Members of the Small States Forum met virtually on October 13, 2021.
The COVID-19 pandemic continues to have a disproportionate economic and social impact on small economies. Following an average contraction in small states of more than 8% in 2020, recovery is expected to remain sluggish, with most small states not reaching their pre-pandemic per capita income levels before 2024 at the earliest. With global travel still 60% below pre-pandemic levels, the recovery is expected to be particularly weak in tourism-dependent economies. The pandemic will have a lasting legacy in small states, with potential output expected to remain below pre-pandemic projections for the next decade.
Small economies have been responding to the crisis with their limited resources and capacities. We value the multilateral and bilateral international support made available to us. Yet our challenges remain daunting. Even as our attention has been fixed on dealing with the pandemic and its impacts, our economic vulnerabilities have been intensifying. We remain committed to getting back on track and strengthening resilience to escalating longer-term risks, including climate-induced disasters. A continued inflow of external financing at elevated levels and on affordable terms will be critical to our recovery and to sustained blue, green, resilient, and inclusive growth.
The economic and social recovery of our countries depends critically on vaccinating people against COVID-19. However, availability to date remains variable at best. Small states need an equitable, expeditious, and transparent availability of vaccines. While a large number of SSF members are on track to reach global vaccination targets for mid-2022, others still face serious constraints around vaccine procurement, delivery, and deployment, and will require continuing assistance, including adequate level of concessional financing.
Small states entered COVID-19 with higher debt levels than other EMDEs, due to small domestic economies and high exposure to climate-induced disasters. Responding to the crisis substantially exacerbated their debt burdens and acutely eroded the fiscal space to invest in the recovery. We welcome the Debt Service Suspension Initiative that provided temporary fiscal space to 15 members of our Forum. This further needs to be decisively and comprehensively supported by long-term and durable solutions and sustained focus and commitment from the international community. To this end, we ask the World Bank and the IMF to provide the necessary technical support to address debt vulnerabilities in small states, on a country-by-country basis, and for the international community to engage more closely with creditors to develop common approaches to addressing debt sustainability.
Small economies are at the forefront of the impact of climate change triggered by anthropogenic activities. Rising sea-levels affecting our coastal areas are an existential threat to small island states, and warming seas bring more intense and frequent storms to some, while severe droughts impact others. The fragile biodiversity of oceans surrounding our states is under threat, and ocean pollution and rising sea temperatures are hurting our fisheries and coastal economic activities. While we have repeatedly drawn attention to the climate emergency, to date there has been much talk, but little action. We strongly support the principles and goals of the Paris Agreement to limit global warming to 1.5 degrees Celsius above pre-industrial level through global community’s concerted efforts in reducing greenhouse gas emissions. We see COP26 as a pivotal moment, when inspired political leadership can rise to meet the challenge of climate change. In this context, we welcome the World Bank Group’s Climate Change Action Plan for 2021-25 and its commitment to focus more financing for adaptation. The unequivocal link between economic stability and climate change must continue to be a core pillar for financing to small states. We expect that improved climate financing will become more readily available on affordable terms to small states.
For 24 IDA-eligible members of the Forum, IDA resources have been critical to responding to the COVID-19pandemic and maintaining public services. To recoup development losses and build back better from the crisis, it is imperative that concessional resources remain available at high levels. We are happy to see the commitment and solidarity of the international community to support a strong IDA20 replenishment and call for a successful completion of the on-going IDA20 negotiations, so that $100 billion is made available to help IDA countries to recover from COVID-19 and return to their long-term blue, green, resilient, and inclusive development trajectories.