Unequal access to vaccines will widen the gap between rich and poor nations, leading to low-income countries requiring billions of dollars in investment to alleviate poverty and hunger, according to Kristalina Georgieva, the managing director of the International Monetary Fund.
"The crisis has already reversed years of progress in reducing poverty and boosting development – and diverging recoveries will make it even more difficult to address these challenges," Ms Georgieva told the Vatican-based Pontifical Academy of Sciences during an address on Friday.
Sound economic policies that create a stable foundation for growth and expand fiscal space for the future will help to mitigate some of the challenges in inequality exacerbated by the Covid-19 pandemic, she added.
"It means investing in people: expanding access to educational opportunities, building up social safety nets that can protect the health and well-being of the most vulnerable," Ms Georgieva said.
In April, the IMF revised up its forecast for global economic growth to 6 per cent for 2021, from an earlier 5.5 per cent forecast, citing the rapid vaccine rollout and substantial fiscal and monetary stimulus by governments and central banks.
However, about 150 countries are unlikely to return to pre-pandemic levels by the end of this year and 110 will still be suffering from the same fate next year, the Washington-based lender warned at the time.
The yawning gap between developed and low-income countries is being partly bridged by multilateral institutions such as the IMF and the World Bank, which Ms Georgieva previously headed.
The IMF has allocated special drawing rights of $650 billion to help member countries tide over the health, economic and fiscal challenges stemming from the impact of Covid-19.
"Low-income countries, in particular, require $200bn in funding over the next five years to fight the pandemic. Another $250bn is required to invest and return to the path of "catching up to higher income levels", Ms Georgieva told the Vatican's scientific academy.
Globally, governments provided $16 trillion in fiscal stimulus last year, backed by $9tn in monetary support from central banks.
In terms of proportionate spending, developed economies deployed nearly 28 per cent of their gross domestic product to support households and firms. Emerging markets could only afford to spend the equivalent of 7 per cent of their GDP to support their populations.
Low- and middle-income countries need to pursue "comprehensive and concerted efforts" to raise domestic revenues, boost the quality of public spending and improve the business climate, Ms Georgieva said.
The international community also needs to step up support through grants, concessional and non-concessional financing, and debt relief where needed.
Ms Georgieva cited the debt relief suspension plan by the G20 countries, which deferred $5.7bn in payments until the end of this year as a way for more developed nations to support low-income countries.
The IMF head also pledged to continue support for debt restructuring with private creditors similar to its efforts in Argentina and Ecuador.
"We have upgraded our analytical tools to assess debt situations in market-access countries. And we will continue to work on improving the architecture for debt restructuring with private-sector creditors," Ms Georgieva said.
She also sounded the alarm over complacency in tackling climate change-related challenges.
"If you didn’t like the pandemic, you will not like the climate crisis one iota," she said.
"We know that we cannot choose the world as it was before the pandemic. And we cannot afford to maintain the world as it is today."
