Finding stronger together in 2022

As a born optimist, I consider 2021 to be a year of recovery. The COVID-19 pandemic is not yet over, but there is a silver lining for a better future both in the health sector and in the economy at large. Safe and effective vaccines have reduced deaths from COVID-19, while government fiscal interventions have helped spur economic growth. But the global recovery remains uneven, owing to varying countries’ pre-pandemic economic conditions and divergent stimulus policies.

Certainly, COVID-19 vaccines have been a game-changer. Rising vaccination rates have bolstered herd immunity, creating opportunities to ease restrictions and boost the economy. Yet while multilateral institutions have strived to ensure equitable global distribution of vaccines, many developing countries still struggle to get enough doses for their citizens while advanced economies deploy vaccines at high speed. This underpins an uneven global recovery and exacerbates inequalities.

Because we are only as strong as our weakest link in the fight against the pandemic, global collaboration is imperative. Every country wants to control the virus and get back to normal life. Multilateral institutions should therefore assume a greater role in ensuring that all can carry out their immunization programs quickly.

We also need to establish an early warning system and improve our crisis preparedness – in the form of resources, governance mechanisms, decision-making and information sharing – for future pandemics. Managing the frequent tensions between national sovereignty and global governance will be a major challenge. As the COVID-19 pandemic has shown, failure to do so risks causing further catastrophic damage in the future.

Boats are moored at a jetty in a fishing village in the Indonesian province of Aceh in May. | AZWAR IPANK / AFP / VIA GETTY IMAGES

As for the economy, countries are currently in different stages of recovery and are pursuing various types of post-pandemic strategies, both in terms of policy and timeframe. But in a highly interconnected world made up of many different but interrelated financial and economic systems, the easing of stimulus measures in one country will affect others. In particular, normalization of monetary policy in developed economies, if not communicated transparently, can increase volatility and trigger potentially destabilizing capital outflows from emerging markets.

The COVID-19 crisis has put enormous pressure on the public finances of many developing countries, leaving governments grappling with rising debt levels as they attempt to fight the pandemic. International financial institutions and private creditors must work together to ensure a fair burden-sharing system to help them. While the tailor-made approach envisioned under the common framework of the G20 Debt Service Suspension Initiative is useful, this relief remains a temporary measure. Multilateral institutions need to provide increased surveillance and advice to address the growing debt problems of developing economies and alleviate their high financial distress.

Additionally, as the economic recovery begins to take hold, the global supply chains that have been disrupted by the pandemic cannot immediately adapt to meet the current surge in demand. This problem may be transient, but it is costly. The pandemic is therefore expected to prompt businesses and policymakers to reassess current global supply chains and resource allocation – a calculation that could generate momentum for emerging markets to gain a greater share of the global economic recovery.

Meanwhile, demand for energy has exceeded its pre-pandemic level, causing a global crisis. Besides the risk that soaring prices will spur inflation, the energy crisis also threatens our efforts to tackle climate change. Like the fight against the pandemic, measures to combat global warming can only be successful if we implement them together and in a coherent manner.

A ranger carries his grandson after completing a patrol in the Indonesian province of Aceh.  |  CHAIDEER MAHYUDDIN / AFP / VIA GETTY IMAGES
A ranger carries his grandson after completing a patrol in the Indonesian province of Aceh. | CHAIDEER MAHYUDDIN / AFP / VIA GETTY IMAGES

Today, we have the opportunity to jumpstart the economy and tackle climate change at the same time by fostering a green, resilient and inclusive recovery. Grasping it requires us to design positive economic policies for the climate and to provide more sustainable financing. As part of Indonesia’s economic recovery strategy, for example, the government has introduced programs to create alternative activities that both generate income and preserve forests for local communities.

Green stimulus programs are also likely to empower women, who have typically been hit harder than men by the pandemic and the climate crisis. In many cases, women act as change agents for sustainable initiatives. As a country with one of the largest areas of rainforest in the world, Indonesia is firmly and clearly committed to implementing a green recovery. And as the co-chair of the Coalition of Finance Ministers for Climate Action, I firmly believe that green initiatives should not be unfunded mandates.

Indonesia will assume the presidency of the G20 in 2022 and the presidency of the Association of Southeast Asian Nations in 2023. It can therefore help define the strategic direction of these groups to ensure a sustainable global recovery, resilient and inclusive. In particular, G20 members must establish an effective common framework to address the major global challenges of our time, including pandemic prevention, sustainable financing and climate change.

None of this will be easy, of course. But, like I said, I am an optimist. By generating sufficient political will, I am convinced that we can come back together, and therefore stronger, from the COVID-19 crisis.

Sri Mulyani Indrawati is Minister of Finance of Indonesia and Co-Chair of the Coalition of Finance Ministers for Climate Action. © Project Syndicate, 2021

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