What is the responsibility of Western countries toward the economic development of developing countries?

Abstract

The unprecedented health and economic crisis developing countries are facing will aggravate existing development challenges. While governments have started to respond, their capacity is tightly constrained. OECD governments and the broader international community need to unlock ambitious support, to prevent the loss of lives, contain the risk of aftershocks, and invest in sustainable recovery. The international response to the COVID-19 should be unprecedented in terms of resources mobilised, scope and ambition. It should lead to a new development model that is conducive to resilience and sustainability.

Developing countries will be hardest hit by the COVID-19 pandemic. They are facing an unprecedented health and economic crisis, with potentially extreme economic, social and sustainable development consequences that may reverse decades of development progress and further jeopardise efforts to achieve the 2030 Agenda for Sustainable Development.

• A significant increase in infections could rapidly overwhelm already weak health systems.

• In many developing countries, the pandemic comes in addition to pre-existing food or security crises.

• Socio-economic impacts are already being felt and will have long-lasting consequences, possibly reversing decades of progress in poverty eradication: exports in developing Asia are falling, growth in Africa could be halved, and an extra 30 million people in Latin America could fall into poverty.

• Containment measures in developing countries will further affect businesses and households, and could disrupt supply chains, engender a food security crisis, and result in increased incidence of gender based violence.

The crisis will aggravate existing development challenges, and while governments have started to respond, their capacity is tightly constrained.

• Many developing countries have been grappling with structural vulnerabilities such as persistent social and economic inequalities, conflict and forced displacement, declining trust in government, the impacts of climate change, and environmental fragility.

• Crucially, many lack the resources to scale-up health interventions and the fiscal space to implement support measures and minimise disruptions the way OECD countries are currently doing. Moreover, containment measures may be difficult to implement and have ripple effects in contexts of widespread informality and a lack of safety nets for the majority of households. They may have disproportionate impacts for poor people and socially marginalised and excluded groups.

• Developing countries urgently need support from the international community. They are entering this crisis with lower fiscal buffers than they had in 2008-09. Twice as many countries have approached the IMF for short-term emergency assistance as in the immediate aftermath of the 2008 global financial crisis.

OECD governments and the broader international community need to unlock ambitious support to developing countries, to prevent the loss of lives, contain the risk of aftershocks, and invest in their sustainable recovery.

• The international response to COVID-19 should be unprecedented in terms of resources mobilised, scope and ambition. It must preserve hard-won gains in poverty reduction, social inclusion and democratic governance, and enable a sustainable economic recovery. It should lead to a new development model that is conducive to resilience and sustainability.

• Immediate support to the healthcare sector, its workers, and social infrastructure should go hand-in-hand with efforts to strengthen health systems and expand social protection and health coverage. Support for the economic recovery is crucial too, as governments need to deploy income-support and stimulus measures to protect jobs and firms.

• Official development assistance, should, to every extent possible, be protected and stepped up, while expanding support to global public goods.

• The scope for co-ordinated and equitable debt management efforts and concessional resources should be explored, building on the debt service payment standstill agreed by the G20 Finance Ministers on April 15.

• In addition, a global investment effort for a green and global sustainable recovery is needed, with developed and developing countries coming together in its design.

• A supportive multilateral system is crucial to keep governments accountable and refrain from measures that disrupt flows of goods and services; to foster innovative and coherent responses; and to increase co-ordination in contexts of multiple crises, such as in the Sahel.

• In addressing the immediate impacts of the COVID-19, the role of women in combatting the pandemic needs to be recognised, as well as the increased risk of gender based violence, including sexual exploitation, abuse and harassment (SEAH).

• Particular attention needs to be placed upfront on ensuring respect for policy coherence. Policies in OECD countries need to be designed in a way that avoids negative externalities on developing countries.

