While Vermont has had the lowest death rate from COVID, most of us have heard how this pandemic is killing tens of thousands of our fellow Americans. However, we have heard less about the toll this pandemic is taking in developing countries. On July 31, the U.S. House of Representatives passed historic legislation for a no-cost global COVID response that would unblock trillions of dollars worth of assets from the IMF – without costing U.S. taxpayers a cent, and without putting poor countries further into debt. U.S. Sen. Bernie Sanders, I-Vt., has led this effort in the Senate. U.S. Sen. Pat Leahy, D-Vt., should publicly support.
Last month, Senator Leahy eloquently explained the urgent need for Congress to introduce bold measures to support developing countries in their fight against the COVID-19 pandemic and its economic fallout. He correctly warned of the dire consequences that will follow an inadequate and slow global response, especially for the most vulnerable populations, and clearly demonstrated that the fate of the U.S. – from its economy to the health of millions of Americans – is inextricably tied to that of the rest of the world.
To mitigate this, the Senator has called for large increases in emergency funding for traditional international assistance. While commendable, publicly Leahy has overlooked an effective tool Bernie is championing to help save millions of lives without costing U.S. taxpayers a single penny – Special Drawing Rights (SDRs). SDRs are international reserve assets created by the International Monetary Fund (IMF) and allocated to its 189 member countries. SDRs can be exchanged for dollars by low- and middle-income countries in order to meet their external financing needs. This means more liquidity to fund critical healthcare infrastructure, increased protection against famine and disease, and a crucial tool to fight off economic collapse. Unlike the United States, the majority of the world cannot simply print more money to stimulate their economies and provide crucial funding during an emergency.
In 2009, the U.S. supported a $250 million SDR allocation, which successfully assisted countries around the world in mitigating some of the harmful effects of the 2008-2009 financial crisis. Already, capital outflows from developing countries are three times more than during `08 and `09, and economists are predicting the worst global economic crisis since the Great Depression. This is why leading economists, hundreds of global leaders, major news publications, and over 100 U.S. civil society organizations have called for another major issuance of Special Drawing Rights.
The U.S. has veto power at the IMF, so without U.S. support, this life saving and cost-free opportunity will be wasted. Given the U.S. Treasury Department has failed to support this measure, it is up to Congress to lead the way.
Recently, Representatives and Senators have heeded this call. On July 1, Senators Sanders, Durbin, Reed, Cardin, and Merkley introduced the Support for Global Financial Institution Pandemic Response Act which calls for the U.S. representatives at the IMF to support a 2 trillion increase in SDRs (worth roughly $2.8 trillion USD) along with global debt relief measures. And on the House side, Representatives recently passed legislation that calls for the same.
An increase of this magnitude would significantly help the most vulnerable countries in the global south cope with the virus while stabilizing their economies. For example, from a 2 trillion SDR allocation, Haiti would receive almost $840 million in liquidity while larger countries like South Africa would receive almost $18 billion.
Vermonters also stand to benefit from a significant SDR allocation. In 2019, Vermont exported $3 billion worth of commodities internationally – much of which went to low- and middle-income countries. Both our economic recovery here at home, and our efforts to prevent further spread of the pandemic, rely on the economic and physical health of our trading partners. Senator Leahy said it best: “controlling the outbreak here at home is ultimately a lost cause if we do not act aggressively to assist other countries against this pandemic.”
In this spirit, it is imperative that Pat Leahy join Bernie Sanders and his colleagues in Congress in publicly supporting the current efforts to push forward this global emergency fiscal stimulus. He could do this by co-sponsoring the Durbin-Sanders bill and advocating for its inclusion in the COVID relief package. Senator Leahy’s role as ranking member in the Foreign Operations Subcommittee makes him uniquely poised to demonstrate critical leadership in the global response to COVID-19 and prioritize this straightforward and cost-free solution.