Last month the European Commission proposed that the EU should mobilize the next tranche of funding for Turkey (€3 billion) under the EU–Turkey deal agreed in 2016. The deal is part of a rapidly developing strategy on the part of the EU to improve cooperation on migration issues with countries of origin as well as those through which migrants and refugees transit en route to Europe. Since 2015, the EU has ramped up negotiations, with the New Partnership Framework underpinning arrangements with countries such as Niger, Mali and Ethiopia, and endorsing a memorandum of understanding between Italy and Libya in February 2017.

A common thread that runs across all of these deals is their focus on containment in exchange for funding, rather than a principled approach to refugee protection. For example, the EU has committed around €6 billion to Turkey as a contribution towards the cost of humanitarian assistance for the over 3 million Syrian refugees residing there. This funding also operates as an incentive for Turkey to take back all refugees and migrants who have irregularly arrived in Greece via Turkey since the deal entered effect.

Similarly, the EU is providing financial support to Libya in exchange for its cooperation in reducing the flow of migrants and refugees towards Europe, while the New Partnership Framework aims to reduce the number of migrants and refugees departing for Europe in exchange for EU aid. While financial incentives geared towards containment do not amount to new policy, with the increasing number of deals being negotiated, the use of such a strategy appears to be both accelerating and becoming more explicit.

An effective investment?

Implementation of these deals has been hindered by obligations under international law, raising questions not only as to their legality but also their value for money.

Under the EU–Turkey deal, refugees arriving in Greece irregularly were to be returned to Turkey, with an equal number of Syrian refugees resettled to Europe in exchange. However, implementation of this aspect of the deal has been limited.

Under EU asylum law, Greece is obliged to provide access to asylum procedures for those arriving on its shores. Given that most arrivals from Turkey came from refugee-producing countries (including Syria, Afghanistan and Iraq), an individualized assessment of ‘safe third country’ is required before any possible return to Turkey can take place. This requires a finding that Turkey can guarantee effective access to protection for the individual in question, including protection against refoulement (i.e. forced return to a country where he or she is at risk of serious harm or persecution). By the end March 2018, only 2,164 people had been returned to Turkey.

As for Italy, with EU support, under the MOU with Libya it has been training as well as providing funding and logistical support to the Libyan coastguard – including an Italian naval presence in Libyan waters – to intercept boats in the Mediterranean. Given the mounting evidence of abuse of migrants and refugees, whether by Libyan coastguards or inside Libyan detention centres, this raises questions as to whether the support being provided by Italy and the EU amounts to a breach of international law.

Despite concerns about the protection risks for refugees, advocates of such deals claim they have the potential to prevent dangerous journeys, saving lives and interrupting the business model of smugglers. Numbers crossing the Mediterranean have indeed dropped since the deals were agreed. However, in Libya it has created an ‘anti-smuggling’ market which, despite leading to a reduction of migration in the short term, may not be sustainable in the long term if it drives conflict between various non-state actors.

In the case of the EU–Turkey deal, while it has led to a fall in arrivals to the Greek islands in the first six months of 2017, there is also evidence that smugglers were already adapting their routes, forcing refugees and migrants to travel on the more dangerous central Mediterranean route.

For now, at least, these deals appear to have gained significant popular support within the EU. Italy’s approaches in Libya, for example, have been broadly backed by the Italian public – unsurprising given that some polls indicate 50 percent of the Italian population believe migrants to be a threat to public security. However, the drivers of public attitudes towards refugees and migration are complex and, as noted in a policy brief published under the Chatham House–ODI Forum on Refugee and Migration Policy, influenced in part by narratives driven by politicians and the media.

What some of these deals have achieved is the significant flow of aid money towards job creation and economic opportunities for refugees, incentivizing policy change in some contexts and producing real benefits for the refugees concerned (while reducing pressures on them to move onwards via dangerous journeys).

A prominent example is the Jordan Compact, a 2016 agreement between Jordan, the EU and international financial institutions including the World Bank to improve the livelihoods and education of Syrian refugees inside Jordan. While challenges in its implementation remain, including concerns about labour rights, the Jordan Compact has resulted in real improvements in education and access to the labour market for Syrian refugees. The Jordanian government has made policy concessions on access to work permits for Syrian refugees, removing some of the barriers that prevented refugees accessing jobs, while the EU has committed to ease trade barriers for goods produced in Jordanian factories on condition they hire a percentage of Syrian refugees.

Likewise, the EU–Turkey deal’s most successful component has been its financial contribution of €3 billion of aid under the EU Facility for Refugees towards support for the 3.7 million Syrian refugees currently being hosted by Turkey. This includes €1 billion allocated to the Emergency Social Safety Net, described by the European Commission as the ‘largest single humanitarian project in the history of the EU’, directly impacting the livelihoods of some 1.1 million vulnerable refugees.

Moving ahead

While some aspects of these deals reflect a genuine effort to cooperate in addressing the needs of refugees, other elements risk undermining the very essence of the global refugee protection regime.

The diplomatic squabble over a proposed refugee ‘swap’ of 1,250 refugees between the US and Australia in February 2017 highlights the danger of refugees becoming bargaining chips. Similarly, the Kenyan government’s announcement that it would close Dadaab refugee camp in late November 2016 cited the EU-Turkey deal as justification. Migration partnerships which emphasise the securing of EU borders against refugee arrivals may diminish the willingness of states in the Global South to continue to host large numbers of refugees.

While the positive aspects of such deals deserve acknowledgement, understanding their impact on refugee protection must be given greater attention. This is vital not only to ensure their workability but also to ensure that those countries who spearheaded the creation of the global refugee protection regime do not end up undermining its existence.

This roundtable focuses on the economic dimensions of displacement and migration and brings together an international group of experts from government, international organizations, civil society, research institutes and the private sector.   

The event was co-hosted with the Overseas Development Institute.

The specific objectives were to:

• create a platform for Chinese international law academics working on international human rights law issues to present their thinking and exchange ideas with counterparts from outside China;
• build stronger understanding within the wider international law community of intellectual debates taking place in China about the international human rights system and China's role within it;
• support networking between Chinese and non-Chinese academics working on international human rights and related areas of international law.

The roundtable forms part of a wider Chatham House project exploring China's impact on the international human rights system and was inspired by early discussions with a burgeoning community of Chinese academics thinking, writing (mainly in Chinese) and teaching about international human rights law.

For CUPL, one of the largest and most prestigious law schools in China and perhaps the only university in the world with an entire faculty of international law, the initiative is part of a drive to forge partnerships beyond China in the international law field.

The meeting in Geneva was co-hosted by the Graduate Institute Geneva and involved 19 participants, 9 Chinese (from six research institutions in Beijing and Shanghai) and 11 non-Chinese (from eight research institutions in Australia, Germany, the Netherlands, Switzerland, the United Kingdom and the United States).