 Developing countries are facing an unprecedented health crisis, with potentially extreme economic, social and sustainable development consequences

The COVID-19 crisis poses a comprehensive challenge to achievement of the Sustainable Development Goals, notably in developing countries. The crisis has caused a significant loss of life, disrupted livelihoods, and undermined well being throughout the world. While the COVID-19 disease does not discriminate among rich or poor, its impacts will exacerbate existing inequalities. This means developing countries will be among those hit hardest, with the health, economic, and social shocks of the crisis adding to existing development challenges, including extreme poverty, violent conflicts, food shortages, and climate-related emergencies. Furthermore, early evidence suggests that the adverse impacts of COVID-19 will not only affect developing and least developed countries more harshly; they will also endure longer.

Developing countries will be among those hit hardest by the pandemic, and affected through many channels by its fallout. The exact extent of human losses will depend on the ability to reduce the spread of infection and the effectiveness of health systems. Healthcare systems in many developing countries have been chronically underfunded, lack capacity, and are continuing to grapple with the legacies of preceding health crises, such as the Ebola virus, malaria, HIV, malnutrition, as well as challenges related to high levels of air pollution and growing shares of immuno-compromised populations. Access to protective personal equipment, drugs and medical devices remains a challenge in many countries.

While many countries have adopted exceptional measures to protect their borders from the spread of COVID-19, people continue to be forced to flee from war, conflict and persecution. 84% of refugees live in developing countries, and seven out of the top ten developing countries hosting refugees are considered fragile under the OECD fragility framework (OECD, 2019). In this context, the COVID-19 pandemic will have drastic consequences on forcibly displaced people. The increasing number of measures adopted by states to prevent access of non-nationals to their territory and a focus on controlling the spread of the coronavirus (SARS-CoV-2, which causes the disease COVID-19) within countries raise concerns about how asylum seekers and refugees can exercise their rights. Humanitarian needs will increase as a result of COVID-19, and the impact of the crisis is greatest on those furthest behind.

A global health crisis compounded by a major economic and financial crisis will put significant strains on already vulnerable economies and risks reversing progress in living standards. As large parts of the population are living barely above the poverty line, the COVID-19 crisis could not only reduce progress in poverty eradication but actually push large numbers back into poverty. Preliminary estimates suggest that global poverty may increase by as much as half a billion people, or 8% of the total human population. This would be the first time that poverty has increased globally in thirty years, since 1990. Moreover, according to the World Food Programme, 130 more million people could face acute food insecurity as a result of the economic impact of COVID-19 (GNAFC, 2020).

Global growth, international trade, global value chains, and investment activities will suffer. The combination of these external factors and necessary domestic measures to contain the infection will have large and lasting socio-economic implications for developing countries. The crisis is expected to cost global value chains about USD 50 billion in exports and lead to a reduction in foreign direct investment (FDI) between 30-40%. Up to 195 million jobs globally could be lost due the pandemic. Remittances may also fall as migrants see their incomes decline in host countries. Commodity exporters in Africa and Latin America are already bearing the brunt of dropping oil and metal prices, and economies in Southeast Asia might experience the worst economic performance in 40 years, as supply chains have been disrupted, tourism broken down, and demands for regionally produced textiles collapsed.

In the short term, the oncoming shock of the pandemic will have three prongs: first, the direct effects of the disease could be overwhelming in contexts where health systems are already struggling, as is the case in several African countries, where the pace of recorded cases is rapidly increasing and may be underestimated. Second, implementing policy measures to mitigate the risk to health – e.g. closing schools, reducing work – will be more difficult than in advanced economies, but also more costly, for instance in terms of lower educational attainment and rising poverty. Third, the freezing of financial and trade flows will affect exports and economic activity directly. Developing economies lack the fiscal space to cushion the impact of either. Countries confronted with multiple crises, like in the Sahel, would be the hardest hit (Box 1).

In the medium and long term, the re-shaping of investment, production, and trade may have lasting implications for both advanced and developing countries. The pandemic and the response to the crisis may cause major changes in supply chains across the globe, with possible reshoring of certain activities. This could put at risk the economies of developing countries that highly rely on FDI and special economic zones. These economies would need to take measures to actively mitigate the impact of the pandemic and tackle the risks of premature deindustrialisation, by strengthening regional and continental value chains, as well as domestic industrial capabilities. Strategies are needed to ensure the immediate response to the crisis goes hand-in-hand with stimulus measures for a sustainable recovery.

