Developing economies have had to deal with an unholy trinity of COVID-19, debt, and the climate crisis with no respite in sight, and with limited resources and instruments at their disposal.
The developed world’s assistance to developing countries during the pandemic has been mixed in all three areas. What has been billed the UN Decade of Action runs the risk of becoming a decade of inaction if leaders of systemically important countries skirt their responsibility by choosing rhetoric over action. What’s at stake for this G20 summit? Nothing less than the G20’s credibility and the trust of the rest of the world in its ability to rise to the challenge posed by global crises.
In the wake of the 2008 financial crisis, the summits in Toronto and Seoul recognised the need to narrow the development gap (between rich and poor) and reduce poverty in order to achieve strong, sustainable, and balanced growth and a more robust and resilient economy for all. The impact of policy actions on Least Developed Countries (LDCs) was singled out as requiring particular attention.
Africa keeps lagging behind
In the ensuing decade, this commitment has become diluted. The pandemic accentuated this even further. While the G20 was quick to adopt the Debt Service Suspension Initiative last year to assist developing countries in debt distress, the design was such that it was not attractive for all low-income debtors, and middle-income countries did not qualify. Africa as a whole experienced negative growth for the first time in a quarter century, and according to the latest UNCTAD report, LDCs recorded their worst performance in three decades. Up to 40 million more people will fall into extreme poverty in Africa by yearend. Economic insecurity has risen and vulnerable economies, which are most in need of financing, have seen such costs escalate at a time when the provision of social protection by the state is essential. Low vaccination rates compound the limited fiscal space as economies battle to return to normality. The IMF has calculated that the cost of vaccinating everyone in the developing world would be $50bn, but yet the advanced economies have not been able to convert their vaccination pledges to doses. By the end of September less than 15% of vaccine doses pledged by the G7 and the EU had been delivered. Only 60 million Africans have been fully vaccinated so far. Of the more than 6 billion vaccines administered globally, Africa accounts for only 2%.
Development aid is an important source of finance for low-income countries, but in 2020 net bilateral aid to LICs dropped by 3.5%, while aid to sub-Saharan Africa contracted by 1%, according to the OECD-DAC. This decline was compensated by increases in multilateral aid flows, which saw overall aid to developing countries grow to its highest level ever, $161 billion. But these flows were minuscule compared to the fiscal measures adopted by advanced economies to counter the pandemic (some $11.7 trillion). The same OECD report noted that non-grant aid to developing countries grew in 2020 to 22% of gross bilateral ODA, up from 17% in previous years. And while such concessional lending was critical for developing economies as other sources dried up, LDCs in particular have also seen the terms of such loans harden.
What does the T20 recommend to the G20?
Bearing the above in mind, the T20 Task Force on 2030 Agenda and Development Cooperation recommended to the Italian G20 Presidency that it push for increased G20 collective action in support of Agenda 2030 at the UN; that it update the G20 Action Plan on the 2030 Agenda for sustainable development, based on the idea of “partnerships for development”, emphasising the G20 commitment to multilateral action; and establish strong coordination between itself and the incoming Indonesian presidency in 2022and the Indian presidency the year after to focus on identifying effective monitoring systems to track performance and ensure a more coordinated ownership between the global North and South in tackling complementary challenges.
In addition, the task force made a number of specific recommendations around debt relief, tackling the interconnectedness of food security, optimising the developmental dimensions of technology, harmonising carbon trading mechanisms and using tracking tools and indices for better coordinated aid programming among others.
The task force emphasised the imperative of addressing debt relief in both LICs and LMICs with the aim to ensure increased ownership for recipient countries, particularly in Africa. In this vein, the task force supported the idea to launch a Liquidity and Sustainability Facility (LSF) as a special purpose lending vehicle to support LICs and LMICs sovereigns in advancing sustainable development initiatives and, more immediately, facilitate access to liquidity.
The interconnectedness of policies related to better food systems and security requires the establishment in the G20 of a permanent joint Thematic Group on Food that brings together the Agriculture, Finance, Development and Health Ministers to engage in policy dialogue and transparency in food supply chains, support nutrition-sensitive interventions, reach consensus on how to repurpose fisheries subsidies towards sustainable and nature-based practices and promote an integrated approach to food governance to strengthen urban-rural linkages while empowering new actors such as small and intermediary cities.
The pandemic again demonstrated both the enabling developmental role that technology and digitalisation can play as well as how its absence is an accelerator of inequality. Developing countries need to participate in the development of these technologies, not simply be consumers of them. Science, Technology and Innovation missions for SDGs in LMICs should be supported, based on country level priorities, boosting multilateral and regional efforts to enable financing for technology facilitation that can promote global public goods for LMICs. The G20 and engagement groups such as the B20 should also support and encourage public-private sector initiatives that accelerate technology diffusion and adoption by women and that prepare them to successfully participate in the digital labour force. In addition, the G20 should identify tools to strengthen financing for women-led businesses and grow capital market access to equity, and crowdfunding financing for women-led businesses.
As the urgency to scale up action to counter the climate crisis has dominated many of the public debates in the last year, so too has the need to incentivise all countries to be more ambitious in their climate commitments. The G20 members have recommitted to the $100 billion annual pledge to support developing countries, but the advanced countries have to put their money where their mouth is. Many developing countries’ NDCs are conditional on external support. At the same time, many G20 countries have carbon trading mechanisms aimed at creating incentives to reduce carbon emissions, but which need to be more sensitive to their impacts on poorer countries and their ability to make a just transition away from fossil fuels. In the regard, the task force called on the G20 to support initiatives that harmonise and increase interoperability among G20 countries’ carbon trading mechanisms. In addition, the G20 should launch measures to push high emitters to incorporate zero-carbon fuels faster. As a pilot, the G20 should identify measures to support the fishing industry to invest in fleet changes that are compatible with zero-carbon fuels.
Lastly, the G20 should endorse the construction at the UN level of a “Multidimensional Livelihoods Index” to enable the design of a coordinated livelihood and resilience-based programming approach across agencies and organisations, informed and based on the livelihood index, and implemented by humanitarian and development players.
High stakes at the G20
There is a lot at stake in Rome on 30-31 October. If the G20 leaders show boldness and convert rhetorical ambition to precise action it can define the path towards just transitions, improved livelihoods and healthy societies not just in their own countries but across the world. The G20’s impact lies in its collective leadership in guiding and galvanising global processes, none more important than the SDGs; its credibility lies in its ability to deliver, especially in supporting developing countries – and here there is a greater responsibility on its richer members to make good on their current financing commitments and go beyond, if the long-term development effects of the last two years are to be mitigated and significant progress is to be made in achieving the SDGs.