To ensure continuity while also expanding the expert network being built, the third meeting included a mix of participants from the first two meetings and some new participants

All discussions were held in English under the Chatham House Rule.

The idea that trade agreements should be subject to human rights impact assessment has been gathering momentum in recent years. This idea springs from concern – particularly on the part of trade unions and civil society organizations – that states are not presently doing enough to anticipate and address the human rights-related issues that arise from their trading arrangements with other countries.

This meeting will coincide with the launch of a research paper on human rights impact assessment by Dr Jennifer Zerk. It will bring together experts from law, trade policy, human rights impact assessment practice and civil society to take stock of progress so far and consider the future prospects for human rights impact assessment as a risk-analysis and policymaking tool in the trade context.  

The meeting will explore the key risks and benefits of the human rights impact assessment of trade agreements. What legal, political and practical challenges have been encountered so far? In what ways could communication, stakeholder consultation and follow-up of findings be improved? And what is needed to build political and stakeholder support for these kinds of processes?  

This meeting will be followed by a reception. 

The transition of power in Oman from the deceased Sultan Qaboos to his cousin and the country’s new ruler, Sultan Haitham bin Tariq, has been smooth and quick, but the new sultan will soon find that he has a task in shoring up the country’s economic position.

Above all, the fiscal and debt profile of the country requires careful management. Fiscal discipline was rare for Oman even during the oil price spike of the 2000s. Although oil prices only collapsed in 2014, Oman has been registering a fiscal deficit since 2010, reaching a 20.6 per cent high in 2016. As long as fiscal deficits remain elevated, so will Oman’s need to finance those deficits, predominately by borrowing in the local and international market.

Oman’s Debt-to-GDP ratio has been rising at a worrying pace, from 4.9 per cent in 2014 to an IMF-estimated 59.8 per cent in 2019. By 2024, the IMF is forecasting the ratio to reach nearly 77 per cent. A study by the World Bank found that if the debt-to-GDP ratio in emerging markets exceeds 64 per cent for an extended period, it slows economic growth by as much as 2 per cent each year.

Investors are willing to lend to Oman, but the sultanate is paying for it in terms of higher spreads due to the underlying risk markets are placing on the rising debt profile of the country. For instance, Oman has a higher sovereign debt rating than Bahrain yet markets perceive it to be of higher risk, making it costlier to borrow. Failure to address the fiscal and debt situation also risks creating pressure on the country’s pegged currency.

If oil revenues remain low, Sultan Haitham will have to craft a daring strategy of diversification and private sector growth. He is well placed for this: Sultan Haitham headed Oman’s Vision 2040, which set out the country’s future development plans and aspirations, the first Gulf country to embark on such an assessment. However, like all vision documents in the Gulf, Oman’s challenge will be implementation.

In the age of climate change, renewable energy is a serious economic opportunity, which Oman has to keep pursuing. If cheap electricity is generated it could also be exported to other Gulf states and to south Asia. In Oman, the share of renewables in total electricity capacity was around 0.5 per cent in 2018; the ambition is to reach 10 per cent by 2025.

However, in order to reach this target, Oman would have to take additional measures such as enhancing its regulatory framework, introducing a transparent and gradual energy market pricing policy and integrating all stakeholders, including the private sector, into a wider national strategy.

Mining could provide another economic opportunity for Oman’s diversification efforts, with help from a more robust mining law passed last year. The country has large deposits of metals and industrial minerals and its mountains could have gold, palladium, zinc, rare earths and manganese.

Oman’s strategic location connecting the Gulf and Indian Ocean with east Africa and the Red Sea could also boost the country’s economy. The Duqm special economic zone, which is among the largest in the world, could become the commercial thread between Oman, south Asia and China’s ‘Belt and Road Initiative.’

Oman has taken important steps to make its economy more competitive and conducive to foreign direct investment. Incentives include a five-year renewable tax holiday, subsidized plant facilities and utilities, and custom duties relief on equipment and raw materials for the first 10 years of a firm’s operation in Oman.

A private sector economic model that embraces small- and medium-sized enterprises as well as greater competition and entrepreneurship would help increase opportunities in Oman. Like all other Gulf economies, future employment in Oman will have to be driven be the private sector, as there is little space left to grow the public sector.

Privatization needs to continue. Last year’s successful sale of 49 per cent of the electricity transmission company to China’s State Grid is a very positive step. The electricity distribution company as well as Oman Oil are next in line for some form of partial privatization.

The next decade will require Oman to be even more adept in its competitiveness as the region itself tries to find its new bearings. Take tourism for instance; Oman hopes to double its contribution to GDP from around 3 per cent today to 6 per cent by 2040 and the industry is expected to generate half a million jobs by then. Over the next 20 years, Oman will most likely be facing stiff competition in this area not only by the UAE but by Saudi Arabia as well.

The new sultan has an opportunity to embark on deeper economic reforms that could bring higher growth, employment opportunities and a sustainable future. But he has a big task.

The Syrian conflict has not only resulted in material losses but also in loss of familiar everyday life for Syrian people. Through their work, many Syrian artists have been trying to come to terms with the conflict and its impact on their memories, sense of self and the place they call home. 

Against this backdrop, Broken Dinners, Postponed Kisses provides an insight into the lived experience of artists affected by violence and upheaval in Syria. The film follows the lives of six Syrian artists as they narrate their journeys of loss, displacement and adaptation. Each story builds on the last providing an exploration of the expressive power of art in conflict. 
 
The screening will be followed by a Q&A discussion with Aleppo-born Syrian Armenian filmmaker, Nigol Bezjian. Led by al-Arabiya’s London Bureau Chief, Rima Maktabi, the discussion will place some of the themes raised by the film into a wider conversation surrounding the intersection of art and politics and the impact of war on the memories, lives and viewpoints of individuals.

COVID-19
This event is proceeding as scheduled, as are other Chatham House events, in accordance with the advice from the UK Government, Foreign and Commonwealth Office and Public Health England. However, we are closely monitoring the spread of COVID-19 and will send updates to attendees as the situation warrants. 
In the meantime, in line with the official advice for returning travellers or visitors to the UK from specified countries and areas (see guidance here), we ask that:

• If you have travelled from Category 1 countries/areas, you refrain from attending the event even if asymptomatic (i.e. even if you are showing no symptoms);
• If you have travelled from Category 2 countries/areas, you refrain from attending the event should you develop symptoms.

If you fall under one of these affected categories and have any questions, please call +44 (0)207 314 3638 or email lbedford@chathamhouse.org.

This event will be preceded by a drinks reception, taking place from 17:00.

This event is open to all Chatham House members as well as attendees of the 'The Struggle for the State in Syria' conference taking place the next day.

As Lebanon strains to contain COVID-19, it is not clear which governmental public health policies apply to refugees. The government announced free testing for coronavirus in the public Rafiq Hariri University Hospital in Beirut but has not mentioned if refugees are eligible.

