PM for global leadership, robust actions to address liquidity crisis now and post-Covid era

Strong leadership from G7, G20, OECD countries needed, prime minister says

Prime Minister Sheikh Hasina on Monday underscored the need for ambitious and concentrated global action plans to address the liquidity crisis and sovereign debt burdens resulting from the Covid-19 pandemic.

The prime minister said this in a video message delivered at the “Financing for Development in the Era of Covid-19 and Beyond Initiative: International Debt Architecture and Liquidity” meeting.

Canadian Prime Minister Justin Trudeau, Jamaican Prime Minister Andrew Holness and UN Secretary General António Guterres convened the meeting of world leaders to urge the international community to take additional and urgent action to ensure a robust economic recovery.

The high-level virtual meeting aims to underscore the urgency of the need for more audacious and concrete action to provide liquidity and address debt vulnerability.

Moderated by BBC news anchor Laura Trevelyan, the meeting of heads of state and government featured opening remarks by António Guterres, Justin Trudeau and Andrew Holness.

Sheikh Hasina said strong leadership is needed from the G7, G20 and OECD (Organisation for Economic Co-operation and Development) countries.

She said developed countries, MDBs (multilateral development banks) and IFIs (International financial institutions) should scale up liquidity for vulnerable countries measures such as the large and new “Special Drawing Rights” allocation.

“International debt architecture also needs to be revisited for suitable reform,” she said.

The prime minister also put emphasis on fulfilling the 0.7% ODA commitment of the developed countries. “They should expand fiscal stimulus, concessional finance and debt relief measures for vulnerable economies.”

Finally, Sheikh Hasina said there must be new international support measures for the graduating LDCs at least till 2030, commensurate with the SDGs.

She said more than one year has elapsed since the outbreak of Covid-19 and the world is still struggling to overcome the resulting socio-economic challenges. “The UN has estimated that the global economy is expected to lose nearly $8.5 trillion in output over the next two years.”

Talking about Bangladesh, she said the government adopted comprehensive plans to minimise the impact of the pandemic on the lives and livelihoods of people.

“We immediately rolled out a stimulus package worth more than Tk1.24 trillion, equivalent to $14.58 billion, which is around 4.44% of our GDP.”

Sheikh Hasina mentioned that the government has provided adequate liquidity and loanable funds to the market to ensure uninterrupted business operation. “We undertook supportive policy interventions to minimise shocks on the foreign exchange market, foreign trade and finance, remittances, external borrowing etc.”

Despite the pandemic, Bangladesh has still been comfortably servicing its debt with the reputation of “non-defaulting party” because of the prudent borrowing policy of the government, the prime minister said.

According to the UN website, the Covid-19 pandemic, which has claimed more than 2.6 million lives and resulted in more than 120 million confirmed cases to date, has gone beyond a health and humanitarian crisis to also become an unprecedented global development emergency.

Unprecedented action over the last year has helped control the spread of the deadly virus and mitigate its socioeconomic impact.

These emergency policies succeeded in flattening the curve of contagion and saved lives, but they also resulted in a 4.3% drop in global GDP, the first increase in extreme poverty since 1998, and the equivalent of 255 million jobs being lost in 2020.

Covid-19-related economic shocks have already caused rating agencies to downgrade the credit worthiness of 42 countries since the start of the pandemic, including six developed countries, 27 emerging market economies, and nine least developed and low-income countries.

The current economic situation has also exacerbated inequalities between and within countries that pose significant threats to global efforts to build back better. The risk of a global sovereign debt crisis, in addition to the fourth global debt wave that the world entered prior to the pandemic, is now greater than ever.

Following a high-level roundtable with IMF Managing Director Kristalina Georgieva, World Bank Group President David Malpass, OECD Secretary-General Ángel Gurría and WTO Director-General Ngozi Okonjo-Iweala, approximately 20 heads of state and government will recommend measures to overcome debt and liquidity problems to help the world recover better and invest in the SDGs.