Vaccinating 40% Of Global Population Can Yield $9 Trillion In Gains By 2025: IMF
Ensuring that about 40% of world population is vaccinated by the end of 2021 and 60% by mid-2022 could lead to an estimated $9 trillion in gains for the global economy over the next four years, said the International Monetary Fund.
The fund, in a proposal released on Friday, called for a global effort to speed up vaccinations and said that “urgent action is needed to arrest the rising human toll and economic strain.”
“Saving lives and livelihoods should need no justification, but a faster end to the pandemic could also inject the equivalent of $9 trillion into the global economy by 2025 due to a faster resumption of economic activity,” said a blog co-authored by managing director Kristalina Georgieva, chief economist Gita Gopinath, and economist Ruchir Agarwal.
“Advanced economies, likely to spend the most in this effort, would see the highest return on public investment in modern history—capturing 40% of the cumulative $9 trillion in global GDP gains and roughly $1 trillion in additional tax revenues,” the authors estimated.
According to the IMF’s estimates a plan to vaccinate 60% of world population by mid-2022 could cost around $50 billion. This could come through a mix of grants, national government resources, and concessional financing.
There is a strong case for grant financing of at least $35 billion, the IMF said, adding that G20 governments have already noted the importance of addressing $22 billion in the grant funding gap.
“This leaves an estimated $13 billion in additional grant contributions needed. The remainder of the overall financing plan—around $15 billion—could come from national governments, potentially supported by Covid-19 financing facilities created by multilateral development banks,” the authors said.
Closing The Gap
The vaccine supply for 2021 is sizeable and would vaccinate 3.5 billion people, sufficient to cover about 45% of the world’s population by the end of 2021, as per the IMF estimates.
However, vaccine access is highly unequal and the trend is expected to persist, it said.
Despite the fact that pandemic had hit developed economies harder on an average, “the ongoing catastrophic second wave in India, following a terrible wave in Brazil, is a sign the worst may be yet to come in the developing world,” the authors wrote.
While India’s health system held up fairly well in the first wave, this time around its health system is so overwhelmed that many are dying because of a lack of medical supplies like oxygen, hospital beds, and medical care, said the blog.
“India is a warning of possible events in other low- and middle-income countries that so far have seemingly escaped the pandemic, including in Africa.”
The fund recommends a three-pronged approach towards vaccination, which will ensure equitable distribution:
- Provide additional upfront grants to COVAX, a worldwide initiative to ensure equitable access to vaccines, of at least $4 billion. This financing will help finalise orders and activate unused vaccine capacity.
- Ensure free cross-border flows of raw materials and finished vaccines: Such restrictions are jeopardising access to vaccines for billions of people in the developing world.
- Immediately donate surplus vaccines. The IMF projects at least 500 million vaccines courses (equivalent to around 1 billion doses) can be donated in 2021, even if countries give preference to their own populations.
- Donations, including for delivery costs, should be done through COVAX so vaccines are shared on equitable and public health principles.
We project the measures identified in steps 1–3 may be sufficient to achieve the 40% vaccination target by the end of 2021 and the 60% target by the first half of 2022, if no downside risks materialise.IMF
India May Not Need Funding Support
As part of its proposal, the IMF has conducted a budgeting exercise for funding needed to accelerate the pace of vaccinations.
Under the business-as-usual scenario, coverage in India is expected to reach under 35% by end-2021, the IMF forecast. This is half the estimated coverage of 70% across high income countries.
“To get to 60% coverage, India will need to immediately place sufficient vaccine orders of about 1 billion doses through contracts that incentivise investment in additional capacity and augmentation of the supply chain, the note recommended,” the fund said.
The IMF welcomed the government’s announcement of financing of about $600 million to the Serum Institute of India and Bharat Biotech to boost production capacity in the near term. Authorities estimate that 2 billion doses will be available by the end of 2021, the IMF said, adding that, “efforts should be made to ensure that the projected production capacity will materialise without delay, including through securing the supply chain for raw materials”.
India is not likely to need any additional funding support.
“Given the current vaccine pricing offered by domestic suppliers, and the estimated size of the younger population in India, the additional funding needs for the center for covering the 18-44 population is approximately 0.25% of GDP, suggesting that there is scope for the government to handle the entire procurement centrally.”