The fact that ‘pandemic’ itself means something widespread globally, it is a shame that rich, advanced countries have practiced ‘vaccine nationalism’ – hoarding, for instance, vaccines for their own populations while billions in the global south have few at their disposal.
Multilateral institutions, including World Health Organization (WHO), World Trade Organization (WTO), and International Monetary Fund (IMF), have fallen well short of the required response. Moreover, vaccine inequality has meant that the rich countries have shown a far greater recovery rate from Covid than developing countries, in turn increasing the gap between the rich and poor countries.
However, no country is safe from Covid until everyone is safe from it, especially with the rise of more potent Covid variants. In this regard, renowned economist, Daron Acemoglu in his recent Project Syndicate article ‘Vaccine nationalists are not immune’, pointed out the limitedness of this nationalistic approach, both in terms of falling short of practicing good values but also because of the rise of even faster-spreading Covid-variants.
He argued ‘Rich countries’ failure to lead a coordinated global response to the pandemic has been regarded as a moral failure. But now that the continued spread of the virus elsewhere is producing new variants, it has turned out to be a practical failure, too.’
Although China has provided some support to Pakistan in terms of vaccine, as a goodwill gesture, which is welcome since China itself has a big population to cater to, the situation at hand with regard to availability of the vaccine to a wider number of masses in developing countries can be understood in a number of ways.
First, a study by the Economist Intelligence Unit (EIU) showed that developing countries, for instance, such as Latin America and Pakistan, will be among the last group of countries that are likely to receive large scale vaccines globally – somewhere between April 2022-2023!
Second, the multilateral initiative led by WHO called ‘COVAX’ to provide Covid vaccines to developing countries reportedly faced serious underlying issues, according to internal documents seen by Reuters a few months back.
They reported, ‘The global scheme to deliver COVID-19 vaccines to poorer countries faces a “very high” risk of failure, potentially leaving nations home to billions of people with no access to vaccines until as late as 2024.’
Furthermore, Reuters pointed out while COVAX being the main programme of WHO, intends to provide inoculation to at least 2 billion people in poor and middle-income countries of Latin America, Africa, and Asia by end-202, yet internal documents with regard to the programme painted quite a worrisome picture – ‘lack of funds, supply risks and complex contractual arrangements’ – in turn, putting big question marks on the success of the programme.
Sadly, WHO has not taken a leadership role in another sense as well, and that is regarding throwing its weight and lobbying enough for getting a patent waiver on Covid vaccines, which in turn, would have allowed much needed greater production of the vaccine, and the vaccine being available at lot lower prices than where they stand currently.
Moreover, IMF has not provided the much-needed support for developing countries in terms of balance of payments support, to enable them to manage better purchase of vaccines, and with dealing with higher import bills in the wake of triple nationalism – vaccine, food, and oil.
In addition to the vaccine, major exporters of agricultural commodities have reportedly hoarded exportable agricultural commodities, which in turn has caused a price hike in international agricultural markets for the last six months or so.
OPEC (Organization of the Petroleum Exporting Countries) has resorted to oil nationalism by drastically cutting supply during the pandemic to cause a sharp rise in oil prices, and have been around the pre-pandemic price levels recently.
IMF and its shortcomings
Firstly, IMF is still to provide the much-needed allocation of Special Drawing Rights (SDRs) to the tune of around $500 billion to help developing countries better manage their import related expenditures with regard to both the purchase of vaccine, and also to appropriately deal with the impact of the inflationary spiral being generated by the triple nationalism, through providing some sort of subsidy cushion on keeping prices lower on essential imports like for instance vaccine, oil, and agricultural commodities.
Secondly, and on the contrary, it has reportedly not even waived the component of ‘surcharges’ from the financial support it provides to program countries. In this regard, a March 3, 2021, Financial Times (FT) article ‘The IMF’s surcharges are unfit for purpose’ pointed out that while IMF approved 119 programmes with 85 countries during the pandemic to the tune of around $100 billion, but it showed indifference to the pressure of the surcharges on these countries – already stressed with balance of payments challenge, and which is why approaching the IMF in the first place – that was continued on these programmes, whereby as per the article, programme countries ‘will have to pay over $4bn in extra surcharges on top of interest payments and fees from the beginning of the crisis through the end of 2022.’
The article further highlighted that surcharges topped IMF’s source of revenue ‘accounting for almost half of revenues during this period’, which indicates the high level of insensitivity of IMF, since countries need foreign exchange for purchasing vaccine, undertake welfare programmes, and ushering in green, inclusive economic recovery.
Moreover, according to the article, ‘These surcharges can often lead to as much as tripling of debt costs. Currently, 30 percent of the countries with IMF funding face surcharges in the midst of the crisis, including Angola, Argentina and Georgia.’