Lebanon’s coronavirus containment strategy is based on self-reporting and, given incidents of forced deportation and harassment of Syrian refugees from both the authorities and local communities, it is certainly less likely refugees would present themselves to the health authorities for fear of deportation.

Despite agreeing a Lebanon Crisis Response Plan with the UN for refugees, different ministries were left to implement it without coordination, just as Lebanese politicians from all sides started trying to rally popular support for ridding Lebanon from refugees - in particular from Syria, who Lebanese leaders say are causing a strain on the country’s already weak infrastructure.

This finger pointing is coupled with the leaders’ own complete disregard for the rampant corruption and lack of accountability within Lebanon’s political class, which contribute to the weakening of the country’s infrastructure.

For refugees who do find themselves back in Syria, there are different challenges according to which area they are in. In the north-east, the WHO and international NGOs (INGOs) negotiate with both Kurdish authorities as well as the government - each presenting its own hurdles.

Kurdish authorities in northeast Syria have closed the Semalka border with Iraqi Kurdistan, posing a serious dilemma for INGOs offering services in north-east Syria but concerned about their staff safety whose movement is now curtailed.

The government of Syria has stipulated all emergency response must go through its ministries. But this limits what the WHO can do in the country and gives Syrian authorities the ability to block ‘cross-line aid’ which goes from government-controlled to non-government areas.

Despite reports that doctors raised the alarm about suspected cases well before patient zero was confirmed, the government appears to be either covering up the actual extent of the spread of COVID-19 or failing to respond. Some limited testing kits have arrived but testing has barely started.

The WHO’s Syria plan is divided into three regions (north-west, north-east, and areas under government control). But concerns remain as to how workable such a decentralized plan is because of the government’s practices. In January, the UN Security Council did not renew the cross-border response resolution for the Yaroubiye border crossing between Syria and Iraq that the WHO was using to send medical supplies into north-east Syria.

Syrian authorities do not permit recently authorized ‘cross-line’ responders to engage with non-government authorities in areas outside regime control. This essentially voids the authorization to work cross-line as it is practically impossible to implement programs. The WHO has sought approval from the Syrian Ministry of Foreign Affairs to move medical supplies by land to north-east Syria.

While promising facilitation, the Ministry’s reply comes with conditions of seeking detailed approval for every shipment. When Eastern Ghouta was under siege, similar conditions led to certain supplies being removed from UN/ICRC convoys to Eastern Ghouta, and there is no guarantee this will not happen again.

Due to lack of capacity in north-east Syria, coronavirus tests conducted by the WHO there must be processed through the Central Public Health Laboratory in Damascus. Samples are transported twice a week from Qamishli to Damascus but no results were ever received from Damascus for those tests.

While the WHO is able to coordinate access to north-west Syria with the Turkish authorities, the prospective coronavirus testing capacity in the Idlib region is low – despite claims that thousands of kits are arriving, a lack of resource on the ground means potentially only 20 tests per day could be done in an area inhabited by an estimated three million people.

Following the recently announced ceasefire in the area, many internally displaced people are returning from the Turkish border to their homes in the north-west, but such mass movement increases the risk of coronavirus spreading. People also continue to move between Syria, Iraq, Turkey and Lebanon, posing a challenge to the WHO’s COVID-19 response in the Levant, as the WHO has distinct response plans for each country in the region and it is difficult to coordinate across these plans.

Challenges face refugees even if they head towards Europe due to the potential for conflation between migration control and coronavirus outbreak control. Aurelie Ponthieu, Coordinator for Forced Migration at Médecins Sans Frontières (MSF) says there is a risk some countries could use COVID-19 to impose draconian measures towards asylum seekers.

The crisis has also put a halt to search and rescue operations in the Mediterranean because European countries are not allowing boats carrying migrants to disembark under the pretext of limiting the spread of coronavirus. And for migrants who already made it - such as in Greece - they are now being put in collective quarantines in asylum centers, often with poor medical facilities.

Ponthieu also reports that migrants being quarantined on overcrowded navy ships docked in Greek ports, making social distancing impossible. And she is concerned the Greek authorities are imposing a curfew on asylum seekers but not on the local population.

UNHCR is stressing that people’s right of asylum must not be overruled by concerns about the spread of coronavirus, while local and international NGOs across the Levant are trying to coordinate their advocacy on lifting restrictions on freedom of movement for humanitarian workers and on other policies and practices by authorities in the region which are adversely affecting refugee and other vulnerable communities.

The international community must not lose sight of the impact of the crisis on refugees and migrants. It is not enough simply to supply humanitarian and medical assistance without paying attention to the policies and practices of the different authorities who have direct control over the fate of vulnerable communities.

The author would like to thank Aurelie Ponthieu and the two INGO field workers who all agreed to be interviewed to inform this analysis piece.

The entry into force of the African Continental Free Trade Area (AfCFTA) on 30 May, after only three years of negotiations, is an economic, political and diplomatic milestone for the African Union (AU) and its member states, crucial for economic growth, job creation, and making Africa a meaningful player in international trade. But the continent will have to work together to ensure that the potential benefits are fully realized.

A necessary innovation

With its advances in maintaining peace and security, abundant natural resources, high growth rates, improved linkages to global supply chains and a youthful population, Africa is emerging as a new global centre of economic growth, increasingly sought after as a partner by the world’s biggest economies. Governments from across Africa have been taking a more assertive role in international markets, including through proactive diversification of trading partners, and the continent remains a strong advocate for the multilateral trading system.

However, this is not yet reflected in outcomes. The African Union does not have observer status at the World Trade Organization, despite diplomatic efforts in the past decade. Africa has less than a three per cent share of global trade, and the growing trend towards protectionism across the global economy may only increase the vulnerability of a disunited Africa. Its fractured internal market means that trade within Africa is lower than for any other region on the globe, with intra-African trade just 18 per cent of overall exports, as compared to 70 per cent in Europe.

The AfCFTA is the continent’s tool to address the disparity between Africa’s growing economic significance and its peripheral place in the global trade system, to build a bridge between present fragmentation and future prosperity. It is an ambitious, comprehensive agreement covering trade in goods, services, investment, intellectual property rights and competition policy. It has been signed by all of Africa’s states with the exception of Eritrea.

It is the AU's Agenda 2063 flagship project, brought about by the decisions taken at the January 2012 African Union Summit to boost intra-African trade and to fast track the establishment of the Continental Free Trade Area. It builds upon ambitions enshrined in successive agreements including the Lagos Plan of Action and the Abuja Treaty. Access to new regional markets and reduced non-tariff barriers are intended to help companies scale up, driving job creation and poverty reduction, as well as attracting inward investment to even Africa’s smaller economies.

The signing in 2018 of the instruments governing the Single Air Transport Market and the Protocol on Free Movement of Persons, Right of Residence and Right of Establishment provided another step towards the gradual elimination of barriers to the movement of goods, services and people within the continent.

