As the response from the multilateral institutions are inadequate during crisis, there is a need to create global risk pooling fund to overcome it. Explain (200 Words)
Refer - Business standard
Enrich the answer from other sources, if the question demands.
IAS Parliament 4 years
KEY POINTS
· According to the World Bank, 60 million people worldwide will fall back into extreme poverty (living on less than $1.9 per day) as a result of the severe economic crisis unleashed by Sars-CoV-2.
· The Rapid Credit Facility by IMF is offering concessional loans to help with balance of payments of low-income countries (LICs). The Catastrophe Containment and Relief Trust, is giving grants for debt relief to the most vulnerable countries affected by natural disasters or public health crises.
· IMF debt relief so far (across all regions) is minuscule. Interest payments will keep accumulating and result in higher debt burdens next year. Further, IMF loans/grants to cover debt servicing, while necessary to prevent downgrading of sovereign ratings and currency devaluation, do not cover for the losses suffered due to a catastrophe.
· In order to be more inclusive of risks facing the most vulnerable countries, the principle of risk pooling offers clues. A Global Risk Pooling Reserve Fund* would pool risks of environmental and health shocks across countries.
· In response to partial or entirely missing insurance safety nets for many vulnerable communities, a global reserve fund would rest on three premises. By pooling risks, peaks of risk curves could be lowered for individual countries.
· The reserve fund would not require initial payments of public money. The nominal capitalisation of the reserve fund could be based on a voluntary allocation of a share of a country’s Special Drawing Rights (SDRs) at the IMF. There are already calls for more SDRs (at least $500 billion) to be issued to deal with the liquidity crunch that developing countries are facing.
· The reserve fund would be drawn on only when disasters above a certain threshold strike. The risks and thresholds could be based on plotting a Climate Risk Atlas (and related risk indices) for developing countries.
Sanjeev Kumar Singh 4 years
Kindly give feedback
IAS Parliament 4 years
Try to cut short the introduction part, provide the reasons for inadequacy of funds from IMF. Keep Writing.
aswin 4 years
please review
IAS Parliament 4 years
Try to include about the assistance provide by IMF and explain why it is inadequate and then link with the need for Risk pooling fund. Keep Writing.
