G20 Policy Actions in the time of COVID-19

Statement delivered by Haoliang Xu at the OECD-UNDP-G20 Workshop: 'Sustainable Development and Inclusive Globalization: G20 Policy Actions in the time of COVID-19'

January 12, 2021

The COVID-19 pandemic has laid bare systemic fragilities in our societies, our global economic system and the frameworks that govern the international system. The consequences are clear: inequalities are growing ever wider; debt burdens are skyrocketing; and an ever-expanding number of families, communities and economies require essential support

The Covid-19 crisis is setting back decades of progress in many developing countries. Financing for Sustainable Development is off track to achieve the SDGs by 2030. To fill the gap, more public and private sustainable development finance is needed.

The early response of the G20 with the Debt Service Suspension Initiative (DSSI) and the Common Framework for Debt treatment was a strong and timely signal of solidarity with the most vulnerable countries.

The G20 needs to scale up ambition and deliver bolder measures to enable developing countries to address the crisis effectively. Debt relief is critically needed as a potential major sovereign debt crisis looms on the horizon.

In line with the recommendations from the UN initiative on financing development in the context of COVID-19 and beyond, I want to flag a few policy actions that can be part of the solution:

1. Support a new issuance of special drawing rights (SDRs) and the reallocation of unused SDRs;

2. Extend the duration of the DSSI through the end of 2021 and expand its coverage to include vulnerable middle-income countries that need it;

3. Expand eligibility for the common framework for debt treatments to vulnerable middle-income countries and consider further debt relief, including debt cancellations;

4. Build a global architecture to enhance debt transparency and sustainability.

The main objective of this international support is to help developing countries build back better and greener, using the fiscal space thus generated as an opportunity to build an inclusive recovery and a sustainable and resilient future.

To that end, G20 countries should:

Align public spending on COVID recovery with climate targets and sustainable development goals. Debt swaps can be used to transform public debt into sustainable investments. Green bonds can help finance environmental sustainability. Fiscal measures should include carbon pricing and the elimination of fossil fuel subsidies. SDGs localization in this endeavor would be critical to meet basic needs through a bottom-up approach and align with local circumstances and resources.

Set clear direction for climate policy by turning Paris Commitments into national long term objectives to provide more certainty to companies and investors and ensure a smoother transition towards low carbon economies and net zero emissions.  

Embed a framework to ensure that every financial decision takes climate change into account, first and foremost by mandating climate-related financial disclosures. Additionally, the creation of standards, norms and certification systems to align public and private finance with sustainable development should be a priority.

Finally, ensure global solidarity and multilateral cooperation are at the centre of our actions

At the outset of the Italian Presidency of the G20, that is also co-chair of the COP-26, this annual workshop presents a unique opportunity to reflect on collective actions that are critically needed to keep advancing towards the Sustainable Development Goals that remain the blueprint to build back better and greener.

Thank you.