Global co-operation on vaccines will benefit economies, IMF says

Providing access to affordable inoculations for all will 'more than pay for itself', officials say

A healthcare worker wearing protective gloves draws a dose of the Moderna Inc. Covid-19 vaccine at a mobile drive-thru vaccination site in Novato, California, U.S., on Wednesday, March 24, 2021. Health departments across the U.S. have deployed mobile units to eliminate challenges like waking up early to schedule appointments, navigating online portals and standing in line, all of which can deter the elderly, disabled or immune-compromised. Photographer: David Paul Morris/Bloomberg

Co-operation must be stepped up to produce and distribute affordable vaccines to all countries for the benefit of the global economy, according to the International Monetary Fund.

The race to vaccinate people is accelerating in many countries, which led the Washington-based fund to upgrade its global growth forecast to 6 per cent for 2021 in its World Economic Outlook this week.

However, "the pace of inoculations is widely different across countries, with access unavailable for many", the IMF said in its April 2021 Fiscal Monitor on Wednesday.

"If the global pandemic is controlled via vaccination, the resulting stronger economic growth would yield more than $1 trillion in additional tax revenues in advanced economies by 2025 – and save more in fiscal support measures," the head of the IMF's fiscal affairs department, Vitor Gaspar wrote in an accompanying blog post.

"The Covid-19 vaccination will thus more than pay for itself ... providing excellent value for the public money invested in it," the post, co-written with departmental colleagues W Raphael Lam, Paolo Mauro and Mehdi Raissi said.

Globally, governments have injected more than $16tn in fiscal stimulus and central banks have taken monetary easing measures equating to a further $9tn since Covid-19 was declared a pandemic in March 2020.

Such fiscal support "has prevented more severe economic contractions and larger job losses", but at the price of increasing government debts.

Average deficits as a share of gross domestic product increased to 11.7 per cent for advanced economies, 9.8 per cent for emerging market countries and 5.5 per cent for low-income developing countries last year. This increased average public debt to 97 per cent of GDP, a ratio that is likely to stabilise this year at about 99 per cent of GDP, the IMF said.

Interest payments on these are manageable for advanced economies and many emerging markets given low lending rates. But financing deficits remains challenging for low-income countries that face higher rates.

Given limited market access and short-term difficulties in increasing revenue, "these countries need assistance through grants, concessional financing or, in some cases, debt restructuring".

The Covid-19 vaccination will thus more than pay for itself ... providing excellent value for the public money invested in it.

Earlier this week, the IMF said contributions from some of its members had allowed it to extend $238m of debt relief to 28 of the world's poorest nations. This means scheduled repayments can be suspended until October 15 for these countries. The fund is also continuing to raise more reserves that would allow it to further prolong this relief until April next year.

Higher unemployment and poverty rates mean governments will need to continue fiscal stimulus to prevent long-term damage, but spending needs to be targeted.

Support should be geared towards the most vulnerable households and to viable companies suffering from temporary losses of income, "particularly in contact-intensive service sectors and small and medium-sized enterprises", the report said.

"Done properly, fiscal policy will enable a green, digital, and inclusive transformation of the post-pandemic economy," Mr Gaspar said in the blog post.

Investments should be geared towards health systems – most notably vaccines – education and infrastructure, with green projects given the highest priority.

Schemes to help people get back to work or change jobs should also be targeted, but spending needs to be transparent. Over the medium term, tax systems should be reformed to improve revenue collection, especially in poorer nations, to help fund development needs, the fund said.

So far, more than 698 million doses of the Covid-19 vaccine have been administered around the world, according to Bloomberg's Vaccine Tracker. In the UAE, where vaccination rates are among the highest in the world, more than 8.6 million shots have been provided. This is enough to cover more than 40 per cent of the population.