As a result, the direct impact of the 2008 Global Financial Crisis will be 60 percent higher in 2020 than it was in 2019. Because of this, there’s a greater chance of severe development setbacks, which would put us at more risk from things like pandemics and climate change. It’s a fact that tax revenues are the only long-term feasible funding source for many public services, yet no single development finance provider can meet the task on their own to “build back better” for a more equal, sustainable, and hence resilient world, actors in development finance and beyond must work closely together.
The suffering during this COVID-19
Existing estimates of domestic revenue and foreign aid to poor economies were insufficient to meet the Sustainable Development Goals even before the COVID-19 issue (SDG). Low- and middle-income nations may find it difficult to fund their public health, social, and economic responses to COVID-19 due to high public debt levels and additional demands from the epidemic. A decline in remittances and rippling effects on domestic finance is already being stimulated by the unfolding public health and economic problems, according to early observations. When faced with such daunting circumstances, how can we prevent a crisis in development funding that would drive millions of people back into poverty and jeopardize our ability to achieve Sustainable Development Goals?
Research conducted for the OECD Global Outlook on Financial for Sustainable Development (OECD, forthcoming) informs this note about the current and future impact of the COVID-19 epidemic on primary financing sources needed to assist developing economies as per https://cardinalpointwealth.com/canadians-living-in-the-u-s/ .
The key facts to remember.
The COVID-19 dilemma has come at a critical time for developing countries. Before the financial crisis, funding had already fallen short of the spending required to meet the Sustainable Development Goals (SDGs) by 2030, and budgetary flexibility was constrained by rising public debt levels and service costs.
The COVID-19 dilemma poses a significant risk of funding for sustainable development suffering significant setbacks. As economic activity declines, so will the availability of domestic resources. According to the projections, external private finance inflows will be USD 700 billion lower in 2020 than in 2019, an impact 60 percent worse than the Global Financial Crisis of 2008. With increased domestic consumption and currency moves versus the USD, fiscal space will likely become significantly tighter.
Other sources of funding should be held steady for the time being by using government development finance. Because of the scarcity of resources and the economic impact of the crisis, developing countries may have difficulty funding public health and social and economic measures that are acceptable. A single source of funding cannot fill the COVID-19 funding deficit.
This collaboration will help to “build back better” for a more fair, sustainable, and hence more resilient world in the medium term. As an example of going beyond development funding, tiny island developing governments need to rev up their trade and promote a more sustainable maritime economy.
The COVID-19 coronavirus pandemic has arrived at a critical juncture for emerging countries.
When the COVID-19 problem began, sustainable development financing was already in peril (OECD, 2018). UNCTAD predicted in 2014 that developing economies faced a USD 2.5 trillion shortfall in financing towards the Sustainable Development Goals (2014). More recently, Gaspar et al. (2019) calculated that low-income-countries would have to spend an additional 15.4% of GDP on average and rising economies an additional 4% of GDP to fill their SDG spending gap. While the discrepancy might be explained in part by inefficient spending, it has long been acknowledged that domestic and external resources before COVID-19 were insufficient to accomplish the Sustainable Development Goals (SDGs) (UN SG, 2019). High amounts of debt also hampered the government’s ability to bridge the gap quickly.