At recent gatherings of G7 leaders, NATO members, and G20 foreign ministers, it was clear to everyone that the world is facing a confluence of emergencies unlike anything we have seen in decades. International tensions have risen to alarming heights on the back of increasing food and energy insecurity, depreciating currencies, looming debt crises, the ongoing COVID-19 pandemic, the intensifying effects of climate change, and armed conflicts.
Previously a forum for tackling financial and economic problems, the G20, chaired by Indonesia this year, is being pushed into perilously sensitive terrain. The group’s Leaders Summit in mid-November will be critically important; but we cannot wait until then to address today’s intertwined crises. The G20 should launch a virtual (online) process to start working toward a common, coordinated response in advance of its November summit.
According to the World Food Program (WFP), more than 800 million people are now chronically hungry, with up to 323 million facing the prospect of starvation. Energy prices have soared, and COVID-19 continues to rage through the world’s under-vaccinated populations (only 16.5 percent of people in low-income countries have been fully vaccinated). Moreover, some 60 percent of low-income countries are in debt distress, and communities around the world are experiencing droughts, floods, wildfires, and other symptoms of climate breakdown.
In April, UN Secretary-General António Guterres warned that today’s confluence of crises “could throw up to 1.7 billion people – over one-fifth of humanity – into poverty, destitution, and hunger on a scale not seen in decades”. But though the situation is perilous, we are not powerless to change it. Some multilateral initiatives have already been launched to address debt, energy, and food insecurity. To be effective, however, such efforts must be coordinated and comprehensive. Our problems are too interconnected to be addressed piecemeal.
The immediate priority is to ensure fair prices and secure supplies across food and energy markets. At least USD 10 billion is needed to bridge the WFP’s financing shortfall this year. So far, international institutions and many governments have responded to the food crisis with initiatives such as the Global Alliance for Food Security, which was launched this spring to coordinate humanitarian financing and investments in food-system resilience. And more than 80 countries have endorsed a US-led Roadmap for Global Food Security Call to Action, and there have been important regionally focused summits such as the Mediterranean Ministerial Dialogue on the Food Security Crisis and the Uniting for Global Food Security Ministerial Conference.
But even though it is well known that open trade is crucial to containing food insecurity, more than 20 countries have imposed restrictions on food exports (through export licenses, taxes, or outright bans). While World Trade Organisation member states recently agreed to exempt the WFP’s humanitarian purchases from export restrictions, that is not enough. We need to take full advantage of our knowledge of how the global food market operates both in the short and long run, and in terms of both supply and reserves.
To that end, major countries holding grain stocks in reserve should release them onto international markets to dampen further price increases; and governments should strengthen the Agricultural Market Information System (AMIS) to improve transparency and monitoring (including of futures markets) and to prevent speculation. We must ensure that more countries can build self-sufficiency through agricultural-import diversification and more resilient domestic production (where possible).
On energy, Italian Prime Minister Mario Draghi, US President Joe Biden, and others have discussed creating an oil-purchasing cartel to negotiate better prices; and there are many new initiatives to accelerate the deployment of renewable energy, improve energy efficiency, and reduce dependence on fossil fuels. But we need to pick up the pace in the run-up to November’s United Nations Climate Change Conference (COP27) in Egypt.
For their part, the International Monetary Fund and the multilateral development banks can and must do more to provide relief from today’s food, energy, and debt crises. Only one-quarter of the IMF’s trillion-dollar balance sheet is currently committed to providing financial assistance and debt-service relief to struggling countries. Likewise, the World Bank could lend more, by negotiating a capital replenishment with its member states and by leveraging its triple-A credit rating to crowd in private capital with loan guarantees.
To address the looming debt crisis, we need a robust pre-emptive multilateral restructuring and relief initiative for developing countries with unsustainable debt burdens. The share of low-income countries in debt distress, or at high risk of it, has doubled from 30 percent to 60 percent since 2015. Making matters worse, many middle-income countries’ credit ratings are being downgraded, which means that they will face higher debt-service costs, especially now that the US Federal Reserve and other major central banks are tightening their monetary policies.
