How Can the G20 Support Innovative Mechanisms to Mobilise Financial Resources for LDCs in a Post-Pandemic World?
The covid-19 pandemic has generated severe health, economic and debt crises for the least developed countries (LDCs). On the one hand, they cannot mobilise sufficient financial resources on their own to cope with the effects of the pandemic because their public revenues are too low and external finance is not always available. On the other hand, many LDCs have been highly indebted, even prior to the crisis. Of the 45 LDCs covered by the Debt Sustainability Framework of the World Bank and International Monetary Fund, five were in debt distress and thirteen more were classified at high risk of debt distress. In this context, the G20 members hold a strong responsibility to support and identify innovative mechanisms to mobilise financial resources for the LDCs. The G20 could play a key role in bringing forward a more effective architecture for development finance: blended finance, special drawing rights reallocation and sustainable bonds.
Paper prepared in the framework of a research project coordinated by the IAI as scientific advisor for the Italian Presidency of the G20 and Co-Chair of the Think20 (T20) Italy 2021, with the support of the United Nations Conference on Trade and Development (UNCTAD).
1. Financial needs in LDCs in the wake of the covid-19 crisis
2. The role of the G20 in promoting innovative finance in LDCs
2.1 Blended finance
2.2 Redistributive new allocation of Special Drawing Rights
2.3 Sustainable bonds
3. Conclusion and policy recommendations for the G20