Box 1. Africa and the Sahel: A particular concern

The case of Africa, in all its diversity, is of particular concern. According to the WHO, under-resourced national health systems lack both the equipment and health workers needed to respond to the unfolding public health emergency. Home to the world’s poorest (90% by 2030) and many fragile countries, the continent has far fewer doctors, hospital beds, and ventilators per capita than any other region, not to mention the profound disconnect between metropolitan capitals, intermediary agglomerations, and rural areas, in terms of distribution of health infrastructure. African health systems and their capacity suffered from severe cuts in social spending (notably in education and health sectors) during the structural adjustment programmes of the 1990s. More recently, Ebola epidemics have also severely affected health personnel in the Democratic Republic of the Congo, Guinea, Sierra Leone and Liberia.

The state of health in Africa is further undermined by a shrinking fiscal space. Low tax revenues (OECD, 2020a), as low as 5.7% in Nigeria for example, and rising public debt limit the ability to finance current and capital expenditures. While the demographic structure, with a median age of 19 years, might play in favour of the continent in limiting the direct impacts of COVID-19, the very large number of people whose immune systems are weakened by chronic illnesses of nutritional insufficiencies could accelerate the spread of the disease. Moreover, structural weaknesses in public service and infrastructure, as well as generalised informality may compound the effects of the pandemic. Against this backdrop, it is clear that many African countries will not have the means to effectively prepare and respond to the unfolding epidemic. With Africa being the last continent hit by the wave, and overall reported cases and deaths now above 25 000 and 1 000 respectively (as per the latest updates on the COVID-19 crisis from Africa CDC consulted on 22 April 2020), the region now risks being de facto “confined” by the rest of the world. The humanitarian, social, economic, and geopolitical consequences of such a scenario are unimaginable.

In the Sahel and West Africa, COVID-19 is yet another shock to the system for countries who are already grappling with significant development and humanitarian challenges. These include pervasive poverty, conflict and violence, food insecurity, extreme weather events, etc. The region is currently home to both a looming food crisis – 17 million people are expected to be in a crisis situation or worse during the upcoming lean season of June-August 2020 – and increasing political violence as clusters of violence in Libya, Central Sahel and Lake Chad have cost the lives of 92 000 people since 2011. With the spotlight now on COVID-19, efforts to counter pre-existing crises run the risk of being neglected. Furthermore, highly dense urban agglomerations with little possibility for social distancing and the dominance of the informal economy, which depends on face-to-face contact, pose additional challenges in the efforts to fight the virus. Finally, humanitarian aid to conflict zones and refugee camps is being disrupted as well, highlighting the need for innovative modalities for assistance interventions in order to avoid spreading the virus as well as the need for humanitarian corridors to reach vulnerable communities.

Focus on Burkina Faso: Conflict, displacement and weak health systems

Health facilities and infrastructure have been severely compromised in the Sahel, as conflict and insecurity have escalated to unprecedented levels. In Burkina Faso, for example, 135 health centres are closed and 140 are operating with reduced services due to the escalation of violence, jeopardising the access of nearly 1.6 million people to basic healthcare. This context of high levels of displacement, weakened health system, and escalating violence could seriously affect detecting and managing the virus and the overall response to the crisis.

Key figures

135 health centres closed and 140 operating with reduced services affecting 1.6 million

780 000 displaced persons

26 000 refugees

338 000 students out of school due to insecurity

2 527 schools closed

1.2 million are food insecure

2.2 million people require humanitarian assistance

A sudden and large increase in COVID-19 cases can overwhelm the healthcare sector, its workers, and key social infrastructure. Health systems in many developing countries were under strain before the pandemic, and have no reserve capacity. According to the WHO (2019), 90% of low-income countries suffer from health worker shortages. For example, sub-Saharan African countries on average have 0.2 doctors for 1 000 people, compared with 2.2 in Latin America and 3.4 in OECD countries. Moreover, developing countries might suffer from inadequate access to drugs and medical devices. Safeguard measures to serve domestic markets first exacerbate the vulnerability of those countries relying on imports and with limited local manufacturing capacities. Africa already faces a large trade deficit in medical devices, with imports accounting for 92% of total trade in medical devices in the continent (Figure 1). The role of women in this pandemic is a key aspect of the health and social infrastructure. Women are on the frontlines of the COVID-19 response, comprising almost 70% of the global healthcare workforce. At the same time, they are also shouldering much of the burden of unpaid work and face increased risks of violence or harassment during times of quarantine.

