Unprecedented Covid-19 world health crisis a monumental disaster for developing world

An elderly woman covers her face with a makeshift mask as people queue to collect social grants in Khayelitsha, Cape Town. Picture: Mike Hutchings/Reuters

An elderly woman covers her face with a makeshift mask as people queue to collect social grants in Khayelitsha, Cape Town. Picture: Mike Hutchings/Reuters

Published Mar 14, 2021

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Nothing has shaken the world in our lifetime quite as Covid-19 has, and a trail of misery has been left in its wake. To date, 2.6 million people across the world have died from Covid-19 in just over a year.

As people try to compute the loss of life, income, the human suffering, and the significant economic contraction of most economies, comparisons have been made with past global pandemics, world wars, and the global financial crisis of 2007/08.

While the pandemic has ravaged the world, the number of infections have been highest in the US, India, Brazil, Russia, the UK, France, Spain and Italy. The developed countries will recover far quicker than those in the developing world, as the pandemic has impacted virtually every aspect of development.

Even before the pandemic developing countries were struggling with massive debt burdens, under-resourced health systems, challenges in internet connectivity, conflict, violence against women, and food insecurity. Some estimate that the ravages wrought on national economies and societies by Covid-19 will lead to a lost decade for many in the developing world.

While rich nations benefited from large government spending which has been estimated at more than $8 trillion (about R120 trillion), as well as surges of credit provided by central banks, developing countries were unable to access such resources. Before the onset of Covid-19, almost half of all low-income countries were in debt distress or at high risk of it, leaving them with severely constrained resources to draw from to assist the most vulnerable in their societies.

The World Bank and the International Monetary Fund have the mandate to support nations in times of financial crisis, and with the onset of the pandemic, the institutions had made grand promises of responding robustly, and the head of the IMF had promised to tap into the organisation’s $1 trillion lending capacity.

But, despite the World Bank doubling its lending in the first half of last year, it was slow to distribute the money. This was probably as a result of the debt-relief initiative agreed to in April last year by world leaders of the G-20, who agreed to pause debt payments until the middle of this year. The Debt Service Suspension Initiative enabled countries to free up billions of dollars to address Covid-19.

But the pause in debt payments exempted banks, asset managers and global financial services, making debt servicing to foreign creditors a heavy burden for years to come for developing countries reeling from the effects of the pandemic. Private creditors failed to offer debt relief, exposing their primary interest as being to get developed countries back into the business of borrowing, rather than helping them to recover economically from the pandemic. Without a serious commitment by both the international financial institutions and private creditors to offer meaningful debt relief and suspension, recovery for many poor countries will be far off.

What has hit developing countries particularly hard is the fact that many of them rely heavily on tourism to bring in foreign currency, which they use to purchase essential goods. Cuba is an example of a country that has been devastated by the loss of tourism due to Covid-19, and the lack of foreign currency has made it impossible to purchase adequate food and medicine for its population.

The other major challenge for developing countries during the pandemic has been the drastic reduction in the amount of remittances they receive from their nationals abroad, which for many, is a key source of foreign currency. In 2019 remittances were on par with foreign direct investment and official development assistance, but estimates are that remittances will decline by 14% by the end of this year. Migrants’ remittances are crucial to families across the world, and with their decline comes increasing poverty levels, lack of food and inability to pay for health care.

A country like Yemen has been severely affected by the loss of remittances during the pandemic as many of their nationals abroad lost employment opportunities. Many have been unable to provide life-saving financial support to their families at home where food is priced in foreign currency and has become unaffordable to many who are facing malnourishment or starvation.

Covid-19 has exacerbated the challenge of food insecurity across the world. According to the UN Food and Agriculture Organization, the pandemic may add between 83 and 132 million people to the total number of undernourished in the world. World Bank estimates are that, by next year, the pandemic could push 150 million people into extreme poverty, in the first increase in more than two decades.

In terms of meeting a number of the Sustainable Development Goals, the pandemic has been a major setback for developing countries. The value of ICTs and the internet to development has been clearly demonstrated across the globe, and that value has increased with time due to rapid improvements in technology, bandwidth, social media and cloud computing.

The internet provides the underpinning platform for the growth of ICTs and for an emerging digital economy. As such, the internet has become a critical enabler of sustainable development, and plays an important role in facilitating development in agriculture, health, education and enterprise. But the Covid-19 pandemic has highlighted internet inequalities, and underscored the fact that digital connectivity is a necessity. For those in the developing world without internet connectivity, they have been unable to take advantage of online learning opportunities or e-commerce during lockdown, which has become the way of the future.

Gender-based violence is another major challenge which has become an even graver scourge under the pandemic. As countries implemented hard lockdowns last year, the UN had issued an alert in May about the alarming rise of rape and domestic violence across the globe, calling it a “shadow pandemic.”

Data showed an increase in calls to domestic violence helplines in many countries, and resources in many places were diverted from mitigating violence against women to providing Covid-19 relief. Women with violent partners found themselves trapped with their abusers and cut off from the support of family and friends. The restrictions on movement made it more difficult for the survivors of GBV to report abuse and seek help. The pandemic also heightened the vulnerability of refugee and displaced women who have always been at greater risk of gender-based violence.

Women in the workplace have also been discriminated against throughout the pandemic, and have lost their jobs at a faster rate than men. The fact that many women are employed in the tourism and retail industry, and in lower income countries are predominantly employed in informal jobs, have put them at a disadvantage during global lockdowns.

Covid-19 has been a monumental disaster for the developing world, and dampened optimism that global poverty levels could be drastically improved this decade. Estimates are that, as a result of the pandemic, as many as 115 million people may be pushed into extreme poverty. The World Bank forecasts that the largest share of the “new poor” will be in South Asia, with sub-Saharan Africa close behind.

Many of the new poor are likely to be engaged in informal services, construction and manufacturing, which happen to also be the sectors in which economic activity is most affected by lockdowns and restrictions on movement.

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* Read more in the special Insider supplement which can be found in the Sunday Independent, Sunday Tribune and Weekend Argus newspapers today.