Tests to come

However, while progress is being made towards the ratification of the AfCFTA, much remains to be done before African countries can fully trade under its terms. The framework for implementation is still under development, and the creation of enabling infrastructure that is critical for connectivity will take time to develop and requires extensive investment.

So, the first test for the AfCFTA will be the level to which Africa’s leaders make it a domestic priority, and whether a consensus can be maintained across the AU’s member states as the costs of implementation become clear.

There is no guarantee that the gains of free trade will be evenly distributed. They will mainly depend on the extent to which countries embrace industrialization, liberalization of their markets and opening of their borders for free movement of goods and people – policies that some incumbent leaders may be reluctant to implement. Political will to maintain a unified negotiating position with diverse stakeholders, including the private sector, will come under increasing stress.  

A second challenge is how the AfCFTA relates to already existing trade arrangements, notably with the EU.  The AU has long preferred to pursue a continent-to-continent trading arrangement instead of the bilateral Economic Partnership Agreements being sought by the EU under the African, Caribbean and Pacific (ACP) framework to which, with the exception of Algeria, Egypt, Libya, Morocco, Tunisia and South Africa, all African states belong. The signing of the AfCFTA is one important step towards making this possible.

But there are currently negotiations under the ACP to replace the Cotonou Accord (the framework governing trade between ACP members and the EU, including Economic Partnership Agreements [EPAs], that is due to expire in 2020). Negotiations on the African pillar of the accord are due to take place after the AfCFTA has entered into force. So African states and the AU will face the challenge of balancing their commitment to the ACP bloc with pursuing their own interests.

And though the AfCFTA should supersede any other agreements, the EPAs or their successors, will continue to govern day-to-day trading, in parallel to the new pan-African market. It is not yet clear how these contradictions will be reconciled.

A new role for the AU?

The AU will need to play an active role as the main interlocutor with Africa´s international trading partners, with the AfCFTA secretariat being the arbiter of internal tensions and trade disputes. The AU´s engagement at continental level has to date revolved mainly around headline political diplomacy, security and peacekeeping. With the continental free market becoming a reality, an effective pivot to economic diplomacy will be critical for growth and development.

With the AfCFTA, the AU has endeavoured to address Africa’s unsustainable position in global trade, to stimulate growth, economic diversification and jobs for its growing population. Much will depend on the commitment of African leaders to maintaining a unified negotiating position to implement the agreement and the AU’s capacity to effectively move from political to economic diplomacy.

Theresa May’s announcement in 2018 on the UK’s ambition to become the G7’s largest investor in Africa by 2022 has been followed by similar stated ambitions at the recent UK-Africa Investment Summit, which saw the attendance of 16 African heads of states. Such ambitions mirror overtures from various international players including a call for a ‘comprehensive strategy for Africa’ by the EU in 2019. While the UK’s recent expansion of its diplomatic networks in Africa and the signing of the Economic Partnership Agreement with the Southern African Customs Union and Mozambique appear promising, there are significant challenges to deepening partnerships including visa restrictions and complex business environments.
 
At this event, the panellists will assess the future of trade and investment relations between the UK and Africa. Amid a proliferation of new trading partners including Asia’s emerging economies, Russia and the Gulf states, what are the points of change and continuity in the long-standing relationship between Africa and the UK? And what are the challenges and opportunities facing governments and businesses in Africa and the UK in efforts to build long-lasting economic ties?
 
This event will be followed by a drinks reception.

This event is open to Chatham House Corporate Members and corporate contacts of Chatham House's Africa Programme only.

Not a member? Find out more. For further information on the different types of Chatham House events, visit Our Events Explained.

Freedom House’s annual report,  Freedom in the World, assesses the condition of political rights and civil liberties around the world. Its next report, to be published on 4 March, will examine trends and changes since its previous assessment which found that political rights and civil liberties have declined globally over 13 consecutive years. This event will launch the Africa findings of its forthcoming report, highlighting positive and negative changes, and why different regions are diverging.

Jon Temin, Director of Africa Programs at Freedom House, will examine trends in political freedoms in Africa in the global context, discussing the causes and potential consequences of the shifts being seen, and what needs to be done to protect positive shifts and prevent further decline elsewhere.

Please note that this event is at capacity and registration is now closed. 

With Africa hosting half of the UN peacekeeping missions currently in operation and more than 80 per cent of the UN’s peacekeepers, it is clear that crisis management and conflict resolution on the continent remain key priorities. However, traditional international supporters, notably Canada and the United States, have reduced their financial support for peacekeeping in recent years. Together with frequent reports on peacekeeping abuse, declining support is proving disruptive for the maintenance and predictability of UN missions.

At this event, which will launch the book A Peacekeeper in Africa: Learning from UN Interventions in Other People’s Wars, Alan Doss will reflect on past UN peacekeeping missions in Africa and will consider how lessons learned might help to improve future UN peace operations.

PLEASE NOTE THIS EVENT IS POSTPONED UNTIL FURTHER NOTICE.

Nigeria is better placed than many to respond to the arrival of the coronavirus disease. In 2014, it successfully contained a deadly Ebola virus outbreak and the country’s current score on the Epidemic Preparedness Index (38.9 per cent) is higher than the African and global averages.

But the outbreak is compounding Nigeria’s numerous pre-existing crises. It was already grappling with a Lassa fever outbreak that has claimed more than one hundred lives in 2020, the aftermath of recession, and conflict and insecurity within its borders.

Effective leadership to build confidence will be vital. However, President Muhammadu Buhari has made few appearances, delivering his first speech on Nigeria’s response more than one month after the country’s first recorded case. And the indefinite suspension of meetings of the Federal Executive Council has raised questions on the efficacy of the response.

Extended lockdown imposed

The recent loss of President Buhari’s steadfast chief of staff Abba Kyari as a result of contracting COVID-19 is a further significant setback for the presidency. But the administration has established a presidential task force to develop a national strategy and an extended lockdown has been imposed on the most affected states – Lagos, Ogun and the Federal Capital Territory of Abuja. The country has also closed national borders and is expanding testing capacity to 1,500 per day.

However, when Nigeria’s first case was recorded on February 27 it was state governments that initially took action – shutting schools, closing state borders and imposing lockdowns. Going forwards, the 36 state governments will have a key role to play although their governance capacity and commitment varies widely.

The federal government has released $2.7 million to support the Nigeria Centre for Disease Control (NCDC), and promised an additional $18 million – but this falls well short of the estimated $330 million needed to tackle the coronavirus disease in Nigeria. The government is looking to its private sector to help make up the difference. The country’s finances are under severe pressure with Nigerian crude oil – the main source of government revenue and foreign exchange reserves – selling for as low as $12 or $13 a barrel (with production costs of around $22 per barrel), and a debt servicing to revenue ratio of more than 50 per cent even before the oil price crash.

