Multi-coloured ‘New Deal’ needed for global economic recovery

The world needs a multi-coloured ‘New Deal’ that addresses gender, the climate crisis, access to clean water, the lack of investment in care and rampant inequality to recover from the economic fall-out of the COVID-19 pandemic, according to new analysis from IIED.

G7 leaders agreed earlier this year to mobilise billions of dollars to help developing countries tackle climate change through the ‘Build Back Better World’ initiative. The United States is pushing ahead with plans under this scheme to finance major infrastructure projects in countries like Senegal, Ghana and Colombia, further details of which are expected next month.

But while hard infrastructure projects may grab headlines, lower-income countries also urgently need restructuring of unsustainable levels of debt if there’s to be a just and equitable economic recovery.

The report 'Gender concerns in debt relief' describes a ‘New Deal’ that considers all sectors and people and that needs to be green, to address climate and environmental threats; blue, to deal with the growing shortages of clean water; purple, with an emphasis on the care economy; and red, with a critical focus on addressing and reducing inequalities in assets, income, access to food, essential public services and employment opportunities.

IIED director Andrew Norton said: “The rupture in 'business-as-usual' created by the pandemic has given us a unique opportunity to address the multiple challenges that blight the lives of millions of people every day.

“This may seem like a lot to ask both for debt relief and adjustment packages, and for future economic strategies, but the constraints are mainly political. The nations of the world have come together in the past to confront seemingly impossible challenges; now is the moment to find similar if not greater levels of ambition for humanity.”

In the past, debt packages have come with strings attached that end up constraining economic recovery and job opportunities.

Analysis of the contents of recent and ongoing International Monetary Fund (IMF) agreements that were all associated also with some form of debt relief revealed that between March and September 2020, 76 out of the 91 IMF loans negotiated with 81 countries involved cutting public expenditure in ways that could result in deep cuts to public healthcare systems and pension schemes, wage freezes and cuts for public sector workers such as doctors, nurses and teachers.

A study of debt relief efforts in the late 1990s undertaken by the government of Netherlands covering Mozambique, Nicaragua, Tanzania, Bolivia, Jamaica, Peru, Uganda and Zambia found that they had not led to sustainable debt burdens over time or had other expected positive outcomes.