Figure 1. Share of trade in medical devices by trade flow and category (%), selected geographical regions, 2016-18

Note: Medical device classifications and categories are based on Bamber and Gereffi (2013) and Torsekar (2018).

Source: OECD (forthcoming), Production Transformation Policy Review of the Dominican Republic, OECD Development Pathways, OECD Publishing, Paris.

The COVID-19 crisis has coincided with a fall in oil prices and subsequent decline in most commodity prices, affecting economies that rely on natural resource extraction. By late March, oil prices had fallen below USD 30 per barrel, a drop of a more than 50% since January 2020. Caused by a breakdown of existing price-setting mechanisms, the collapse in prices was exacerbated by the precipitous fall in demand resulting from the pandemic. Oil prices further declined in April and ventured into negative territory for the first time in history. The International Energy Agency suggests that oil demand will remain negative at least until the second half of 2020. This situation will radically curtail the ability of oil producing countries to respond to the pandemic. In heavily oil-dependent countries, oil exports account for as much as 60% or more of fiscal revenue – in some cases above 90%.1 These revenues could fall by as much as 50 to 85% in 2020, compared with 2019. This estimate assumes an oil price of USD 30 per barrel – by some estimates, the oil price could fall even further. Compounding the fiscal constraints, several oil-exporting countries have higher debt levels than they did ahead of the 2008 financial crisis.

Figure 2. Global prices of key commodities

2005-2019 (base 100 = year 2005)

The closure of borders and confinement measures in most countries has provoked a collapse of travel and tourism that will affect countries across the developing world. Tourism represents 10% of the world’s GDP, 7% of the world’s exports, and 30% of the world’s services exports. For many developing economies, it is a major source of foreign exchange and employment. The reduction in international travel and tourism could imply a 45-70% decline in the international tourism economy in 2020 (OECD, 2020b). The consequences for developing countries will be large, in particular in small island developing states, where tourism generates between 30% and 40% of GDP.

Moreover, developing countries might also be penalised by a reduction in remittances. Money sent home by the diaspora is an important source of income and foreign exchange in many developing economies. Remittances tend to be more stable than other financial flows and counter-cyclical, i.e. they increase during economic downturns in the migrant’s country of origin. But in the current crisis, this may not be the case: the global downturn is affecting both countries of origin and of destination, and migrants see their income curtailed by confinement measures in advanced economies. Many countries in Latin America and the Caribbean are likely to see those financial streams dry out. For example, remittances to the Dominican Republic – mostly from the United States and Spain – account for 8% of GDP, twice as much as FDI, and are likely to be reduced as COVID-19 unfolds (OECD, forthcoming). The World Bank (World Bank, 2020) estimates remittance could decrease as much as 20% in 2020 due to the economic crisis induced by the COVID-19 pandemic and shutdown.

Developing countries are particularly vulnerable to links between environmental and disease threats. While this pandemic is foremost a health and humanitarian crisis with widespread economic and social consequences, its origins link to environmental degradation and the climate emergency. The increasing frequency of disease outbreaks is linked to climate change and biodiversity loss, and these interrelated factors have the largest impacts on the most vulnerable people. Over-exploitation of nature is a key driver of emerging infectious disease. Many developing countries are candidates for disease hotspots, and experience rapidly changing interactions between people, animals and ecosystems that outpace workable regulatory mechanisms. Temperature rise will continue to result in biodiversity loss – encroaching further on wildlife habitats and bringing animals and human populations closer together. Paired with coastal degradation, rising temparatures will also accelerate the spread of pathogens from land to marine environments and increase disease transmission to humans as well as domestic and wildlife animals. Also, the economic consequences of COVID-19 will impact many ocean-based sectors and small island developing states (SIDS); tourism, a key ocean-based sector for many developing countries, is expected to be one of the most affected sectors globally by the COVID-19 pandemics, with large economic repercussions on the countries that strongly rely on it for foreign exchange, jobs, and income.

