SECO is committed to strengthen the resilience of its partner countries
For instance, while the global financial crisis started in the US in 2008, it also plunged several developing countries into crisis.
Climate change puts additional pressure on low and middle income countries.
Natural disasters do not only threaten humans and the environment, they are also a risk for local economies.
When floods, earthquakes or storms destroy large parts of a country’s infrastructure, reconstruction requires huge investments by governments.
Natural disasters have a negative impact on economic growth and lead to a deterioration of the fiscal and trade balance.
In 2020, the world was unprepared for the Covid-19 pandemic. As countries implement various measures to limit the spread of the virus, they also need to mobilize funds quickly to absorb the economic and social fallout from the crisis, piling up public debt in the process.
SECO strengthens the resilience of partner countries in the pandemic by supporting them in increasing fiscal space, advancing digitalization, and adapting public debt strategies, for instance through:
- Financing an app to track Covid related expenses in Peru;
- Helping partner countries design emergency relief to vulnerable populations and affected businesses;
- Providing advice on debt management strategies to cope with the Covid-19 pandemic.
In an increasingly complex world, SECO’s efforts to strengthen resilience become even more relevant.
Supervise banks to prevent future crises
In 1997, Indonesia was hit hard by the Asian Financial Crises. The crisis started in Thailand but then spread to almost all East Asian countries.
The impact on Indonesia’s economy was devastating: the local currency depreciated, the prices for imported goods exploded. Many companies were unable to repay their loans in foreign currency, and went bankrupt, destabilizing the financial sector.
Within a few months, a large part of the population was unemployed, their savings depleted and their hopes for a better future crushed.
In the aftermath of the crisis that revealed Indonesia's strong vulnerability, SECO, together with international partners such as the World Bank, engaged in the strengthening of the financial sector.
The Program helped to design more prudent regulation and trained government officials to more effectively supervise banks to prevent future crises. The efforts showed their impact: During the global financial crisis in 2008, Indonesia was less affected than other countries in East Asia and proved to be resilient.
In 2013, the Albanian authorities requested a Financial Sector Assessment, because the Albanian economy had difficulties to recover from the 2008 global financial crisis. The assessment revealed various risks for the financial sector and public debt was high.Consequently, SECO supported the Albanian Financial Supervisory Authority with capacity building. The goal was to strengthen the institutions' supervisory and regulatory capacities as well as the Central Bank.
The Albanian Government undertook different reforms – such as strengthening supervision of the banking sector – to tackle those risks that might have lead to new crises in the future.
Retrospectively, the advance warnings enabled the Albanian government to approach the weak spots of the financial sector.
Strengthen fiscal resilience
Peru is highly dependent on the export of commodities: trading copper, zinc and gold is the State’s main source of revenue. Consequently, as global prices of such metals dropped in 2012, this tore a hole in Peru's budget.
The project proved successful. Peru’s budget is now more resilient to global fluctuations in commodity prices.
Stable and sufficient revenue stream
Ghana is also highly dependent on revenues from commodity exports. Oil is the country's main source of wealth.
To support the mobilization of domestic resources, SECO supports reforms that foster the transparent management of natural resource revenues.
Colombia is vulnerable to natural disasters, including from climate change.
Floods are a particularily acute problem: between 1970 and 2014, 16 million people were affected by floods in Colombia.