Facing its second recession in four years, with -3.4 per cent GDP growth forecast by the IMF, the country has little economic resilience. Nigeria will not be able to sustain restrictions on its 81.15 million-strong workforce, 83.2 per cent of which operate in the informal sector. One area at particular risk is food security, as the pandemic is disrupting farming, supply chains and trade. By building on past benefit programmes, the federal government is providing cash and distributing food to vulnerable households, but this important effort is being hampered by poor communication, inefficiencies and a lack of transparency – longstanding challenges in many aspects of public service delivery in Nigeria.

In the absence of a reliable social safety net, Nigerians trust and rely on their families, communities and the informal economy to see them through difficult times. It is these informal mechanisms that lend Nigeria its oft-referenced resilience, which has enabled society to function and continue while a largely disconnected political class has focused on self-enrichment.

It is through these traditional channels that the government will need to deliver information, support, testing and treatment. But without high levels of trust, the administration may find it difficult to do so. Many Nigerians initially considered the pandemic a hoax, some describing it as a ‘rich man’s disease’, while others see it as another conspiracy by politicians to loot the treasury.

Lockdown measures have also heightened tensions across the country. Some citizens are rebelling and in one instance burned down a police station in response to the closure of mosques in Katsina state. Marking a further breakdown in the relationship between the population and its leaders, the Nigerian National Human Rights Commission (NHRC) recently reported security services enforcing the lockdown have extrajudicially killed 18 people, while, so far, COVID-19 has killed 25 people in Nigeria.

Mitigating the spread and worst consequences of the virus will depend on the state rebuilding trust with its citizens through effective communication and action. It is particularly important that the community mechanisms of support are protected as they come under growing pressure as communities become increasingly affected by the virus.

The stark choice facing most Nigerians – between risking starvation and risking contagion – means a sustained lockdown is not a tenable option. People will choose to go to work. This will especially be the case as people grow weary of measures imposed upon them by a state that the vast majority of the population believe does not serve or care for them.

Having largely ignored the needs of Nigeria’s citizens for decades, the political class face an uphill battle in building trust with the population. Earning this trust is not only crucial for the struggle against COVID-19 but also for Nigeria’s longer-term progress and system of political governance.

The entry into force of the African Continental Free Trade Area (AfCFTA) on 30 May, after only three years of negotiations, is an economic, political and diplomatic milestone for the African Union (AU) and its member states, crucial for economic growth, job creation, and making Africa a meaningful player in international trade. But the continent will have to work together to ensure that the potential benefits are fully realized.

A necessary innovation

With its advances in maintaining peace and security, abundant natural resources, high growth rates, improved linkages to global supply chains and a youthful population, Africa is emerging as a new global centre of economic growth, increasingly sought after as a partner by the world’s biggest economies. Governments from across Africa have been taking a more assertive role in international markets, including through proactive diversification of trading partners, and the continent remains a strong advocate for the multilateral trading system.

However, this is not yet reflected in outcomes. The African Union does not have observer status at the World Trade Organization, despite diplomatic efforts in the past decade. Africa has less than a three per cent share of global trade, and the growing trend towards protectionism across the global economy may only increase the vulnerability of a disunited Africa. Its fractured internal market means that trade within Africa is lower than for any other region on the globe, with intra-African trade just 18 per cent of overall exports, as compared to 70 per cent in Europe.

The AfCFTA is the continent’s tool to address the disparity between Africa’s growing economic significance and its peripheral place in the global trade system, to build a bridge between present fragmentation and future prosperity. It is an ambitious, comprehensive agreement covering trade in goods, services, investment, intellectual property rights and competition policy. It has been signed by all of Africa’s states with the exception of Eritrea.

It is the AU's Agenda 2063 flagship project, brought about by the decisions taken at the January 2012 African Union Summit to boost intra-African trade and to fast track the establishment of the Continental Free Trade Area. It builds upon ambitions enshrined in successive agreements including the Lagos Plan of Action and the Abuja Treaty. Access to new regional markets and reduced non-tariff barriers are intended to help companies scale up, driving job creation and poverty reduction, as well as attracting inward investment to even Africa’s smaller economies.

The signing in 2018 of the instruments governing the Single Air Transport Market and the Protocol on Free Movement of Persons, Right of Residence and Right of Establishment provided another step towards the gradual elimination of barriers to the movement of goods, services and people within the continent.

Tests to come

However, while progress is being made towards the ratification of the AfCFTA, much remains to be done before African countries can fully trade under its terms. The framework for implementation is still under development, and the creation of enabling infrastructure that is critical for connectivity will take time to develop and requires extensive investment.

So, the first test for the AfCFTA will be the level to which Africa’s leaders make it a domestic priority, and whether a consensus can be maintained across the AU’s member states as the costs of implementation become clear.

There is no guarantee that the gains of free trade will be evenly distributed. They will mainly depend on the extent to which countries embrace industrialization, liberalization of their markets and opening of their borders for free movement of goods and people – policies that some incumbent leaders may be reluctant to implement. Political will to maintain a unified negotiating position with diverse stakeholders, including the private sector, will come under increasing stress.  

A second challenge is how the AfCFTA relates to already existing trade arrangements, notably with the EU.  The AU has long preferred to pursue a continent-to-continent trading arrangement instead of the bilateral Economic Partnership Agreements being sought by the EU under the African, Caribbean and Pacific (ACP) framework to which, with the exception of Algeria, Egypt, Libya, Morocco, Tunisia and South Africa, all African states belong. The signing of the AfCFTA is one important step towards making this possible.

But there are currently negotiations under the ACP to replace the Cotonou Accord (the framework governing trade between ACP members and the EU, including Economic Partnership Agreements [EPAs], that is due to expire in 2020). Negotiations on the African pillar of the accord are due to take place after the AfCFTA has entered into force. So African states and the AU will face the challenge of balancing their commitment to the ACP bloc with pursuing their own interests.

And though the AfCFTA should supersede any other agreements, the EPAs or their successors, will continue to govern day-to-day trading, in parallel to the new pan-African market. It is not yet clear how these contradictions will be reconciled.

A new role for the AU?

The AU will need to play an active role as the main interlocutor with Africa´s international trading partners, with the AfCFTA secretariat being the arbiter of internal tensions and trade disputes. The AU´s engagement at continental level has to date revolved mainly around headline political diplomacy, security and peacekeeping. With the continental free market becoming a reality, an effective pivot to economic diplomacy will be critical for growth and development.

With the AfCFTA, the AU has endeavoured to address Africa’s unsustainable position in global trade, to stimulate growth, economic diversification and jobs for its growing population. Much will depend on the commitment of African leaders to maintaining a unified negotiating position to implement the agreement and the AU’s capacity to effectively move from political to economic diplomacy.

The transition of power in Oman from the deceased Sultan Qaboos to his cousin and the country’s new ruler, Sultan Haitham bin Tariq, has been smooth and quick, but the new sultan will soon find that he has a task in shoring up the country’s economic position.