 The crisis will aggravate existing development challenges. While governments have started to respond, their capacity is tightly constrained

Governments in developing countries need to take swift action to counter the infection and its socio-economic consequences, but pre-existing structural challenges risk hampering the crisis response, both in the short and long term. Informal settlements in urban areas across developing countries make social distancing and confinement measures particularly hard to implement. High levels of informality in the labour market hinder the impact of social protection packages and subsidies for workers, as well as targeted measures for small and medium-sized enterprises. The fiscal response in developing countries will have to take into account their specific context and institutional capacities.

Besides, institutional and fiscal capacities vary enormously across regions and countries. At a macro level, developing countries face a limited fiscal space as they often rely on a narrow public revenue base and their vulnerability increases with commodity prices declining and global value chains coming to a halt. Unlike the 2008-09 global financial crisis, many developing countries are entering this pandemic with no or very limited fiscal buffers. Declining exports and tourism as well as capital outflows are depressing tax revenue and aggravating sovereign debt levels – in turn limiting room for manoeuvre. According to the IMF, capital outflows from emerging market economies reached USD 83 billion in March 2020. Morever, as investors move to safer assets, emerging and developing economies’ currencies start to depreciate – in some case by as much as 25%.

 Regional policy responses

Several African governments and development partners are taking action to mitigate the economic impact (OECD, 2020c). The African Union (AU) and its Africa Centres for Disease Control and Prevention (Africa CDC) are leading the continental response to COVID-19. They convened a meeting of African Health Ministers as early as 22 February 2020, set up an Africa Taskforce for Coronavirus (AFCOR), developed a Joint Continental Strategy for COVID-19 Outbreak and established a Continental Anti-COVID-19 Fund endowed with USD 12.5 million as seed funding for AU Member States to contribute. Four Special Envoys were appointed to mobilise international economic support for continental fight against COVID-19. The AU Development Agency (AUDA-NEPAD) released a white paper to emphasise the impact of the many “known unknowns” of the pandemic. Regional organisations and sub-regional entities, such as ECOWAS and UEMOA, are providing strategic plans, co-ordination platforms, and watch committees to their respective member states. Most African governments have adopted prevention and containment responses to curb the spread of the virus. More often than not, these prevention measures and lockdowns present challenges in a context where one-third of West Africans have no handwashing facility at home and up to 85.8% of people across the continent depend on informal labour requiring daily face-to-face interactions.

In order to mobilise health resources and minimise the social and economic impact of COVID-19, financial institutions are organising assertive responses. The African Development Bank with a USD 3 billion “Fight COVID-19” Social Bond and a USD 10 billion Response Facility; or the Central Bank of West African States and the West African Development Bank with provisions for their economies to best face the outbreak. After Ethiopia’s Prime Minister Abiy Ahmed urged G20 countries to provide a USD 150 billion financing package, African Finance Ministers co-ordinated to call for an immediate emergency economic stimulus to the tune of USD 100 billion. This includes the waiver of all interest payments on public debt and on sovereign bonds, estimated at USD 44 billion for 2020, and the possible extension of the waiver to the medium term, which would provide immediate fiscal space and liquidity to governments during the crisis. Countries are seeking debt relief and emergency financing. Kenya is in talks with the World Bank for budget support of USD 750 million and the IMF for USD 350 million in emergency assistance. The IMF approved the first COVID-19 emergency funding for an African country, with a USD 109.4 million disbursement planned to help Rwanda. On 13 April 2020, the IMF approved immediate debt relief for 25 poor countries, 11 of which are West African countries, over the following six months to enable them channel more resources in the fight against COVID-19. Similarly, the Paris Club and the G20 Finance Ministers agreed on a time-bound suspension of debt service payments for the 76 International Development Association (IDA) countries, plus Angola. Half of the beneficiary countries are on the continent, including all 17 of the Sahel and West African countries.

