Why International Financial Institutions matter for COVID-19 recovery

Posted On March 11, 2021

Financing has enabled UNDP to support government partners in procuring vital personal protection equipment (PPE), healthcare equipment and expertise, to strengthen COVID-19 response in countries such as Armenia, Bolivia, Cambodia, Cameroon, The Gambia, Grenada, Guinea Bissau, Yemen, Palestine, Equatorial Guinea, Madagascar, Mexico, Timor Leste, Turkey, Ukraine, Uzbekistan, and Zimbabwe. Photo: UNDP Ukraine/Maksym Kytsiuk

 

A year ago, a tiny virus named COVID-19 turned the world upside down. What began as the Decade of Action for the 17 Sustainable Development Goals became a year of a global crisis the likes of which had not been seen in living history since the end of World War II.

To date, the virus has taken over 2.5 million lives. There are over 113.9 million confirmed cases globally according to WHO. It continues to exact a terrible toll in all facets of society, spreading like wildfire across the building blocks of human development.

International Financial Institutions (IFIs) are providing essential recovery financing across developing countries. Their investments are also helping the world meet an annual financing gap of US$2.5 trillion to achieve the SDGs and promote a green recovery. Collectively, the MDBs will have provided US$230 billion to reduce the impact of the pandemic by mid-2021, of which US$75 billion will be directed to the world’s poorest countries before the end of 2020, according to the first joint report on the Multilateral Development Banks’ Contribution to the SDGs.

UNDP has been working with the world’s leading IFIs on COVID-19 response and recovery, and to get the SDGs back on track. These partnerships are vital to UN-wide global efforts to respond to COVID-19. Here are some examples:  

Lifeline financing for COVID-19 response

Since the start of the pandemic in 2020, UNDP has signed agreements worth US $219 million with some of the world’s largest International Financial Institutions such as the World Bank, African Development Bank, Islamic Development Bank, Asia Development Bank, Inter-American Development Bank, German Development Bank (KfW), Corporación Andina de Fomento, and IFAD to strengthen COVID-19 response in developing countries.

The majority of this financing has enabled UNDP to support government partners in procuring vital personal protection equipment, healthcare equipment and expertise in places like Armenia, Bolivia, Cambodia, Cameroon, The Gambia, Grenada, Guinea Bissau, Yemen, Palestine, Equatorial Guinea, Madagascar, Mexico, Timor Leste, Turkey, Ukraine, Uzbekistan, and Zimbabwe. In countries affected by crisis, such as Yemen, PPE support supplemented The Yemen Emergency Crisis Response Project (YECRP), an existing World Bank partnership with UNDP and other UN partners to preserve vital services for water, food, health, education, and safe roads and support livelihoods.

Quality analysis and data to understand what has been lost, where the need is greatest, and coordinate action plans for a better recovery

 UN Country Teams have mobilized globally to assess and respond to the social and economic devastation caused by the COVID-19 pandemic, working with about 97 governments across five regions.

To date, 144 Socio-Economic Impact Assessments have been completed across 97 countries and five regions. These have guided governments in navigating public policy amidst unprecedented complexity. Since July 2020, the UN has tripled the number of Socio-Economic Response Plans – currently at 119 – as a result of dedicated efforts of UN Country Teams, steered by Resident Coordinators, with the technical lead and support of UNDP. An estimated 50 percent of those response plans have been developed in partnership and with insights from the World Bank, and a third from the IMF. Some notable examples include:

In Ecuador, UNDP, in close collaboration with the World Bank, the European Union, and UN agencies, has guided the formulation of a recovery strategy, provided expertise to Government officials, facilitated the provision of protective equipment for hospital staff and indigenous communities, and expanded chatbot tools providing information about the pandemic and how to avoid, treat, and curb it.

In Jordan, UN agencies are scaling up efforts to support the Government’s health response, providing humanitarian assistance for vulnerable host communities and refugee populations, and mitigating the socio-economic impact of COVID-19. UNDP is also supporting proper disposal and treatment of medical waste, such as PPE and solid waste from quarantine centers—which have created a large environmental burden. This includes procurement of sterilization machines for 11 public hospitals and training for some 130 Health Ministry staff. In Uzbekistan, 17 UN agencies and six IFIs are working to create jobs, re-skill migrant workers, deliver medical and protective gear, and provide vital information and expertise to its 33 million people.

Looking beyond the immediate crisis to the longer road toward 2030

In November last year, public development banks and development partners from all over the world came together during the Finance in Common Summit and signed an unprecedented Declaration committing to collectively shift strategies and investment patterns to contribute to the Paris agreement and to the achievement of the SDGs, while responding to the COVID-19 crisis. This is an enormous, yet achievable ambition.

Three critical steps that development banks can take to move their commitments into action.  

First, the adoption of common methodologies to help guide SDG-aligned investments. Second, providing access to sound financing while ensuring that sovereign debt remains on a sustainable path. Third, catalyzing a major crowding-in of private investments for the SDGs. These three concrete actions would greatly contribute to unleash banks’ full potential to better serve the Global Goals. But they will not happen without strong political backing.  Government partners— especially country shareholders on whom the Banks depend for financial support— need to give them the financial and operational means to become enablers of financing aligned with the SDGs.

UNDP is committed to accompany development banks in our collective ambition towards Agenda 2030 in different ways, for example:

  • By providing clear national SDG policy frameworks: UNDP is leading technical support to 52 developing countries in implementing Integrated National Financing Frameworks (INFFs), in collaboration with the EU, the IMF, and other parts of the UN system, to ensure that financing for COVID recovery is aligned with sustainable development.
  • By identifying SDG investment opportunities: UNDP’s SDG Investor Maps identify concrete, investable solutions at country level for PDBs and other investors’ action.
  • By proposing harmonized policies and standards : the OECD-UNDP Framework for SDG Aligned Finance launched last November provide an ambitious yet feasible set of policies, standards and tools to deploy capital in ways that drive the greatest impact towards achieving SDGs.

The COVID-19 crisis is in many ways a wake-up call—a once in a lifetime opportunity to rethink how we can evolve towards a more sustainable global financial system. Today, more than ever before, IFIs and development partners like UNDP need to increase their commitments— and their partnerships— to scale-up the alignment of public and private finance to the SDGs if we are to truly make a difference in helping national partners recover better, and resume a path towards more inclusive, green and sustainable economies by 2030.