COVID-19: UN calls for urgent $2.5 trillion aid package for developing countries

United Nations has called for an urgent $2.5 trillion aid package to help developing countries avoid worst-case scenarios due to the coronavirus pandemic. The United Nations Conference on Trade and Development (UNCTAD) has predicted a drop of $2 trillion to $3 trillion overseas investment in commodity-rich exporting countries.

“The economic fallout from the shock is ongoing and increasingly difficult to predict, but there are clear indications that things will get much worse for developing economies before they get better,” UNCTAD Secretary-General Mukhisa Kituyi said in a statement.

The UN trade and development body said that the combined effect of COVID-19 pandemic and global recession will be catastrophic for developing countries, impacting the progress towards Sustainable Development Goals. UNCTAD published a report on March 30 highlighting the economic shock to developing countries due to the health pandemic and advocated for a “whatever it takes” programme.

The $2.5 trillion aid package demanded by the UN agency has been divided into three parts of which $1 trillion should be used to cancel the debts owed by developing countries. Another $1 trillion should be made available through the expanded use of special drawing rights and the rest $500 billion should be used to fund a “Marshall Plan for health recovery” and dispersed as grants.

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Four-pronged strategy

UNCTAD has proposed a four-pronged strategy to minimise the economic shock in the wake of the coronavirus crisis and called for a conversion of international solidarity into concrete action. The UN agency said that the $1 trillion liquidity injection will be like “helicopter money drop” for economies left behind through reallocation of special drawing rights at the International Monetary Fund (IMF).

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It also called for debt jubilee for distressed economies and suggested to use German debt relief, administered after World War II, as a benchmark. The ongoing crisis has forced governments and international organisations to take drastic measures and further aid package might be needed to sustain reeling economies.

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(Image Credit: Twitter / @UNCTAD)