In Latin America, countries must take urgent measures to support not only the poor, but also all vulnerable individuals, households and firms, including internally dispaced people. Several countries in the region have announced monetary and fiscal measures (OECD, 2020d) For instance, central banks in Brazil, Colombia, Mexico, Paraguay and Peru, have reduced interest rates or adopted liquidity measures to promote domestic demand and facilitate business. However, the exchange rate pass-through to inflation means these can only be temporary and limited. Financial intermediaries have postponed credit payments for the most vulnerable firms and households. On the fiscal front, most countries in the region, including Argentina, Brazil, Chile, Colombia, Costa Rica, the Dominican Republic, El Salvador, Paraguay, and Peru, have announced measures to support businesses and households with cash flow. Measures include the deferral or temporary reduction of certain tax payments, as well as temporary payment cancellations for selected public utilities, the suspension of social security contributions, or support to partially cover payrolls costs for micro, small and medium enterprises.

Most Asian emerging economies have some room for active monetary and fiscal policies, but need to cope with disruptions in global value chains and risks for the financial sector (OECD, 2020e). Most Southeast Asian countries have eased their monetary policy stance. Some authorities intervened multiple times within the space of one month. Reductions of policy rates occurred in the People’s Republic of China (“China”), Indonesia, Malaysia, the Philippines, Thailand, and Viet Nam. The reserve requirements applicable to the banking sector were reduced in China, Indonesia, and Malaysia, while Philippine policy makers decided to relax some of the regulatory and reporting rules applicable to banks. Other measures include purchases of government bonds (Indonesia), loan maturity conversions (Malaysia), direct provision of credit (China), open market operations (India and Indonesia), as well as temporary suspensions of loan principal/interest repayments (Malaysia). In addition, several Asian countries unveiled comprehensive fiscal stimulus packages aimed at supporting businesses and households. Although they differ by country, packages typically include financial subsidies, tax deferral and exemption, as well as increases in direct spending. Overall, the composition, the timing, and the targeting of stimulus packages will be crucial to bring about the desired growth-lifting effect. In the South Pacific, COVID-19 cases have only recently begun to escalate but are multiplying rapidly. In addition to the economic risks from a reduction of tourism, the overall combination of weak health systems, reduction in worker mobility and remittances flows, significant job losses and the collapse of commodity prices exacerbate existing vulnerabilities. For many Pacific countries reliant on food imports from the broader region, trade restrictions are having significant effects.

 OECD governments and the broader international community need to unlock ambitious support to developing countries to prevent the loss of lives, contain the risk of aftershocks, and invest in their sustainable recovery

This is an unprecedented global development crisis. It affects how we produce, consume, work and live and has massive repercussions on present and future generations. It affects every country and individual in the world, but not everyone is equally affected or prepared. As such, the crisis requires an unprecedented global response in size, range and ambition. The international community – including multilateral organisations and international financial institutions, the G7 and G20 group of countries, philanthropic organisations, the international private sector and NGOs – can and should reinvigorate co-operation and adopt a bold, innovative and inclusive multilateral approach to mobilise financing, technology, and expertise across the policy spectrum to overcome the crisis, uphold and realise the 2030 Agenda for Sustainable Development as well as climate targets, and ensure that no one is left behind. It needs to support developing countries as they tackle the consequences of the pandemic and avoid the erosion of years of progress in poverty reduction.

This ambitious global response must provide sufficient support and financing, through all forms of development finance, not only to fight the disease and mitigate the short term impacts, but also to invest in a durable and sustainable recovery. Efforts to reduce the costs of transferring remittances, promote high quality investment in developing regions, fight illicit financial flows, tackle base erosion and profit shifting (BEPS), and promote fairer international taxation must continue and address the new challenges associated with the COVID-19 crisis. In the area of official development assistance (ODA), OECD countries should, to every extent possible, protect and step up their commitments to developing countries. As the pandemic evolves, ODA should be used to respond to immediate needs in the area of health (Box 2) and beyond, and to strengthen support of the multilateral system, in co-ordination with national, local and civil society partners. In the medium to longer term, ODA can support the mobilisation of resources from other actors, including the private sector, such as through blended finance. Development partners should ensure a coherent and co-ordinated humanitarian-development-peace approach. Interventions designed specifically to support the COVID-19 response should follow effectiveness principles and information-sharing practices. Joint analysis, implementation and results evaluation of previous and current pandemic responses are critical to ensure results on the ground and positive outcomes in the medium and long-term.

