RESOLUTION LFC 323

FORUM: LEGAL & FINANCE COMMITTEE

QUESTION OF: Proactively putting methods in place in the anticipation of state debt following the COVID-19 crisis

SUBMITTED BY: Burundi

CO-SUBMITTERS:China, Cameroon, Argentina, United States of America, Tajikistan, Sudan, Sri Lanka, Spain, Solomon Islands, Poland, Pakistan, Paraguay, Netherlands, New Zealand, Morocco, Malaysia, Liberia, Kazakhstan, Jamaica, Hungary, Guatemala, Nigeria, Togo.

STATUSApproved

THE LEGAL AND FINANCE COMMITTEE,

Commending the International Monetary Fund’s (IMF) rapid deployment of aid in response to the COVID-19 pandemic and ensuing economic and health crises,

Taking into account A/RES/74/307 of September 2020 on the united response against the global health threat of COVID-19, A/RES/74/306 of September 2020 on the comprehensive and coordinated response to COVID-19, and A/RES/69/319 on the basic principles of sovereign debt restructuring processes, 

Noting with concern that as unemployment rates and, subsequently, poverty rise due to the COVID-19 crisis, state spending must increase to protect populations,

Recognizing that Less Economically Developed Countries (LEDCs) are specifically prone to amassing state debt and further recognizing that state debt is a major challenge that has hindered the prosperity of LEDCs prior to the COVID-19 crisis,

Deeply conscious that LEDCs suffer from many health-related, environmental, and humanitarian issues, such as, Ebola outbreaks, various types of pollution, the threat of terrorist groups like al-Qaeda and Boko Haram, lack of access to clean water, and unvaccinated populations,

Reaffirming that without methods to protect sovereign states from debt and proactively resolve it, economic growth will be stunted and populations will suffer as a result,

Noting with appreciation the World Bank Group (WBG) and IMF’s efforts in providing strategic and policy support to low-income countries, specifically, the Heavily Indebted Poor Countries Initiative,

Stressing the importance of achieving the UN Sustainable Development Goals (SDGs), and that inability to proactively deal with state debt will lead to failure to achieve the goals, namely SDG Goal 10: Reduce inequality within and among countries,

