Economic inequities threaten COVID-19 response

The growing pandemic funding gap

The gap between donor commitments and the funding needed to respond to the pandemic continues to grow. As the UN Office for the Coordination of Humanitarian Affairs tripled its appeal last week to US$6.7 billion, they admit to only receiving US$1 billion towards its initial request for US$2 billion. That includes a mere $65 million contribution from the U.S. that a senator described as “unconscionable,” while the Washington Post reports the US$3 trillion COVID-19 bill introduced by Democrats this past week contains no funding for international assistance. Germany and France likewise agreed to support a 500 billion Euro aid package to support E.U. countries with recovery from the pandemic.

NGOs such as the International Rescue Committee argue that much of the aid is stuck within multilateral channels, as humanitarian funding to front-line NGOs accounts for only 2% of commitments under the UN Global Humanitarian Response Plan.

The global economy is shrinking, and 130 million people may be pushed into extreme poverty

Global economic output is expected to drop by 3.5% in 2020, and by US$8.5 trillion over the next two years as a result of the pandemic. The UN World Economic Situation and Prospects report warns that an additional 34 million people could fall below the extreme poverty line by the end of this year. The UN Department of Economic and Social Affairs did “not anticipate (the global economy) would dive as quickly as it did” amidst the sharpest economic contraction since the Great Depression. The report projects that by 2030, an estimated 130 million will be pushed into extreme poverty. Africa is expected to absorb 56% of the rise in poverty, in part due to limited economic and social protection measures as well as debt burdens.

In the World Economic Forum’s weforum.org, the Dean of the Wharton Business School projects that COVID-19 would also reverse trends in globalization and urbanization. The resulting compression of the global economy, he predicts, will be further impacted by reduction in international cooperation and increased likelihood of international conflict.

250 million Africans could be infected, with up to 190,000 dead by years’ end

Modelling by the WHO predicts that nearly a quarter of a billion people across 47 African countries will be infected with the Coronavirus, with as many as 190,000 projected mortalities by year’s end, according to a study to be published in BMJ Global Health. While African countries may experience fewer severe cases and deaths per capita due to younger populations and lower obesity rates, health system capacity gaps and disruptions in maternal and child health could result in additional deaths.=

ODI calls for increased solidarity to support developing countries

The Overseas Development Institute estimates that the economic impacts of the pandemic to sub-Saharan Africa remain uncertain but will likely exceed $100 billion. While many countries have imposed stringent measures to contain the spread of the virus, there are immediate and long-term concerns about the lag in economic and social protection measures as governments face major liquidity and fiscal constraints. Since much of the global economic dislocation stems from decisions to protect citizens in wealthier countries, the ODI calls for increased international solidarity to support developing countries. That can include special drawing rights to address capital outflows, moratoria on debt service repayments, development finance to provide liquidity to protect employment, as well as non-concessional lending and economic resource packages as aid.

Rising Inequity Gap

The IMF warns that COVID-19 could widen the inequality gap between rich and poor across and within countries, urging policymakers to put in place risk-sharing and social assistance mechanisms to protect the most vulnerable from economic impacts. Using past pandemics as a guide, the analysis shows net increases in Gini coefficient (a measure of inequity within a country) after five years as well as long-term impacts due to job loss and other shocks to income (e.g. lower remittances). To minimize long-term damage (or “scarring”) to the livelihoods of vulnerable communities – and improve resilience to future shocks (including the effects of climate change), the IMF urges countries to consider a range of measures including:

1. Access to sick leave, unemployment benefits, and health benefits;
2. A “New Deal,” particularly in countries where the employment sector is largely informal and where social protection systems are limited; and
3. Expanding social assistance systems, introducing new transfers, boosting public work programs, and progressive tax measures.

“Nothing lays bare inequality and discrimination like a disaster”

In a forceful address on the human rights dimensions of the COVID-19 pandemic, the UN Special Representative for Disaster Risk Reduction highlighted the disproportionate impact on marginalized and vulnerable populations, amplifying social inequities, forced displacement as well as gender- based violence. The central message was that the international community “must do more.” This includes treating persons at risk as people with human rights and not just as beneficiaries of humanitarian actions, who are consulted in decision-making relevant to their lives, and to foster greater resilience by focusing on the drivers of disaster risk, including poverty, lack of international solidarity and pandemic preparedness, and increasing frequency and magnitude of extreme weather events.

‘Donor states can and must do more’

According to a Devex survey of development professionals, two thirds say donors are not doing enough to respond to the Coronavirus. The UN estimates that US$500 billion will be needed to address the pandemic in developing countries, as Oxfam urged 30 donors of the OECD Development Assistance Committee to contribute $300 billion. In addition to more funding, development experts point to three other steps donors should take:

1. Simplified funding mechanisms for a faster response;
2. Clarity and transparency on decisions; and
3. Looking beyond the immediate needs, including longer-term impacts of COVID-19 and what preparation is needed now to respond to those.