However, to succeed in averting the next pandemic, we must strengthen multilateralism. That cannot be achieved with incremental changes to existing mechanisms, which have failed to prevent and respond decisively to the current pandemic. We need major renovation and replenishment of both individual institutions and the global health architecture. The G20 panel has advocated three strategic shifts to enable proper and proactive financing of global health security.
First, we must put the finances of the WHO on a more secure multilateral footing and empower it to perform its core roles more effectively. There is no solution to pandemic security that does not involve a reformed and strengthened WHO at its center. It plays the lead role in the surveillance of global health emergencies and in identifying gaps in the national core capacities set out in the International Health Regulations. It is also integral to the international coalition of health partners that must develop a globally distributed, end-to-end supply ecosystem for medical countermeasures.
Second, we must repurpose the international financial institutions (IFIs) for a new era. The IMF and World Bank were created at the end of World War II to assist countries with economic reconstruction or when they ran into financial difficulties of their own. The World Bank’s success led to the establishment of the other regionally based multilateral development banks. Collectively, the IFIs are unique international institutions with the ability to multiply the impact of finance in ways that will be critical in the decades ahead. They leverage the resources of their shareholders in the capital markets, induce domestic funding and policy reforms by governments, and help catalyze private sector investments.
Yet the mandates of the Bretton Woods institutions must be updated for an era when the largest challenges facing countries lie in threats to the global commons, even as poverty alleviation and inclusive growth remain critical priorities. The IMF and World Bank must work closely with regional development banks and other international players, including global health organizations, to incentivize lower-income countries and regions to invest in the public goods needed to address these threats.
The business models of the World Bank and other multilateral development banks must also pivot toward mitigating risk rather than direct lending, so as to mobilize private capital and transform global savings into development finance. The potential for doing so has long been recognized, given the banks’ triple-A credit ratings and scope for using risk guarantees and other credit-enhancement tools and that most developing economies now have access to capital markets to finance infrastructure. However, progress in moving away from a lending-based model has been slow. A bolder move is now required to use their resources more optimally to support investments in global public goods.
The IFIs must also play lead roles in international financing of the response to pandemics. The IMF and World Bank have designed programs and streamlined processes during COVID-19 to enable more flexible disbursement of funds. Following the recent $650 billion general allocation of Special Drawing Rights (SDRs) among its members, the IMF is also actively working with wealthier countries to channel excess SDRs to those that are more vulnerable via the Poverty Reduction and Growth Trust, among other ways. However, the whole process for an SDR allocation to be approved, and subsequently deployed to countries most in need, takes time. Several other mechanisms were also developed or enhanced in the midst of the pandemic. The IFIs must now improve and formalize them as part of their crisis-response toolkits so they can deploy resources at a much larger scale and more swiftly when necessary.
The shareholders of these key institutions must themselves adapt to the challenges of a new era. They must make timely replenishments of the grants and capital needed by the IFIs and ensure that the greater focus on global public goods does not come at the expense of spending on education, social protections, and other development priorities. They must also enable the IFIs to put out much more money in a pandemic, much faster and with less elaborate conditions, just as their treasuries and central banks became major lenders and investors of first resort in their own countries.
Shareholders should also support a new capital adequacy framework for the multilateral development banks, one that recognizes their preferred creditor status and very low default experience and enables enhanced leverage without compromising their triple-A ratings. Recommendations for doing so were made by an earlier G20 eminent persons group. The recent review initiated by the Italian G20 presidency is an important step in the right direction.