Thirdly, while at one end, IMF continued with keep the component of surcharges on loans to programme countries, it has reportedly offered a lot less in balance of payments support to member countries than it should have during the pandemic, and even by its own standards in terms of lending, such as what was extended during the Global Financial Crisis of 2008.
This was pointed out by a former IMF staff member, Ousmène Jacques Mandeng, in his FT article ‘The IMF no longer functions as the world’s safety net’, whereby as per the article, rather than IMF coming out ‘all guns blazing’ with regard to extending financial support to countries in need of balance of payments support, ‘the fund has approved a large number of borrowing arrangements since the start of the pandemic, these have amounted to less than 10 percent of its $1tn resources.
This is despite the fund saying that it has “substantial space” in its lending capacity and is “ready to help even more”.’ Hence, during the one year ending January 2021 – a time of pandemic mostly being in full swing for the global public health – IMF extended a lot less in terms of financial support than even by its own performance standard of the Global Financial Crisis (GFC) of the late 2000s.
This is because during this one year, as per the writer’s own calculations, IMF approved 111 programmes worth a gross $97 billion, and which also came out to be less at $52 billion, once the fixed credit lines (FCLs) that are not activated generally were included.
On the contrary, during GFC and ‘In the year to September 2009, the IMF approved new lending commitments of $75bn excluding FCLs. Thirty-four arrangements were approved with the average amount representing 340 percent of quota, or $2.4bn.’
A vaccine apartheid
Given the presence of ‘vaccine apartheid’ on one hand, and lack of multilateral spirit on the other has meant that unlike the pre-neoliberalism world when Polio vaccine was readily made available to the world, at a faster pace, and at comparatively more reasonable prices, the post-neoliberal world of Washington Consensus policies, with high patent walls for Covid vaccine, has meant that countries, like Pakistan, which had otherwise a good run in terms of dealing with the pandemic, are being left behind in terms of economic recovery due to lack of proper access to Covid vaccine.
With regard to the situation of ‘vaccine apartheid’, an article ‘A call for global vaccine justice’ by Parsa Erfani, Eugene Richardson, and Jason Hickel pointed out that ‘The global Covid-19 vaccine roll-out is creating a “vaccine apartheid”.
As of February 24, approximately 216 million people have been vaccinated against Covid-19 globally. Only 8.4 percent of these are in low and lower-middle-income countries, which are home to nearly half of the world’s population.
If this trend continues, young and healthy individuals in wealthy countries will be vaccinated while older and vulnerable people in poorer countries continue to die, needlessly.’ Guardian’s economics editor, Larry Elliott, in his recent article ‘Poorest countries will suffer most from Covid downturn, says UN’ while discussing the report by United Nations Conference on Trade and Development (UNCTAD), pointed out that as per the UN report, the pandemic would have caused losses to the tune of around $10 trillion to world economy by end-2021, an amount that could have been avoided if there was no pandemic and the global economy had functioned in a pre-Covid environment.
In addition to output losses, the world also faced the likely outcome of the pandemic in the shape of higher income inequality, much greater indebtedness, and lower levels of investment.
Moreover, in this regard, the article quoted UNCTAD report to highlight the more accentuated nature of miseries being faced by developing countries, whereby ‘The brunt of the hit to the global economy is being felt in developing countries with limited fiscal space, tightening balance of payments constraints and inadequate international support’.
Having said, the article pointed out a lack of caring spirit of the rich countries towards poor countries, whereby they came out with little financial support. To give further perspective in this regard, the article pointed out that the UNCTAD report ‘…compared the $12bn of suspended debt servicing payments for the 46 countries participating in the G20’s Debt Service Suspension Initiative with the $80bn for the 73 countries eligible for the relief in 2019.’
Hence, vaccine inequality has meant that the global economy generally, and developing countries, in particular, would suffer from more prolonged recession/low economic growth situation and higher inflationary pressures than they should have if there was no triple nationalism being practiced, and multilateral institution played a much better role.
Also, inflationary spirals thus being produced are increasing difficulty of developing countries to meet stimulus spending needs during the pandemic-induced recession, on one hand, and on the other manage macroeconomic stability.
Moreover, rising poverty and income inequality in the wake of the pandemic will likely overflow into creating greater political instability globally. Therefore, this situation of vaccine inequality needs to be reversed at the earliest possible to charter a far better, lot less damaging exit out of the pandemic than on the cards in case this vaccine apartheid situation continues to prevail.
Dr Omer Javed holds PhD in Economics degree from the University of Barcelona (Spain), and previously worked at International Monetary Fund. He is author of Springer published book (2016) ‘The economic impact of International Monetary Fund programs: institutional quality, macroeconomic stabilization and economic growth.’ He tweets @omerjaved7