Box 2. Concessional finance for health

Concessional finance for health has evolved significantly in the past decade (Figure 3). As the disease burden shifts from communicable to non-communicable diseases, donors that historically focused on specific diseases or populations (maternal health, children, transmissible diseases such as HIV/AIDS and TB) have also increased their financing to health systems in general. Financing for epidemic preparedness has been an important domain of innovation since the Ebola crisis in 2014-15, but it remains under-funded (CEPI, 2017): the WHO Contingency Fund for Emergencies, its Health Emergencies and Health Systems Preparedness Programmes faced chronic budget shortfalls, while the World Bank Pandemics Emergency Fund was insufficient to face global scale pandemics. Because of insufficient domestic resource mobilisation and external support, African countries’ preparedness, as assessed by a variety of indices, is the lowest of any region. However, there has been some progress: the establishment of the African CDC, based in Addis-Ababa, has allowed to plan and prepare, as well as distribute key equipment to the region.

Figure 3. Total concessional finance to health

USD billion, 2017 prices and exchange rates, gross disbursements

Source: OECD, Distribution of net ODA (indicator), doi: 10.1787/2334182b-en (accessed on 6 April 2020).

Overall, ODA budgets have proven resilient in the face of recession, increasing in 2009 and 2010 despite the global financial crisis in 2008. Trends of official development finance to developing countries during major pandemics or epidemics (specifically, HIV/AIDS, H1N1 swine flu, and Ebola), show that these investments were not to the detriment of other health finance (Figure 4). Total disbursements for infectious diseases (including malaria and TB) increased by nearly 50% between 2014 and 2017 during the Ebola crisis.

Figure 4. Official development finance to health, of which HIV/AIDS, Ebola, H1N1, tuberculosis and malaria

USD commitments, 2017 prices, DAC and multilateral agencies’ outflows

Confronted with the unprecedented situation, G20 leaders have signalled their willingness to do “whatever it takes” to fight the crisis. They stated “consolidating Africa’s health defence is a key for the resilience of global health”, expressing their concern for the impact on developing countries and their readiness to mobilise development finance. G20 Finance Ministers and Central Bank Governors released a G20 Action Plan – Supporting the Global Economy Through the COVID-19 Pandemic. The Action Plan sets out principles and actionable commitments covering immediate measures (economic, financial and health), actions to attain a robust and sustained global economic recovery, and international support to countries in need and preparedness for future crisis. It includes a Debt Service Suspension Initiative for Poorest Countries with a suspension of principal repayments and interest payments will last until end-2020. The G20’s action has focused on recommendations to international financial institutions and multilateral development banks, who have announced emergency support to developing countries and called for swift action by bilateral donors to defer debt payments. International action could be broadened to incldue a holistic approach of international support that looks at all sources of finance, including from the private sector, highlights principles of development cooperation such as effectiveness and ownership, and encourages modalities such as south-south and triangular cooperation.

As of early April 2020, more than 90 countries had approached the IMF for short-term emergency assistance, twice as many as in the immediate aftermath of the 2008 global financial crisis. The IMF is replenishing the Catastrophe Containment and Relief Trust to help the poorest countries and stands ready to deploy all of its USD 1 trillion lending capacity. The Fund estimates that its current lending capacity will not be enough to address the demands from emerging markets and developing countries, as they will need at least USD 2.5 trillion in financial resources to get through the crisis created by the COVID-19 pandemic. The World Bank approved a first set of emergency support operations for developing countries, using a dedicated, fast-track facility for COVID-19 response.2 Overall, the World Bank Group is prepared to deploy up to USD 160 billion over the next 15 months to help countries respond to immediate health consequences of the pandemic and bolster the economic recovery. In a statement released on 9 April, the Development Assistance Committee pledged to “strive to protect ODA budgets, encourage other financial flows to support governments and communities in partner countries”.