  1. Urges the World Health Organization (WHO) and IMF to form a temporary joint secretariat, the Joint Secretariat on Preventing COVID-19 State Debt, which with an advisory panel to ensure the efficient use of allocated funds, will operate with the mandate of:
    1. overseeing and auditing the manufacturing and distribution of testing kits, Personal Protective Equipment (PPE), vaccines and other diagnostic or therapeutic tools to fight COVID-19 in conjunction with the Access to Covid-19 Tools (ACT) Accelerator
    2. create a classification system, which determines Member States’ eligibility to receive additional funding for COVID-19 tools, that takes into account and evaluates:
      1. availability of an ease access to COVID-19 tools, advised by the WHO’s Access to COVID-19 Tools Accelerator
      2. Debt-to-GDP ratio of the Member State in question
      3. Development status and prioritizes LEDCs
      4. Debt-to-GDP ratio prior to the COVID-19 pandemic
    3. facilitating the conducting of research on the short-term and long-term impacts of COVID-19 for individual member states in order to assist member states in anticipating future costs to the pandemic
    4. creating a COVID-19 Response and Recovery Fund plan in as a contingency in order to anticipate increases in the state debt, taking into account the current financial situation of each country:
      1. this contingency plan is serving as a cushion for all countries suffering the effects of COVID-19
      2. encourages other governments, specially More Economically Developed Countries (MEDCs), to create a economic recovery plan in order to support businesses during the pandemic under each country’s discretion;
  2. Strongly recommends the formation of an advisory panel, COVID-19 Policy Support Advisory Panel, as a part of the Joint Secretariat on Preventing COVID-19 State Debt, which will:
    1. comprise of experts on economic and global health, in a 3:1 ratio respectively, to ensure that member states are provided with policies that prioritize economic growth but also consider ramifications on the health of the population
    2. provide affordable policy advice to LEDCs and heavily indebted countries on methods to put in place at a state level to prevent further debt from accumulating, such methods include but are not limited to:
    3. collaborate with other international organizations, such as the UN Conference on Trade and Development (UNCTAD), to assist countries in forming new import and export plans and deals in light of the impediment of COVID-19 in trade
    4. advise the aforementioned joint secretariat on the practicality of the enactment of proposed policies and realistic methods of implementation to ensure swift, functional, and beneficial provision of aid
    5. advise governments on the implementation of a Business Finance Guarantee plan to ensure the stability of all enterprises:
      1. wage subsidies to aid companies
      2. small business cash flow loan
      3. temporary tax loss carry-back
      4. tax administration act changes
      5. tax incentives
      6. remission of penalties and interests 
      7. short-term absence payment
      8. commercial property law changes
      9. instituting budget cuts in order to reduce the increasing deficit due to the COVID-19 crisis;
  3. Encourages Member States that have high unemployment rates and are going through drastic economic recessions to refrain from statewide lockdowns in order not to damage the economy by drastically increasing the unemployment rates, decreasing both production and consumption, which will:
    1. be regulated through the cooperation of each Member State’s Ministry of Health and Ministry of Labor in order lift the restrictions progressively by firstly focusing on vital labor group, then gradually canceling all lockdowns in order to maximize the performance of each and every Member State
    2. require very attentive safety measures in order to avoid the uncontrollable spread of Covid-19 and maintain a healthy work environment such as ones suggested by World Health Organization (WHO) and Centers for Disease Control and Prevention (CDC):
      1. encouraging employees with symptoms to stay at their home
      2. maintaining social distancing at all times in the work environment
      3. asking for employees to take their own temperature and confirm that it is below 38.0°C (100.4°F)
      4. separating employees who have shown symptoms upon arrival or during the day from the rest of the workers
    3. be immediately canceled and appropriate lockdowns will be set if the total number of new Covid-19 cases doubles in a 7-day average;
  4. Recommends all Member States refraining from central bank financing as long as situations allow even the Member State has to source the capital at a higher cost and the Member States be monitored more in-depth  by International Monetary Fund (IMF) in order to formulate recovery plans and aid the worst affected Member States, which will:
    1. supply the stimulus gap in LEDCs, which requires greater international solidarity while improving the effectiveness of stimulus measures
    2. formulate tax incentives for businesses at the edge of collapsing in order to prevent closures
    3. include expanding and finding new ways of direct government approach to the nation’s economy prioritizing health care, social care, and public works;
  5. Further urges Member States to cooperate with Non-Governmental Organizations (NGOs) such as but not limited to Bank Information Center, Bretton Woods Project, and Third World Network (TWN) in order to formulate recovery plans for LEDCs, which monitored by the IMF, will: 
    1. propose stimulus packages in cooperation with the United Nations Department of Economic and Social Affairs (UNDESA) that will mainly focus on:
      1. aiding businesses by securing workers’ jobs or increasing support to dismissed workers
      2. protecting citizens and households by increasing income support to sick workers, access to unemployment benefits, supporting workers who cannot work from home
      3. strengthening the public health system by increasing health spending
    2. address each and every part of the state including small and large businesses, formal and informal sector workers, by:
      1. working closely with each Member State’s Ministry of Treasury in order to identify the sectors that experienced the hardest economic impact and require the most funds
      2. making available loans for small businesses lent by Non-profit organizations, whose amount can vary from $15,000 to $5,000,000 in order to support businesses with the capital, equipment, supplies, etc., which will be funded by the UNDESA and World Bank if the Member State lacks the liquidity to do so
    3. create a committee of debt managers and sub-committees that will focus on each Member State and will have the responsibility of providing information on whether a state’s debt can be absorbed its market, which will:
      1. identify possible time intervals to inject liquidity into the market and cash adjustments depending on the economic performance of the Member States 
      2. analyze the economic risks of actions taken by governments
      3. guide LEDCs with large amounts of debt to Debt Management Facility (DMF), where IMF and World Bank support countries on debt management institutions, ultimately, to decrease debt-related vulnerabilities for the post-Covid-19 era;
  6. Calls for Member States to create job opportunities in order to fight the unemployment through methods such as but not limited to:
    1. decreasing the interest rate ultimately, to increase the money supply of business that will pave the way for them to expand
    2. spending capital on public work projects that directly creates more contracts and more job opportunities
    3. having tax incentives for businesses that hire new workers creating more capital in the hands of businesses and citizens.