China and the United States should stand up for other countries and lead the fight against the coronavirus pandemic crisis. According to the IMF, developed countries are allocating up to 20% of GDP to overcome the crisis, while developing countries can afford to allocate no more than 5% of GDP.
The IMF report says that 45 low-income countries have already applied for emergency financial assistance to combat the pandemic.
According to experts cited by CNBC, the current crisis has hit almost all countries evenly, as the pandemic is equally dangerous to everyone. However, every country has different capabilities to combat the pandemic crisis.
According to Raghuram Rajan, a professor at the University of Chicago Booth School of Business, developed countries have more financial opportunities. They have allocated up to 20% of their GDP as fiscal and monetary stimulus measures to support the economy and financial stability. Developing countries cannot afford this.
At best, they allocate 5% of their GDP, but often emergency measures to support their economies don’t exceed 1% of GDP. Professor Rajan warned that powerful nations haven’t paid enough attention to emerging economies. With limited fiscal resources, they may not be able to deal with the current situation on their own. Many countries are at risk of their debt increasing drastically in relation to their GDP, which will create another threat to financial stability amid the already dire situation caused by the coronavirus crisis.