New initiatives to alleviate debt distress will need to go much further than similar recent efforts did. The Debt Service Suspension Initiative (DSSI) that was launched early in the pandemic has since expired, after providing only USD 13 billion in temporary relief to 48 low-income countries. Moreover, it covered only official bilateral creditors, thus excluding the private creditors who hold the largest share of developing-country debt.
Following the launch of the DSSI, the Common Framework for Debt Treatments was established to deal with sovereign insolvency and protracted liquidity problems in DSSI-eligible countries. It is supposed to provide debt relief and restructuring consistent with a debtor’s essential-spending needs and capacity to pay; but, one and a half years after its inception, only three countries have signed up (Chad, Ethiopia, and Zambia), and none has successfully completed a debt restructuring.
With participation in the Common Framework currently limited to the 73 poorest countries, the eligibility criteria may need to be reviewed and expanded, and all creditors – including China and the private sector – will need to be incorporated into the process. Greater debt transparency is essential for effective sovereign-debt renegotiation. While securing Chinese participation may prove difficult, private-sector participation can be required by regulation, particularly in the United Kingdom and the United States, where there is already a precedent for this.
Finally, IMF surcharges (extra fees charged to highly indebted borrowing countries) should be suspended immediately. The number of countries incurring such costs has already risen from nine to 16 since the pandemic began, and the IMF projects that the total could rise to 38 by 2025.
We are facing an unprecedented confluence of crises that could gravely jeopardise our future. Once again, the world needs the G20 to step up and act with resolve.
This commentary is signed by: Philippe Aghion - Professor of Economics, Collège de France & London School of Economics; María Elena Agüero - Secretary General of Club de Madrid; Abdur-Rauf Al Rawabdeh – Prime Minister of Jordan (1999-2000) and President of the Senate (2013-15); Abdulaziz Altwaijri – former Director-General of ISESCO; Oscar Arias – President of Costa Rica (1986-90; 2006-10); Jan Peter Balkenende – Prime Minister of the Netherlands (2002-10); Kaushik Basu – President of the International Economic Association; Chief Economist of the World Bank (2012-16); Erik Berglof – Professor at the London School of Economics and Head of Economics at AIIB; Sali Berisha – President of Albania (1992-97) and Prime Minister of Albania (2005-12); Ana Birchall – Deputy Prime Minister of Romania (2018-19); Valdis Birkavs – Prime Minister of Latvia (1993-94); Patrick Bolton – Professor of Finance and Economics, Imperial College London; Professor, Columbia University; Kjell Magne Bondevik – Prime Minister of Norway (1997-2000; 2001-05); Gordon Brown – Prime Minister of the United Kingdom (2007-10); John Bruton – Prime Minister of the Republic of Ireland (1994-97); Robin Burgess – Professor of Economics, London School of Economics; Felipe Calderón - President of Mexico (2006-12); Micheline Calmy-Rey – President of the Swiss Confederations (2007-11); Kim Campbell – Prime Minister of Canada (1993); Fernando Henrique Cardoso – President of Brazil (1995-2003); Wendy Carlin – Professor of Economics, University College London; Hikmet Cetin – Minister of Foreign Affairs of Turkey (1991-94), Deputy Prime Minister (1995) and Speaker of the Grand National Assembly (1997-99); Joaquim Chissano – President of Mozambique (1986-2005); Helen Clark – Prime Minister of New Zealand (1999-2008); Sean Cleary – Chairman of