(30 March 2020) United Nations Conference on Trade and Development (UNCDAT) has called for $2.5 trillion coronavirus crisis package for developing countries including $1 trillion debt cancellation. Here is the summary of the UNCTAD proposal:
- First, a $1 trillion liquidity injection; a kind of helicopter money drop for those being left behind through reallocating existing special drawing rights at the International Monetary Fund and adding a new allocation that will need to go considerably beyond the 2009 allocation made in response to the global financial crisis.
- Second, a debt jubilee for distressed economies. An immediate debt standstill on sovereign debt payments should be followed by significant debt relief. A benchmark could be the German debt relief administered after World War II, which cancelled half of its outstanding debt. On that measure, around $1 trillion should be cancelled this year overseen by an independently created body.
- Third, a Marshall Plan for a health recovery funded from some of the missing official development assistance (ODA) long promised but not delivered by development partners. UNCTAD estimates that an additional $500 billion – a quarter of the last decade’s missing ODA – largely in the form of grants should be earmarked for emergency health services and related social relief programs.
- Finally, capital controls should be given their legitimate place in any policy regime to curtail the surge in capital outflows, to reduce illiquidity driven by sell-offs in developing country markets and to arrest declines in currency and asset prices.
- The proposed package is similar in size to the amount that would have been delivered to developing countries over the last decade if countries in the Development Assistance Committee of the Organization for Economic Co-operation and Development had met their 0.7% ODA target.