Above all, the fiscal and debt profile of the country requires careful management. Fiscal discipline was rare for Oman even during the oil price spike of the 2000s. Although oil prices only collapsed in 2014, Oman has been registering a fiscal deficit since 2010, reaching a 20.6 per cent high in 2016. As long as fiscal deficits remain elevated, so will Oman’s need to finance those deficits, predominately by borrowing in the local and international market.

Oman’s Debt-to-GDP ratio has been rising at a worrying pace, from 4.9 per cent in 2014 to an IMF-estimated 59.8 per cent in 2019. By 2024, the IMF is forecasting the ratio to reach nearly 77 per cent. A study by the World Bank found that if the debt-to-GDP ratio in emerging markets exceeds 64 per cent for an extended period, it slows economic growth by as much as 2 per cent each year.

Investors are willing to lend to Oman, but the sultanate is paying for it in terms of higher spreads due to the underlying risk markets are placing on the rising debt profile of the country. For instance, Oman has a higher sovereign debt rating than Bahrain yet markets perceive it to be of higher risk, making it costlier to borrow. Failure to address the fiscal and debt situation also risks creating pressure on the country’s pegged currency.

If oil revenues remain low, Sultan Haitham will have to craft a daring strategy of diversification and private sector growth. He is well placed for this: Sultan Haitham headed Oman’s Vision 2040, which set out the country’s future development plans and aspirations, the first Gulf country to embark on such an assessment. However, like all vision documents in the Gulf, Oman’s challenge will be implementation.

In the age of climate change, renewable energy is a serious economic opportunity, which Oman has to keep pursuing. If cheap electricity is generated it could also be exported to other Gulf states and to south Asia. In Oman, the share of renewables in total electricity capacity was around 0.5 per cent in 2018; the ambition is to reach 10 per cent by 2025.

However, in order to reach this target, Oman would have to take additional measures such as enhancing its regulatory framework, introducing a transparent and gradual energy market pricing policy and integrating all stakeholders, including the private sector, into a wider national strategy.

Mining could provide another economic opportunity for Oman’s diversification efforts, with help from a more robust mining law passed last year. The country has large deposits of metals and industrial minerals and its mountains could have gold, palladium, zinc, rare earths and manganese.

Oman’s strategic location connecting the Gulf and Indian Ocean with east Africa and the Red Sea could also boost the country’s economy. The Duqm special economic zone, which is among the largest in the world, could become the commercial thread between Oman, south Asia and China’s ‘Belt and Road Initiative.’

Oman has taken important steps to make its economy more competitive and conducive to foreign direct investment. Incentives include a five-year renewable tax holiday, subsidized plant facilities and utilities, and custom duties relief on equipment and raw materials for the first 10 years of a firm’s operation in Oman.

A private sector economic model that embraces small- and medium-sized enterprises as well as greater competition and entrepreneurship would help increase opportunities in Oman. Like all other Gulf economies, future employment in Oman will have to be driven be the private sector, as there is little space left to grow the public sector.

Privatization needs to continue. Last year’s successful sale of 49 per cent of the electricity transmission company to China’s State Grid is a very positive step. The electricity distribution company as well as Oman Oil are next in line for some form of partial privatization.

The next decade will require Oman to be even more adept in its competitiveness as the region itself tries to find its new bearings. Take tourism for instance; Oman hopes to double its contribution to GDP from around 3 per cent today to 6 per cent by 2040 and the industry is expected to generate half a million jobs by then. Over the next 20 years, Oman will most likely be facing stiff competition in this area not only by the UAE but by Saudi Arabia as well.

The new sultan has an opportunity to embark on deeper economic reforms that could bring higher growth, employment opportunities and a sustainable future. But he has a big task.

This week the UK will start negotiating its future relationship with the European Union. The government is trying to convince the EU that it is serious about its red lines and is prepared to walk away from negotiations if the UK’s ‘regulatory freedom’ is not accepted – a no-deal scenario that would result in tariffs between the EU and the UK. Yet at the same time the story it is telling the world is that Britain is ‘re-emerging after decades of hibernation as a campaigner for global free trade’, as Boris Johnson put it in his speech in Greenwich a few weeks ago.

The EU is understandably confused. It’s a bit odd to claim to be campaigning for free trade at the exact moment you are creating new barriers to trade. If Britain were so committed to frictionless trade, it wouldn’t have left the EU in the first place – and having decided to leave, it would have sought to maintain a close economic relationship with the EU, like that of Norway, rather than seek a basic trade deal like Canada’s. 

As well as creating confusion, the narrative also absurdly idealizes free trade. Johnson invoked Richard Cobden and the idea that free trade is ‘God’s diplomacy – the only certain way of uniting people in the bonds of peace since the more freely goods cross borders the less likely it is that troops will ever cross borders’. But the idea that free trade prevents war was shattered by the outbreak of the First World War, which brought to an end the first era of globalization.

We also know that the domestic effects of free trade are more complex and problematic than Johnson suggested. Economic liberalization increases efficiency by removing friction but also creates disruption and has huge distributional consequences – that is, it creates winners and losers. In a democracy, these consequences need to be mitigated.

In any case, the world today is not the same as the one in which Cobden lived. Tariffs are at a historically low level – and many non-tariff barriers have also been removed. In other words, most of the possible gains from trade liberalization have already been realized. Johnson talked about the dangers of a new wave of protectionism. But as the economist Dani Rodrik has argued, the big problem in the global economy is no longer a lack of openness, it is a lack of democratic legitimacy.

The UK should therefore abandon this confusing and misleading narrative and own the way it is actually creating new barriers to trade – and do a better job of explaining the legitimate reasons for doing so. Instead of simplistically talking up free trade, we should be talking about the need to balance openness and economic efficiency with democracy and a sense of control, which is ultimately what Brexit was all about. Instead of claiming to be a ‘catalyst for free trade’, as Johnson put it, the UK should be talking about how it is trying to recalibrate globalization and, in doing so, make it sustainable.

In the three decades after the end of the Cold War, globalization got out of control as barriers to the movement of capital and goods were progressively removed – what Rodrik called ‘hyper-globalization’ to distinguish it from the earlier, more moderate phase of globalization. This kind of deep integration necessitated the development of a system of rules, which have constrained the ability of states to pursue the kind of economic policy, particularly industrial policy, they want, and therefore undermined democracy.

Hyper-globalization created a sense that ‘the nation state has fundamentally lost control of its destiny, surrendering to anonymous global forces’, as the economist Barry Eichengreen put it. Throughout the West, countries are all struggling with the same dilemma – how to reconcile openness and deep integration on the one hand, and democracy, sovereignty and a sense of control on the other.

Within the EU, however, economic integration and the abolition of barriers to the movement of capital and goods went further than in the rest of the world – and the evolution of the principle of freedom of movement after the Maastricht Treaty meant that barriers to the internal movement of people were also eliminated as the EU was enlarged. What happened within the EU might be thought of as ‘hyper-regionalization’ – an extreme example, in a regional context, of a global trend.

