% of the population of all eligible countries vaccinated by the end of this year – must be brought to the vaccination of all adults by the end of 2022. This is necessary to end the pandemic and reduce the risks of further mutations.
Second, there is an urgent need to plan until the end of 2022, given the delays in scaling up production and supply chains of vaccines and other essentials. Yet ACT-A and COVAX remain underfunded even for 2021: The $ 11 billion governments have allocated to date leaves a funding gap of $ 22 billion for this year – a deficit that has so far delayed the necessary planning until the end of 2022. In the meantime, the current shortage of vaccines is leading countries to scramble to jump the queue, including paying premium price. This highlights the urgent need to ensure that all countries, including the poorest, can achieve full immunization coverage in an equitable and timely manner.
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The additional sums needed to ensure universal immunization coverage by the end of 2022, and other supplies of COVID-19, are modest – perhaps $ 50 billion for ACT-A. That’s a negligible amount compared to the huge global benefits of ending the pandemic and the massive spending related to the pandemic by governments in high-income countries around the world. The U.S. government alone spent around $ 5 trillion in emergency spending between March 2020 and March 2021.
To do its job, ACT-A (including COVAX) needs advance funding to cover vaccine needs through 2022. As increasing production of vaccines (and some other commodities) requires within 6 to 12 months, the $ 50 billion should be guaranteed in the coming weeks, so that ACT-A and COVAX can work with manufacturers to ensure the necessary supplies. The allocation of new SDRs by the IMF offers a unique – and perhaps the only – opportunity to secure this financing.
When the new SDRs are issued, about $ 20 billion in new reserves will go directly to the poorest countries. In addition, about $ 100 billion or more allocated to rich countries will be recycled to the IMF to be used for long-term loans at low interest rates. Managing Director of the IMF Kristalina Georgieva worked closely and creatively with G20 governments to design this innovative and promising approach. A great idea is to use SDRs to strengthen the IMF’s Poverty Reduction and Growth Trust (PRGF), the IMF’s financing window for poor countries.
There is an important precedent here. In 2015, the IMF established a Disaster Relief and Containment Fund to help provide emergency financing for the Ebola response in Guinea, Liberia and Sierra Leone. This time, PRGT funding could be made conditional on its use for ACT-A and COVAX-related purchases and other COVID-19 control measures that the borrowing government documents to the IMF (such as repayments). COVID-19 vaccines that have been contracted by the Member State outside of COVAX).
ACT-A is currently preparing funding estimates that the 92 low- and middle-income countries of the world eligible supporting COVAX will require vaccines, tests, therapeutics and other supplies until the end of 2022. Based on estimated funding needs, an ACT-A financial plan can be established for each country, which will be supported by SDRs and PRGT Funds.
In the coming weeks, a rational plan to finance the COVID-19 balance of payments needs of all countries through the end of 2022 is expected to emerge. The IMF was created to deal with such a balance of payments emergency. Access to IMF financing will protect the well-being and macroeconomic stability of individual countries and the world as a whole. We must seize this crucial opportunity for the United Nations, the IMF and major governments – including the United States, China, Russia, the EU, Japan, the United Kingdom and others – to cooperate effectively in the interest of humanity.