Strategic Concepts; Marie-Louise Coleiro Preca – President of Malta (2014-19); Emil Constantinescu – President of Romania (1996-2000); Diane Coyle – Co-Director of the Bennett Institute for Public Policy, University of Cambridge; Rut C. Diamint – Professor at Universidad Torcuato di Tella; Herman De Croo – Minister of State of Belgium; Dominique de Villepin – Prime Minister of France (2005-07); Kemal Derviş - Minister of Economic Affairs of Turkey (2001-02); Administrator of UNDP (2005-09); Senior Fellow Global Economy and Development, Brookings Institute; Mathias Dewatripont – Professor of Economics, Université libre de Bruxelles; Rut Diamint – Professor at Universidad Torcuato di Tella; Tsakhia Elbegorj – President of Mongolia (2009-17); María Fernanda Espinosa – former President of the United Nations General Assembly, former Minister of Foreign Affairs of Ecuador; Jan Fisher – Prime Minister of the Czech Republic (2014-15); Yasuo Fukuda – Prime Minister of Japan (2007-08); Chiril Gaburici – Prime Minister of Moldova (2015); Ahmed Galal - Finance Minister of Egypt (2013-14); Felipe González – President of the Government of Spain (1982-96); Dalia Grybauskaitė – President of Lithuania (2009-19); Ameenah Gurib-Fakim – President of Mauritius (2015-18); Sergei Guriev – Chief Economist of the EBRD (2016-19); Professor of Economics, Sciences Po; Alfred Gusenbauer – Chancellor of Austria (2007-08); Antonio Guterres – UN Secretary General; Tarja Halonen – President of Finland (2000-12); Bengt Holmström – Nobel Laureate for Economics (2016); Professor of Economics, MIT; Ekmeleddin Ihsanoglu – Secretary General Organization of Islamic Countries (2004-2014); Mladen Ivanic – President of Bosnia and Herzegovina (2014-18); Asad Jamal – Chairman & CEO of ePlanet Capital; Mehdi Jomaa – Prime Minister of Tunisia (2014-15); Lee Jong-Wha – Professor of Economics, Korea University; Chief Economist & Head of the Office of Regional Economic Integration at the Asian Development Bank (2007-13); Ivo Josipovic – President of Croatia (2010-15); Mats Karlsson – Vice-President of the World Bank (1999-2001); Jadranka Kosor – Prime Minister of Croatia (2009-11); Aleksander Kwaśniewski – President of Poland (1995-2005); Luis Alberto Lacalle – President of Uruguay (1990-95); Ricardo Lagos – President of Chile (2000-06); Zlatko Lagumdzija – Prime Minister of Bosnia and Herzegovina (2001-02); Bolivar Lamounier – Director of Augurium; Yves Leterme – Prime Minister of Belgium (2008; 2009-11); Tzipi Livni – Vice Prime Minister, Minister of Foreign Affairs of Israel (2006-09), Minister of Justice (2006-07; 2013-14); Petru Lucinschi – President of Moldova (1997-2001); Nora Lustig – President Emeritus of the Latin American and Caribbean Economic Association; Professor of Latin American Economics, Tulane University; Susana Malcorra – Dean of the IE School of Global and Public Affairs and former Minister of Foreign Affairs and Worship for the Republic of Argentina; Dalia Marin – Professor Emeritus, University of Munich; Colin Mayer – Professor of Management Studies, Saïd Business School, University of Oxford; Rexhep Meidani – President of Albania (1997-2002); Peter Medgyessy – Prime Minister of Hungary (2002-04); Amre Moussa – Secretary-General of the Arab League (2001-11), Minister of Foreign Affairs of Egypt (1991-2001); Rovshan Muradov – Secretary-General of the Nizami Ganjavi International Center; Joseph Muscat – Prime Minister of Malta (2013-20); Mustapha Kamel Nabli – Governor of the Central Bank of Tunisia (2011-12); Piroska Nagy-Mohácsi – Program Director of the Institute of Global Affairs, London School of Economics; Director of Policy, EBRD (2009-15); Olusegun Obasanjo – President of Nigeria (1999-2007); José Antonio Ocampo – Professor of the School of International and Public Affairs, Columbia University; Djoomart Otorbayev – Prime Minister of Kyrgyzstan (2014-15); Anand Panyarachun – Prime Minister of Thailand (1991-92); Timothy Phillips – Co-Chair and Co-Founder of The Project for Justice in Times of Transition; Sir Christopher Pissarides – Nobel Laureate for Economics (2010); Professor of Economics & Political Science, London School of Economics; Rosen Plevneliev – President of Bulgaria (2012-17); Richard Portes CBE – Professor of Economics, London Business School; Founder and Honorary President of the Centre for Economic Policy Research; Romano Prodi - Prime Minister of Italy (1996-98; 2006-08); Jorge 'Tuto' Quiroga – President of Bolivia (2001-02); Ivetta Radicova – Prime Minister of Slovakia (2010-12); Hélène Rey – Professor of Economics, London Business School; José Luis Rodríguez Zapatero – President of the Government of Spain (2004-11); Dani Rodrik – President-Elect of the International Economic Association; Professor of International Political Economy, Harvard University; Mirko Sarovic – President of Bosnia and Herzegovina (2002-03), Deputy Prime Minister (2015-19) and President of the Republic Srpska (2000-02); Hedva Ser – Goodwill Ambassador of UNESCO; Ismail Serageldin – Vice-President of the World Bank (1992-2000) and Co-Chair of Nizami Gangavi International Center; Joseph Stiglitz – Chief Economist of the World Bank (1997-2000); Nobel Laureate for Economics (2001); Professor, Columbia University; Petar Stoyanov – President of Bulgaria (1997-2002); Laimdota Straujuma – Prime Minister of Latvia (2014-16); Boris Tadic – President of Serbia (2004-12); Ernst-Ludwig von Thadden – President, Mannheim University (2012-19); Professor, Economics Department; Eka Tkeshelashvili – Deputy Prime Minister of Georgia (2010-12); Jigmi Thinley – Prime Minister of Bhutan (2008-13); Aminata Touré – Prime Minister of Senegal (2013-14); Cassam Uteem – President of Mauritius (1992-2002); Vaira Vike-Freiberga – President of Latvia (1999-2007) and Co-Chair of Nizami Gangavi International Center; Raimonds Vejonis – President of Latvia (2015-19); Filip Vujanovic – President of Montenegro (2003-18); Leonard Wantchekon – Founder & President of the African School of Economics; Professor of Politics and International Affairs, Princeton University; Beatrice Weder di Mauro – President, Centre for Economic Policy Research (CEPR); Professor of International Economics, Graduate Institute in Geneva; Shang-Jin Wei – Chief Economist of the Asian Development Bank (2014-16); Professor of Chinese Business and Economy & Finance and Economics, Columbia Business School; Yashar Yakish – Minister of Foreign Affairs of Turkey (2002-03); Professor Justin Yifu Lin – Chief Economist & Senior Vice-President of the World Bank (2008-12); Dean of Institute of New Structural Economics, Peking University; Professor Yu Yongding – President of the China Society of World Economy (2004-06); Director of the Institute of World Economics and Politics, China Academy of Social Sciences; Kateryna Yushchenko – First Lady of Ukraine (2005-10); Viktor Yushchenko – President of Ukraine (2005-10); Valdis Zatlers – President of Latvia (2007-11).
José Ramos-Horta, a Nobel Peace Prize laureate, is President of Timor-Leste.
Danilo Türk is President of Club de Madrid and a former president of Slovenia (2007-12).
Laura Chinchilla is a former president of Costa Rica (2010-14) and Vice President of Club de Madrid.
Han Seung-soo is a former prime minister of South Korea (2008-09) and Vice President of Club de Madrid.
Banner image: Locals queue for food aid in Semarang City, Indonesia - August 19, 2021. Credit: Shutterstock.
Copyright: Project Syndicate, 2022 – www.project-syndicate.org.