EU member states have lost control to an even greater extent than other nation states – albeit to anonymous regional rather than global forces – and this loss of control was felt intensely within the EU. It is therefore logical that this led to an increase in Euroscepticism. Whereas the left wants to restore some barriers to the movement of capital and goods, the right wants to restore barriers to the movement of people.

However, having left the EU, the UK is uniquely well placed to find a new equilibrium. The UK has an ideological commitment to free trade that goes back to the movement to abolish the Corn Laws in the 1840s – which Johnson’s speech expressed. It is difficult to imagine the UK becoming protectionist in any meaningful sense. But at the same time, it has a well-developed sense of national and popular sovereignty, and the sense that the two go together – which is why it was so sensitive to the erosion of them through the EU. This means that Britain is unlikely to go to one extreme or the other.

In other words, the UK may be the ideal country to find a new balance between openness and integration on the one hand, and a sense of control on the other. If it can find this balance – if it can make Brexit work – the UK could be a model for a wider recalibration of sustainable globalization. That, rather than fetishizing free trade, is the real contribution the UK can make.

A version of this article was originally published in the Observer.

An infectious disease outbreak has long been a top national security risk in several countries, but the speed and extent of COVID-19’s spread and the scale of its social and economic impact has come as an enormous and deeply worrying shock.

This pandemic is not just a global medical and economic emergency. It could also prove a decisive make-or-break point for today’s system of global political and economic cooperation.

This system was built up painstakingly after 1945 as a response to the beggar-thy-neighbour economic policies of the 1930s which led to the Second World War. But it has been seriously weakened recently as the US and China have entered a more overt phase of strategic competition, and as they and a number of the other most important global and regional players have pursued their narrowly defined self-interest.

Now, the disjointed global economic response to COVID-19, with its enormous ramifications for global prosperity and economic stability, has blown into the open the urgent need for an immediate reaffirmation of international political and economic cooperation.

What is needed is a clear, coordinated and public statement from the leaders of the world’s major countries affirming the many things on which they do already agree, and some on which they should be able to agree.

In particular that:

• they will give the strongest possible support for the WHO in leading the medical response internationally;
• they will be transparent and tell the truth to their peoples about the progress of the disease and the threat that it represents;
• they will work together and with the international financial institutions to provide businesses, particularly SMEs, and individuals whatever support they need to get through the immediate crisis and avoid long-term damage to the global economy; 
• they will ensure the financial facilities for crisis support to countries - whether at global or regional level - have whatever resources they need to support countries in difficulty;
• they will avoid new protectionist policies - whether in trade or finance;
• they commit not to forget the poor and vulnerable in society and those least able to look after themselves.

Such a statement could be made by G20 leaders, reflecting the group’s role since 2010 as the premier forum for international economic cooperation.

But it could be even more appropriate coming from the UN Security Council, recognising that COVID-19 is much more than an economic challenge; and also reflecting the practical fact, in a time when international travel is restricted, the UNSC has an existing mechanism in New York to negotiate and quickly agree such a statement.

A public statement by leading countries could do a great deal to help arrest a growing sense of powerlessness among citizens and loss of confidence among businesses worldwide as the virus spreads.

It could also set a new course for international political and economic cooperation, not just in relation to the virus, but also other global threats with potentially devastating consequences for economic growth and political stability in the coming years.

Linked to the call for a global response to the Covid-19 pandemic that I, Robin Niblett and Creon Butler have outlined, the case for a specific dramatic economic policy gesture from many policymakers in large economies is prescient.

It may not be warranted from all G20 nations, although given the uncertainties, and the desire to show collective initiative, I think it should be G20 driven and inclusive.

We need some sort of income support for all our citizens, whether employees or employers. Perhaps one might call it a truly People’s QE (quantitative easing).

Against the background of the previous economic crisis from 2008, and the apparent difficulties that more traditional forms of economic stimulus have faced in trying to help their economies and their people - especially against a background of low wage growth, and both actual, and perception of rising inequality - other ideas have emerged.

Central banks printing money

Both modern monetary theory (MMT) and universal basic income (UBI) essentially owe their roots to the judgement that conventional economic policies have not been helping.

At the core of these views is the notion of giving money to people, especially lower income people, directly paid for by our central banks printing money. Until recently, I found myself having very little sympathy with these views but, as a result of COVID-19, I have changed my mind.

This crisis is extraordinary in so far as it is both a colossal demand shock and an even bigger colossal supply shock. The crisis epicentre has shifted from China - and perhaps the rest of Asia - to Europe and the United States. We cannot expect policies, however unconventional by modern times, such as the dramatic monetary steps announced by the Federal Reserve Board and others like it, to put a floor under this crisis.

We are consciously asking our people to stop going out, stop travelling, not go to their offices - in essence, curtailing all forms of normal economic life. The only ones not impacted are those who entirely work through cyberspace. But even they have to buy some forms of consumer goods such as food and, even if they order online, someone has to deliver it.

As a result, markets are, correctly, worrying about a collapse of economic activity and, with it, a collapse of companies, not just their earnings. Expansion of central bank balance sheets is not going to do anything to help that, unless it is just banks we are again worried about saving.

What is needed in current circumstances, are steps to make each of us believe with high confidence that, if we take the advice from our medical experts, especially if we self-isolate and deliberately restrict our personal incomes, then we will have this made good by our governments. In essence, we need smart, persuasive People’s QE.

Having discussed the idea with a couple of economic experts, there are considerable difficulties with moving beyond the simple concept. In the US for example, I believe the Federal Reserve is legally constrained from pursuing a direct transfer of cash to individuals or companies, and this may be true elsewhere.

But this is easily surmounted by fiscal authorities issuing a special bond, the proceeds of which could be transferred to individuals and business owners. And central banks could easily finance such bonds.

It is also the case that such a step would encroach on the perception and actuality of central bank independence, but I would be among those that argue central banks can only operate this independence if done wisely. Others will argue that, in the spirit of the equality debate, any income support should be targeted towards those on very low incomes, while higher earners or large businesses, shouldn’t be given any, or very little.

I can sympathise with such spirit, but this also ignores the centrality of this particular economic shock. All of our cafes and restaurants, and many of our airlines, and such are at genuine risk of not being able to survive, and these organisations are considerable employers of people on income.

It is also the case that time is of the essence, and we need our policymakers to act as soon as possible, otherwise the transmission mechanisms, including those about the permanent operation of our post World War 2 form of life may be challenged.

We need some kind of smart People’s QE now.

The measures taken to limit the spread of the coronavirus - in particular social distancing -  come with significant economic costs, as the drop both in demand for goods and services and in supply due to workers being at home sick will create a short-term economic shock not seen in modern times.

Sectors that are usually less affected by regular economic swings such as transport and tourism are being confronted with an almost total collapse in demand. In the airline sector, companies are warning they might only be able to hold out for a few months more.

