LONDON, UK – Commonwealth Secretary-General Patricia Scotland on Thursday urged the international community to make crucial changes to how it delivers finance to developing nations, including those in the Caribbean, proposing a new system that moves beyond the use of Gross Domestic Product (GDP) as the sole criteria for receiving certain types of support.
Commonwealth Secretary-General Patricia ScotlandAt a virtual media briefing, the Commonwealth Secretariat presented a ground-breaking study that assesses how vulnerable or resilient developing countries are to economic, socio-political and environmental shocks, such as climate change, which could influence how much international finance they can access.
The proposed Universal Vulnerability Index (UVI) has been shared with Commonwealth member countries for their review in ongoing consultations. If endorsed globally, the Index could transform the way development finance is delivered to developing nations.
The Secretary-General said the COVID-19 pandemic has been a stark eye-opener for some, of countries’ various capacities to deal with the risks and impact of shocks.
“As we emerge from this crisis, we cannot return the business as usual. In order to respond effectively as an international community to the interlinked global crises confronting us today, we must overhaul the way we think about development finance, particularly in the post COVID world. We need to move beyond the thin analysis that GDP and per capita income provide us and to come up with a new way of determining the type of support vulnerable countries could receive,” she said.
“Experience has shown us our vulnerability, and comparatively, our resilience oftentimes is only partly determined by our income, or our economic status. And this is why measures such as GDP, or other equally narrowly focused economic statics only provide us part of the picture. And we need much more nuanced and comprehensive measurements and indicators to assess our full risk factors, and more precisely, our susceptibility to harm,” she added.
Scotland said while the use of GDP as the simple and translatable measure of economic progress has, for most of the century, been a useful measure and served as the linchpin of so much that has been built and achieved, most economists and experts would agree that it is not the best measure of a nation, its economic progress, its sustainability or its potential.
“Indeed, in these times of rapidly accelerating climate change, the usefulness of GDP is quickly waning,” she said.
“We face a much more complex world than we did decades ago – a world which is also much better understood, and more thoroughly analyzed any point in our history. And we need tools to tackle this new world, this new reality, to ensure that we move forward in a way that is fit for purpose. Big data, analytics, and AI permeate every aspect of many of our lives. And yet, when it comes to development, finance, we still rely on incomplete GDP measure.”
Developed by experts at the Commonwealth Secretariat and the Foundation for Studies and Research on International Development, the UVI uses widely available data to generate single composite scores for vulnerability for 138 developing countries. The Index takes into account factors such as climate change, exposure to natural disasters or economic shocks, internal violence as well as governance.
Key to the study is the distinction it makes between ‘structural’ factors that are beyond the control of the state, such as a country’s geographic location and size, and ‘non-structural’ ones that are more dependent on the will of governments, such as policy performance.
According to these indicators the poorest nations in the world – those classified as Least Developed Countries – are the most vulnerable group, along with Small Island Developing States at the frontline of the climate crisis. Specifically, the report finds that the highest levels of vulnerability occur in Africa, closely followed by the Pacific and Caribbean regions.
The study has been presented to the Commonwealth’s governing board and is undergoing further consultation with member states. It will feed into international discussions around vulnerability, resilience and the efforts of small states to make a “green recovery” from the COVID-19 pandemic.
