The International Monetary Fund (IMF) on Friday said Cambodia, Nigeria, Pakistan, and Rwanda will, on average, need additional annual financing of over 14 percent of GDP to meet the Sustainable Development Goals (SDGs) by 2030. This implies some 2½ percentage points per year above the pre-pandemic level. Put differently, without increasing financing, COVID-19 may have delayed progress toward the Sustainable Development Goals by up to five years in the four countries.
The setback, the Fund said, could be much larger if the pandemic results in permanent economic scarring. Lockdown measures have significantly slowed economic activity, depriving people of income and preventing children from attending school. “We estimate that the long-lasting damage to an economy’s human capital, and hence growth potential, could increase the development financing needs by an additional 1.7 percentage points of GDP per year,” the IMF said on its blog.
Nigeria’s economy grew 0.1 percent year-on-year in the fourth quarter of 2020, representing the first positive quarterly y/y growth since Q1-2020, an indication that the economy exited the Covid-19 induced recession. However, IMF sees Nigeria’s economy growing strongly at a projected rate of 2.5 percent in 2021, moderating to 2.3 percent in 2022, driven by vaccine rollout.
In a new study, the Washington-based IMF proposed a framework for developing countries to evaluate policy choices that can raise long-term growth, mobilize more revenue, and attract private investments to help achieve the Sustainable Development Goals. Even with ambitious domestic reforms, most low-income developing countries will not be able to raise the necessary resources to finance these goals. “They need decisive and extraordinary support from the international community—including private and official donors and international financial institutions,” the IMF said. Until recently, the IMF noted that development progressed steadily, albeit unevenly, with measurable success in reducing poverty and child mortality. But even before the pandemic, many countries were not on track to meet the Sustainable Development Goals by 2030.
COVID-19 hit the development agenda hard, infecting more than 150 million people and killing over three million. It plunged the world into a severe recession, reversing income convergence trends between low-income developing countries and advanced economies. The IMF has provided emergency financing of $110 billion to 86 countries, including 52 low-income recipients, since the pandemic started. “We have committed $280 billion overall, and our planned general SDR allocation of $650 billion will benefit poor countries without adding to their debt burdens. The World Bank and other development partners have also offered support. But this alone is not enough,” the Fund said.
According to the IMF countries will have to find the right balance between financing development and safeguarding debt sustainability, between long-term development objectives and pressing immediate needs, and between investing in people and upgrading infrastructure. They will have to continue attending to the matter at hand—managing the pandemic. At the same time, however, they will also need to pursue a highly ambitious reform agenda. They need to prioritize, Fostering growth, strengthening the capacity to collect taxes, enhancing the efficiency of spending, and Catalyzing private investment.