Building on the calls to provide income support to all citizens and shore up businesses, European leaders should now be giving explicit permission to the European Central Bank (ECB) to provide whatever financial support is needed.

Although political leaders have responded to the economic threat, the measures announced across the continent have mainly been to support businesses. The crisis is broader and deeper than the current response.

Support for weaker governments

The ECB already reacted to COVID-19 by announcing measures to support the banking system, which is important to guarantee the continuity of the European financial system and to ensure financially weaker European governments do not have to confront a failing banking system as well.

Although government-subsidised reduced working hours and sick pay are a solution for many businesses and workers, crucially they are not for those working on temporary contracts or the self-employed. They need direct income support.

This might come down to instituting something that looks like a universal basic income (UBI), and ensuring money keeps flowing through the economy as much as possible to help avoid a cascade of defaults and significant long-term damage.

But while this is likely to be the most effective remedy to limit the medium-term impact on the economy, it is particularly costly. Just as an indication, total compensation of employees was on average around €470bn per month in the eurozone last year.

Attempting to target payments using existing welfare payment channels would reduce costs, but is difficult to implement and runs the risk of many households and businesses in need missing out.

The increase in spending and lost revenue associated with these support measures dwarf the fiscal response to the 2008-09 financial crisis. The eurozone economy could contract by close to 10% this year and budget deficits are likely be in double digits throughout the bloc.

The European Commission has already stated member states are free to spend whatever is necessary to combat the crisis, which is not surprising given the Stability and Growth Pact - which includes the fiscal rules - allows for such eventualities.

Several eurozone countries do probably have the fiscal space to deal with this. Countries such as Germany and the Netherlands have run several years of balanced budgets recently and significantly decreased their debt levels. For countries such as Italy, and even France, it is a different story and the combination of much higher spending and a collapse in tax revenue is more likely to lead to questions in the market over the sustainability of their debt levels. In order to avoid this, the Covid-19 response must be financed collectively.

The Eurogroup could decide to use the European Stability Mechanism (ESM) to provide states with the funds, while suitably ditching the political conditionality that came with previous bailout. But the ESM currently has €410bn in remaining lending capacity, which is unlikely to be enough and difficult to rapidly increase.

So this leaves the ECB to pick up the tab of national governments’ increase in spending, as the only institution with effectively unlimited monetary firepower. But a collective EU response is complicated by the common currency, and particularly by the role of the ECB.

The ECB can’t just do whatever it likes and is limited more than other major central banks in its room for manoeuvre. It does have a programme to buy government bonds but this relies on countries agreeing to a rescue programme within the context of the ESM, with all the resulting political difficulties.

There are two main ways that the ECB could finance the response to the crisis. First, it could buy up more or all bonds issued by the member states. A first step in this direction would be to scrap the limits on the bonds it can buy. Through self-imposed rules, the ECB can only buy up to a third of every country’s outstanding public debt. There are good reasons for this in normal times, but these are not normal times. With the political blessing of the European Council, the Eurosystem of central banks could then start buying bonds issued by governments to finance whatever expenditure they deem necessary to combat the crisis.

Secondly, essentially give governments an overdraft with the ECB or the national central banks. Although a central bank lending directly to governments is outlawed by the European treaties, the COVID-19 crisis means these rules should be temporarily suspended by the European Council.

Back in 2012, the then president of the ECB, Mario Draghi, proclaimed the ECB would do whatever it takes, within its mandate, to save the euro, which was widely seen as a crucial step towards solving the eurozone crisis. The time is now right for eurozone political leaders to explicitly tell the ECB that together they can do whatever it takes to save the eurozone economy through direct support for businesses and households.

There were several notable achievements during last week’s Spring meetings. The Fund’s frank set of forecasts for world GDP growth are a grim but valuable reminder of the scale of the crisis we are facing, and the Fund’s richer members will finance a temporary suspension on payments to the IMF for 29 very poor countries.

Most importantly, a boost to the Fund’s main emergency facilities - the Rapid Credit Facility and the Rapid Financing Instrument - now makes $100bn of proper relief available to a wide range of countries. But the core problem is that the vast bulk of the Fund’s firepower is effectively inert.

This is because of the idea of 'conditionality', which underpins almost all of the IMF’s lending relationships with member states. Under normal circumstances, when the IMF is the last-resort lender to a country, it insists that the borrowing government tighten its belt and exercise restraint in public spending.

This helps to achieve three objectives. One is to stabilise the public debt burden, to ensure that the resources made available are not wasted. The second is to limit the whole economy’s need for foreign exchange, a shortage of which had prompted a country to seek IMF help in the first place. And the third is to ensure that the IMF can get repaid.

Role within the international monetary system

Since the IMF does not take any physical collateral from countries to whom it is lending, the belt-tightening helps to act as a kind of collateral for the IMF. It helps to maximise the probability that the IMF does not suffer losses on its own loan portfolio — losses that would have bad consequences for the Fund’s role within the international monetary system.

This is a perfectly respectable goal. Walter Bagehot, the legendary editor of The Economist, established modern conventional wisdom about managing panics. Relying on a medical metaphor that feels oddly relevant today, he said that a panic 'is a species of neuralgia, and according to the rules of science you must not starve it.' 

Managing a panic, therefore, requires lending to stricken borrowers 'whenever the security is good', as Bagehot put it. The IMF has had to invent its own form of collateral, and conditionality is the result. The problem, though, is that belt-tightening is a completely inappropriate approach to managing the current crisis.

Countries are stricken not because they have indulged in any irresponsible spending sprees that led to a shortage of foreign exchange, but because of a virus beyond their control. Indeed, it would seem almost grotesque for the Fund to ask countries to cut spending at a time when, if anything, more spending is needed to stop people dying or from falling into a permanent trap of unemployment.

The obvious solution to this problem would be to increase the amount of money that any country can access from the Fund’s emergency facilities well beyond the $100bn now available. But that kind of solution would quickly run up against the IMF’s collateral problem.

The more the IMF makes available as 'true' emergency financing with few or no strings attached, the more it begins to undermine the quality of its loan portfolio. And if the IMF’s senior creditor status is undermined, then an important building block of the international monetary system would be at risk.

One way out of this might have been an emergency allocation of Special Drawing Rights, a tool last used in 2009. This would credit member countries’ accounts with new, unconditional liquidity that could be exchanged for the five currencies that underpin the SDR: the dollar, the yen, the euro, sterling and the renminbi. That will not be happening, though, since the US is firmly opposed, for reasons bad and good.

So in the end the IMF and its shareholders face a huge problem. It either lends more money on easy terms without the 'collateral' of conditionality, at the expense of undermining its own balance sheet - or it remains, in systemic terms, on the sidelines of this crisis.

And since the legacy of this crisis will be some eye-watering increases in the public debt burdens of many emerging economies, the IMF’s struggle to find a way to administer its medicine will certainly outlive this round of the coronavirus outbreak.

This article is a version of a piece which was originally published in the Financial Times