Development Financial Institutions Key To Driving Global Economic Recovery In Post-pandemic World: WGS Report

Development Financial Institutions key to driving global economic recovery in post-pandemic world: WGS report

DUBAI, (Pakistan Point News - 29th Sep, 2021) Governments are being urged to tap into the potential of their Development Financial Institutions (DFIs) to accelerate post-pandemic recovery.

These institutions are well-positioned to deliver the liquidity-injection programmes needed to boost flagging industries, invest in vital infrastructure, and lead countries out of the current economic downturn, according to a report published by the World Government Summit (WGS).

The report, published in collaboration with Kearney’s National Transformations Institute entitled "Rebuilding the Economy ... The Future of Trade and Economy: Operations in the Light of the New Reality", reviews the most prominent current and future challenges facing the global economy considering the radical transformations imposed by the emerging COVID-19 pandemic.

It also recommends why DFIs can act as a road map to help businesses and economies take their first steps into the new, post-pandemic economic reality.

Mohamed AlSharhan, Deputy Managing Director of the World Government Summit Organisation, stressed the summit’s endeavour to enhance government knowledge by highlighting the most prominent trends and challenges facing governments, and its keenness to provide tools and solutions that support government work and enable governments to align their current strategies to track key sectors, ensure global economic recovery and enhance readiness for the future.

AlSharhan stated that the report highlights future opportunities of the most promising and important new sectors by focusing on the best government experiences and policies that have been carried out during the pandemic.

He further pointed to the summit's constant endeavour to strengthen partnerships between government agencies and leading knowledge institutions in the private sector to provide integrated practices and share best practices with various governments of the world.

In response to the pandemic, governments supported businesses through unprecedented fiscal packages. However, these stimulus measures cannot be extended indefinitely and the return of economic activity to pre-COVID levels requires a financial model based on accountability.

DFIs are built on a unique model that is designed both to generate returns and to advance broader development objectives. This makes them well placed to take more risks than traditional commercial banks and to support businesses and projects that these banks would typically avoid, particularly in today’s low-yield and low-return market environment.

The report outlines a seven-point roadmap for policymakers and leaders of DFIs to support businesses gear up for the near- and medium-term future and position them for sustainable success in the post-COVID economic landscape.

These steps include providing targeted financing to stimulate sustainable economic recovery via (Reinvigorating global trade and laying solid foundations for the green economy); Revamp DFI Capabilities by (Revitalising products and solutions, revamping lending models, and managing future expected high levels of debt); and Repurpose DFI Landscape by (Strengthening national DFIs and recommitting to the UN’s Sustainable Development Goals).

Mukund Bhatnagar, Partner and Practice Lead, Financial Services at Kearney middle East, said, "DFIs play a major role in revitalising global trade, particularly for emerging markets during crises, as was evident in the recovery phase of the 2008 global economic downturn.

"A combination of pragmatic financial products and solutions is needed to give countries and businesses the room to make the policy choices and investments, respectively, that will lay solid foundations for a recovery that puts both people and environment at the heart of economic growth and development."

He added that an intuitive solution would be to explore creative ways to enhance indirect programmes through strategies that are better designed to target sectors that have no access to private financing. To ensure that DFIs can operate effectively through economic cycles, direct lending operational capabilities need to be developed. This includes the creation of in-house products, distribution channels preferably digital ones and most importantly, robust risk assessment capabilities.

The World Government Summit has recently announced the signing of eight new Knowledge Partnerships with a selection of the most prominent consulting companies and specialised global research institutions to launch a series of scientific reports and studies based on proactive visions to identify the most significant trends and new opportunities for supporting governments and enhancing their readiness for the future and the post-COVID-19 pandemic world.

These reports focus on forecasting the future of governments around the world, studying global transformations and challenges facing the world, setting priorities and requirements for the next stage, and developing new work mechanisms and methodologies based on the recent data to empower the next generation of governments.