WASHINGTON
As policy-makers in emerging markets and developing economies look to shift from pandemic response to recovery, they’ll need to be careful not to prematurely withdraw fiscal support and look to increase the efficiency of public spending.
According to a World Bank Group report issued on Friday, debt loads in emerging markets and developing economies have spiked during the pandemic.
The challenge is acute in low-income countries – half of which were in debt distress or at high risk of debt distress before Covid-19 arrived.
This comes after a decade that saw the fastest, biggest, and broadest expansion of debt levels around the world. Still, the debt burden will be felt long after the virus abates, as servicing costs rise, slowing recoveries and hindering efforts to address other development challenges – including climate change.
The report said that reporting on debt isn’t a very straightforward exercise. Global debt surveillance today depends on a patchwork of databases with different standards and definitions.
As WBG President David Malpass wrote in the report’s foreword, achieving “greater debt transparency is a vital step in the development process. It facilitates new, high-quality investment, reduces corruption, and provides accountability.”
The report said that the picture of commodity prices isn’t rosy. According to the latest Commodity Markets Outlook, energy prices are expected to average more than 80 percent higher in 2021 compared to the previous year. Since energy is a critical commodity for food production and heating, these soaring prices can have downstream implications.
Higher energy prices have already affected fertilizer prices, in turn increasing the cost of food production. However, in the latter half of 2021, food commodity prices have begun to stabilise in response to favourable global supply outlook, but they are still above pre-pandemic levels.
The report said that the World Bank has approved financing for vaccine purchase and deployment in over 64 countries, amounting to $6.3 billion. The World Bank approved $153 million financing for vaccine purchase for Pakistan.
So far, almost 300 million Covid vaccine doses are under WB contract for developing countries. The Bank has also partnered with COVAX and with the African Union to support the Africa Vaccine Acquisition Trust (AVAT), which will help countries purchase and deploy vaccines for up to 400 million people.
Overall, the World Bank Group is supporting over 100 countries to help address the health emergency, strengthen health systems and pandemic preparedness, protect poor and vulnerable people, support businesses, create jobs and jump start a green, resilient, and inclusive recovery. The report said that 2021 has shown that the impact of the pandemic is far-reaching and has touched every possible area of development.
With the poor and the vulnerable bearing the brunt of it, the pandemic is dealing a severe setback to ending poverty and boosting shared prosperity. But it isn’t all doom and gloom. As the year went on, there were some positive developments — the global economy grew, goods trade rebounded, food commodity prices began to stabilise, and remittances registered a robust recovery. However, with newer variants and unequal access to vaccines, there is still more work to be done, said the report.
