The proposal diverts more funds back to rich countries
The recent letter signed by over 200 former world leaders over the weekend about ‘helping to vaccinate the world’s poor’ has been met with a great deal of fanfare this week. Yet as always, the devil was in the detail: what was also being proposed was a mechanism to strangle the recovery of the world’s Low Income Countries (LICs).
Most of the focus was on the signatories’ plea to the G7 to pay two-thirds of the US$66 billion cost of the Covid vaccines for LICs. As Gordon Brown put it, this was just 30 pence per person in the UK — “a small price to pay for the best insurance policy in the world.” But how was the rest of the bill to be paid for?
The signatories suggested that the IMF could allocate what are known as “special drawing rights” (SDRs) to LICs so that they could pay the remaining third of the vaccine bill. SDRs are supplementary assets created by the IMF and allocated to members — often in times of trouble. In the wake of the 2008 financial crisis, almost $250 billion was allocated through this mechanism.
There was nothing original in this financing suggestion. In late March, the IMF already strongly supported SDRs of US$650 billion to be allocated across the world. But if funds are distributed in the same way as in 2008, only $7 billion would go to poor countries.
So what’s changed? The $22 billion proposed is an increase. Of course this money is urgently needed in LICs. It could at least start the ball rolling on the US$200 billion estimated by the IMF to be needed in poor countries to respond to the economic and broader health crisis triggered by the pandemic. Yet what is now proposed by world leaders is that all of this additional money should be hypothecated to global pharmaceutical companies: this will pay the cost of the Covid vaccines, for which Boris Johnson and EU leaders refuse to waive patent rights.
Instead of helping to refloat LIC economies, under this plan the money allocated by the IMF will revert to rich countries, further boosting their recovery. It will not help the recovery of LICs. And this is all assuming that the G7 does step in and shoulder two-thirds of the cost. Even if pledged, the chances of this happening in the midst of the Covid economic crisis and Johnson’s proposed cut to the aid budget are slim: a 2015 OXFAM study found that only 47% of aid pledges are ever realised. So what will make up the balance? IMF loans, anyone?
The new proposal is more evidence of how the response to Covid has seen global inequality explode. Small wonder that many people in LICs are so reluctant to take vaccines that countries like the Democratic Republic of Congo have had to return their doses: for many, they are part of the problems in their lives, not the solution.
Toby Green is the author of The Covid Consensus: The New Politics of Global Inequality (Hurst).