Vaccines the key to global economic recovery

As far as India is concerned, the IMF has cautioned that things cannot go on as usual. If vaccination policies are not altered, it expects less than 35% of the population to have been covered by the end of 2021. It has thus proposed that one billion doses of vaccines be bought to enable at least 60% of the population to be covered by this time. The IMF is confident that the Centre has enough resources to make these purchases.

Vital cog: The IMF wants 40% of the population in all countries vaccinated in 2021. PTI

Sushma Ramachandran

Senior Financial Journalist

International financial institutions are aware that vanquishing the Covid-19 virus is the first step towards global economic recovery. No wonder then that the International Monetary Fund (IMF) has outlined an action plan to defeat the pandemic with vaccinations as its cornerstone. The proposal envisages vaccinating at least

40 per cent of the population in all countries by the end of 2021 and at least

60 per cent by the first half of 2022. The cost of vaccinations and related health measures are considered affordable at $50 billion, given that the benefits amount to an estimated $9 trillion. This is a strategy that rightly looks forward to global cooperation to resolve a global crisis, even though there has been little coordination in the international response to the pandemic.

The plan has been presented in the backdrop of IMF’s growth projection of a healthy 6 per cent for 2021 following the 3.5 per cent contraction in 2020. But the bulk of this upgrade is due to the revival of advanced economies. Even in this group, only the US is expected to have a significant bounce back while the euro area is likely to revive more slowly. The linkage between vaccinations and higher growth has been well established. The US, for instance, is poised for faster growth as it has managed to fully vaccinate about 39 per cent of its population. Similarly, the UK has rapidly covered about 34 per cent of its population. On the other hand, even rich countries like Germany and France with relatively smaller populations have only reached about 14 per cent. Other developing economies, including those in Africa, are lagging in the vaccination race. And while advanced economies may feel comfortable in moving ahead of the curve on vaccination, the virus is no respecter of geographical boundaries. Few countries will remain safe if the rest of the world remains unvaccinated.

As far as India is concerned, the IMF has cautioned that things cannot go on as usual. The government will be well advised to heed these warnings. If vaccination policies are not altered, it expects less than 35 per cent of the population to have been covered by the end of 2021. It has thus proposed that one billion doses of vaccines be bought to enable at least 60 per cent of the population to be covered by this time. Despite the Central Government suggesting states do their own procurement, the IMF is confident that the former has enough resources to make these purchases sans external support.

The comments of the IMF come at a time when the entire vaccine programme in the country seems to be grinding to a halt. In spite of assertions made by the Covid Task Force about adequate stocks when the programme was rolled out in January, it seems plans for supplying vaccines to the entire country did not factor in the need to place advance orders on manufacturers or to provide funding to ramp up capacities. One reason for this apparently lackadaisical approach is the notorious reluctance in this country to invest in areas that require research and development. In sharp contrast to this attitude, many nations unquestioningly poured billions of dollars into the highly successful Covid vaccine programmes last year. Another factor is the historical deeply ingrained distrust of private industry in the bureaucracy that seems to have permeated more deeply into the Modi government than even the previous administrations. Reports had appeared about an antagonistic approach by the economic ministry officials at preliminary meetings with corporate leaders after the government took over. This suspicious mindset could have been the reason that funds sought for enhancing capacities were not given right away to the two major vaccine manufacturers as would be expected during a crisis of such epic proportions.

The policy response to criticism over the vaccine strategy has also been extremely reactive and has laid policy-makers open to even greater censure after changes were made in the initial approach. The charge of over-centralisation was met with the decision to allow states to carry out procurement of their own vaccines. This was clearly not a viable strategy, as is evident from the fact that global manufacturers like Pfizer and Moderna have rebuffed state governments, maintaining they only deal with Central governments. It is also not ideal for individual states country to compete in global bidding for vaccines.

A recurring demand was also made to involve the private sector in vaccine distribution. The response has been to allow private hospitals to purchase vaccines and allow significantly higher rates for vaccinations. This is not a proposal that should have been acceded to given the fact that the Covid pandemic is a public health crisis. Offering vaccines at higher prices to those who can afford to pay is clearly creating a situation of inequity. Such inequality should not be allowed to enter the arena of public health. In the current situation of shortages, supplies will naturally gravitate to the highest bidder, hence the rich will get quicker access to vaccines than the poor. The original system of supplying vaccines through private sector medical facilities, but at a slightly enhanced rate should have remained in place. Allowing the private sector to purchase and sell vaccines is a viable plan only in the long run when vaccines are plentiful and it is useful to provide multiple options to consumers.

The IMF's global plan comes as a timely reminder of the critical interdependence among nations during this unprecedented health emergency. India would do well to heed the advice to either purchase or create sufficient manufacturing capacity so that one billion doses are available this year. The policy must also be tailored to keep procurement in the hands of the Central Government and give distribution to the states. In addition, direct financial support needs to be given to domestic manufacturers so that production capacities can be raised to meet the country’s needs. The IMF’s comment that pandemic policy is economic policy needs to be kept in mind. Unless the vaccine imbroglio is resolved, economic revival will be a distant dream.