by Navamohana Krishnan S
“Responses to the pandemic must go beyond mitigation and containment measures and towards reforming the very structural conditions of the global economy that have enabled the crisis to take hold and worsen” said Dr Celine Tan, School of Law, University of Warwick. She was speaking in a webinar “Towards A New Architecture of International Public Finance in the COVID-19 Era” on 30th October 2020. This webinar was the first among the yearlong extended lecture series organised by Chinmaya Vishwavidyapeeth (Deemed to be University), Ernakulam in association with Weeramantry Centre for Peace, Justice and International Law, titled “Alternative Approaches to International Law (AAIL 2020-21)”.
Dr Celine highlighted the urgent need of countries to massively scale up finance and other resources needed to tackle both the immediate health, social and economic impacts of the pandemic and the long-term recovery measures once the crisis abates. The situation of developing countries was much more serious especially when it came to countries that have already entered the pandemic with much more fragile and perilous economic conditions. Many such developing countries have borrowed from official and private creditors even before the pandemic started and the arrival of the pandemic just made it worse and has put these countries at the high risk of facing debt distress.
The speaker pointed out that the responses from international institutions like the International Monetary Fund (IMF), World Bank, multilateral and regional development banks, bilateral donors, and private philanthropic foundations have been swift. They have pledged in vast sums of money to support health, economic and other social conditions in the developing countries. However, Dr Celine argued that there was a need to scrutinise the political environment and institutional architecture through which the COVID19 funds were being mobilised and disbursed through these institutions. This is because the amount of financial resources extended to developing countries, and the terms that accompany such financing packages are often determined or influenced by the dominant donors of these institutions. There exist several conditionalities and priority measures imposed on the countries and communities which are at the receiving end of such funds. Therefore scrutiny, accountability and efficacy of funding would be as important as the amounts committed by developed countries and other private institutions.
Dr Celine opined that the current financing architecture faces governance and regulatory shortcomings as they lack clear and consistent oversight. As a result, they not only impact the short-term state responses to the pandemic but also have the potential to endanger longer-term sustainable development. This could happen in three ways: Firstly, the financial resources mobilised and disbursed by these institutions is most likely to fall as they are largely dependent on the political will of the donors and interests of the creditor states. Voluntary contributions remain to be the main source of funds for institutions like the IMF and not mandatory contributions. The cost of borrowing for developing countries continues to go higher and the IMF has imposed fiscal ceilings and fiscal consolidations over them. “Debt relief for countries indebted to the IMF or the IDA are also funded through donor contributions rather than outright cancellations by the institutions themselves.” Dr Celine indicated that the world doesn’t have a sovereign global insolvency mechanism/institution to help the developing countries out of this debt trap.
Secondly, this increasing reliance on donor-dominated institutions to design and deliver COVID-19 financing will mean that donor interests will drive the short, medium and long-term solutions for many developing countries. Development finance offered by these institutions is considered to be a political process as they alter the economic structure of the recipient countries. These interventions often reconstitute state-society relations and the states’ broader relationships with external actors.
Lastly, “the large-scale financial response of the international community will not succeed if not matched by a similarly large-scale framework of policy coherence and accountability”. Dr Celine insisted that there existed a lack of cooperation and coordination in the mobilisation and dispersal of development funds at both international and national levels. The overlapping rules and regulations of countries prove to be an administrative burden on these institutions to effectively mobilise development finance. Responses to the pandemic must go beyond mitigation and containment measures and towards reforming the very structural conditions of the global economy that have enabled the crisis to take hold and worsen.
The speaker then presented her ideas focused on a new architecture of international public finance. “While it is important to advocate for immediate relief and support, it is as important to shine a spotlight on the framework of public finance and international development cooperation that will mobilise pandemic-related funds.” Dr Celine expressed the need for systematic evaluation of mechanisms used by international institutions to mobilise and disperse the funds. She opined that the current model of discretionary aid by countries to these institutions is not sustainable, accountable or redistributive, due to the existing global inequalities. Hence, it needs to be replaced by collective and mandatory pooling of funds. International public finance should be utilised to properly redistribute global wealth and not stop with mere mitigation of economic externalities.
Nizamuddin Ahmad Siddiqui from Weera Centre welcomed the gathering. Nithin Ramakrishnan, from Chinmaya Vishwavidyapeeth moderated the Q/A session that followed the lecture. He thanked Dr Celine Tan for the informative and engaging lecture. Mohammad Umar the Founder Advisor of the Weera Centre also spoke at the lecture. Dr Celine emphasized that rethinking and reforming the international legal and regulatory architecture that governs the global economy was the need of the hour.