A year ago, before the COVID-19 pandemic struck, I was optimistic about the trends in global poverty: extreme poverty rates had been steadily declining for more than two decades. Although considerable challenges like debt still loomed large for the poorest countries, the positive trajectory in the fight against poverty brought great hope for a better future—a future I still believe in.
In just one year, COVID-19 has hit poor and vulnerable countries the hardest, threatening decades of hard-won gains while exacerbating existing inequalities in the poorest countries served by the World Bank’s International Development Association (IDA). That’s why as the pandemic spread, IDA redoubled efforts by providing a significant and speedy upsurge in financing for the 74 IDA countries, and frontloading almost half of IDA19’s $82 billion resources.
Sadly, our efforts in many of these countries are falling short in the face of continuing pressure COVID-19 related economic pressures. By the end of 2021, according to the IMF’s World Economic Outlook, the external financing need in these IDA countries is projected to increase to 3 percent of GDP—translating to over $67 billion dollars of additional need compared to the five-year historical average.
Even as the encouraging news of vaccines give us hope in the new year, IDA continues to work with partners to respond to the public health and economic crises brought on by the pandemic. The projects across the regions and sectors that IDA is financing are making a difference. But they are not enough.
Here are five things that are rapidly emerging as important considerations in the path to the common and urgent goal of a resilient recovery:
- There will be millions more poor people in need of help. We now expect the COVID-19-induced new poor in 2020 to rise to between 119 and 124 million. And many IDA countries are bearing the brunt of the impact compared with the rest of the developing world. Challenges include more losses of jobs and income, a greater struggle to access crucial social services, and increased gender-based violence. Women and people with disabilities are caught disproportionately in the crosshairs of these impacts. We need to engage more gears if we are to reach the 2030 targets on reducing extreme poverty.
SOLUTIONS IN ACTION: IDA continues to step-up its financing to IDA countries to sustainably respond to COVID-19, while pursuing a greener, more inclusive, and resilient recovery towards their long-term development goals. Furthermore, the Ghana Accountability for Learning Outcomes Project, among many projects expanded to respond to COVID-19, is improving access and learning for children with disabilities. The Sahel Women Empowerment and Demographic Dividend project focuses on adolescent girls and their communities in countries that are vulnerable, fragile, or may be at risk of violence.
- There is an unfolding food crisis that needs our immediate attention. COVID-19 was expected to push 96 million people in IDA countries into acute food insecurity by the end of 2020, according to the World Food Program (WFP). Areas at the greatest risk of food insecurity crises over the coming 12 months are concentrated in Afghanistan, Burkina Faso, Democratic Republic of Congo, Ethiopia, Haiti, Niger, Nigeria, Somalia, South Sudan, Sudan, Yemen, and Zimbabwe. These figures also have implications for human capital development and nutrition outcomes in the world’s poorest countries in the years to come.
SOLUTIONS IN ACTION: IDA has provided $5.3 billion in new commitments to food security through the six months to the end of September 2020. And IDA can do much more if significant amounts of additional resources are made available. Responses to meet immediate food security needs include scaling up safety net programs; keeping food moving; distributing and improving access to food; protecting jobs and livelihoods; and supporting agribusinesses and small-scale entrepreneurs.
- Countries with high risk of external debt distress are facing a compound challenge. The year 2020 was one that required increased fiscal cushioning and stimulus to respond to the pandemic. Yet in IDA countries, it was a year in which primary fiscal deficits increased significantly. When increased debt vulnerabilities also mean an increased risk of debt distress downgrades, sustained grants to these countries becomes critical.
SOLUTIONS IN ACTION: IDA is helping provide large net positive flows to the poorest and most fragile countries and people. The World Bank and the International Monetary Fund worked with G20 countries to establish the Debt Service Suspension Initiative, which is helping countries concentrate their resources on safeguarding the lives and livelihoods of millions of the most vulnerable people. Since it took effect in May 2020, the initiative has delivered about $5 billion in relief to more than 40 eligible countries—of which, all but one are IDA-eligible. Furthermore, our Sustainable Development Finance Policy is incentivizing IDA-eligible countries to move towards transparent and sustainable financing.
- COVID-19 has reduced growth in small states by up to 24 percent. A variety of factors can explain the devastating impact recorded in Small States—including falls in tax revenues and remittances; natural disasters that compound effects of the pandemic; and collapses in tourism. For example, in tourism-dependent island economies like St. Lucia and the Maldives, aggregate output is contracting by 17 and 19 percent, respectively. Meanwhile, fragile and conflict-affected situations also face more challenges, with risks of spilling over across borders. In fact, the current crisis is expected to push an estimated additional 17 to 26 million people in fragile and conflict-affected situations into extreme poverty in 2021, if the international community does not act soon.
SOLUTIONS IN ACTION: IDA continues use both its Performance-Based Allocation system—which would ensure that resources benefit all countries, based on their needs and performance— its allocations Windows such as Crisis Response Window, to specifically support countries through major crises as was the case with the global financial crisis in the late 2000s and the 2014–15 Ebola epidemic in West Africa. While the COVID-19 crisis is more significant in breadth and depth, the mechanisms for scaling up support are built on the experience of previous crises.
- Eventually, the goal should be a resilient, greener and more inclusive recovery. COVID-19 is a deeper, more synchronized, and more widespread shock than any in IDA’s memory. Therefore, there is a twin challenge and opportunity: rapidly repair the historic damage to development gains while adapting to a transformed world by building resilience to future shocks like pandemics and climate change. This means finding solutions that put large numbers of people back to work; build equity; and achieve macroeconomic, environmental and social sustainability.
SOLUTIONS IN ACTION: Projects underway as part of the IDA19 replenishment already provide a solid base upon which to scale up for such a recovery. We are helping countries create and connect to markets; providing the tools that respond to the crisis while supporting the transition to a low-carbon future; and redoubling efforts on gender equality, among other solutions.
With these five considerations, this blog kicks off a series on the path to ensuring a resilient recovery in the world’s poorest countries. We must work together now to serve the generations of our future.