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ECLAC chief welcomes IMF drawing rights proposal


ECLAC chief welcomes IMF drawing rights proposal
Alicia Bárcena, ECLAC’s executive director. (Internet image)

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Santiago – The Executive Director of the Economic Commission for Latin America and the Caribbean (ECLAC), Alicia Bárcena, has hailed as “a much welcome and needed initiative” the recent call to action by the US Secretary of the Treasury, Janet Yellen, to the Group of 20 (G-20) of the industrialised powers for a new issue of International Monetary Fund (IMF) Special Drawing Rights (SDRs), which the G-20 recently approved, and the re-allocation of excess SDRs to low-income countries (LICs), such as those in the Caribbean.

“Concerted international action and solidarity are the only means to confront and overcome the COVID-19 crisis,” Bárcena said.

“A truly multilateral and global response to the pandemic must extend the benefits of this initiative to all developing countries, irrespective of their level of income, including to middle-income countries (MICs),” she said.

Bárcena said MICs represent 75 per cent of the world’s population, and roughly 30 per cent of global aggregate demand.

More importantly, Bárcena said MICs account for 96 per cent of developing country public debt, excluding China and India.

“Their success in confronting COVID-19 is central for global recovery and financial stability,” she said.

“Developing countries have, without doubt, borne the brunt of the social and economic impact of the current crisis.

“The increases in poverty and extreme poverty rates, the number of job losses and declines in per capital income have been unprecedented,” she added.

“These impacts are not only concentrated in LICs, but also affect MICs.”

Bárcena said Latin America and the Caribbean (LAC) has been the most impacted region in the world in terms of real gross domestic product (GDP) contraction (-7.7 per cent for 2020).

She said this has been accompanied by the closure of more than 2.7 million firms, and the rise in number of jobless persons to 44.1 million, and in the number of people living in poverty from 185.5 to 209 million people, reaching 33.7 percent of the total population.

The ECLAC chief said that extreme poverty has increased by 8 million to 78 million people, and that, by the end of 2020, the level of per capita GDP equaled that of 2010, stating that it is “another ‘lost decade’ by any measure.”

She said the effects of the pandemic and the policies implemented in response have increased the liquidity needs of developing countries, including those of LAC.

At the same time, she said fiscal emergency measures to contain the decline in output have led to rising debt levels, “which -if not carefully monitored- may jeopardize the recovery and countries’ capacity to build forward better.”

Bárcena said LAC is the most indebted region in the developing world, stating that the debt of the general government in 2020 reached 79.3 percent of GDP.

She said the external debt service stood at 57 percent relative to exports of goods and services, according to IMF 2020 data. (CMC)