The international community can provide invaluable support to developing countries as they respond to the shock and address its immediate, short-term, and medium to long-term effects. Acting together on the priority areas set out below will allow OECD governments, developing and emerging economies and the broader international community to reinvigorate multilateral co-operation, build resilience, and not only put the global economy back on track, but rebuild better economies and societies to achieve the 2030 Agenda for Sustainable Development. Last but not least, all policies and measures to address the crisis, need to respect and uphold human rights, the rule of law, gender equality, non-discrimination, decent work conditions and humanitarian principles. Equally, they must not engage in measures that result in shrinking civic space.

 1. Support the healthcare sector and its workers in developing countries

Immediate needs

• Assist countries facing difficulties in meeting their external financing needs through international financial institutions, ensuring that financing delivered is transparent and accountable.

• Provide humanitarian and emergency assistance to enhance access to medical supplies, protective clothing, water, and to support displaced persons and refugee settlements through existing institutional arrangements and in line with regional strategies, such as the response plan prepared by the Africa CDC or the efforts put in place by the West Africa Health Organisation (WAHO) in training healthcare workers and distributing protective equipment and medicine.

• Reinforce the co-ordination of the peace, humanitarian, and development response to support the most vulnerable, especially in the context of multiple crises, such as in the Sahel.

• Share good practices on effective communication about hygiene and public health, tackling misinformation and collecting relevant data to fight the pandemic.

Short and medium-term needs

• Support the mobilisation of financial resources for health systems and the expansion of health and social protection coverage.

• Support human resource development and tackle shortages in the health sector, also through the WHO Global Code of Practice on the International Recruitment of Health Personnel.

• Invest in health data systems to track the development of the pandemics, its impacts and the effectiveness of policy responses.

• Support inclusive and accountable institutions that respect human rights and support democratic governance.

 2. Support the social and economic recovery in developing countries

Immediate needs

• Support developing countries to overcome the macroeconomic shock and possible external debt overhang, through a coherent strategy to development finance – from official flows, to remittances, taxes, and investment – and sovereign debt restructuring and relief, as appropriate.

• Maintain and where possible increase commitments to financing for sustainable development, including offical development assistance, as well as other official support and mechanisms such as South-South and triangular co-operation, so that governments can provide income-support and other measures to the most vulnerable, minimise the impact of school closures, and address food security risks.

• Recognise the role of women in confronting the pandemic and the increased risk of SEAH, as well as the needs of vulnerable groups, such as the elderly, people with disabilities, people living with HIV, migrants, refugees, and forcibly displaced people; help protect citizen rights and freedoms.

• Ensure that all policies and measures taken to address the crisis respect and uphold human rights, the rule of law, gender equality, non-discrimination, decent work conditions, as well as humanitarian principles; protect the civic space and prevent democratic backsliding.

Short and medium-term needs

• Ensure policy coherence of measures taken to fight the crisis, avoiding negative externalities on developing countries or addressing them through appropriate action.

• Help developing countries preserve critical productive capacities, deepen regional integration, and develop local and regional value-chains.

• Conceive fiscal stimulus and public investment measures as a global public investment in the 2030 Agenda and climate agendas, and ensure developing countries are part and parcel of designing and benefitting from a global sustainable recovery.

 3. Uphold a supportive multilateral system

Success will critically depend on a supportive multilateral system ensuring an effective governance of global flows, delivering essential global public goods, and putting the global economy on track to achieve the 2030 Agenda for Sustainable Development. The Sustainable Development Goals already provide a vision and a framework for a more prosperous, inclusive, resilient and sustainable world. The challenge now is to sustain and accelerate efforts to achieve this vision. To this effect:

• Reinvigorate multilateral co-operation in support of the Sustainable Development Goals. The full implementation of the 2030 Agenda, including climate objectives, remain crucial elements in helping better equip the world for future systemic shocks. International focus on biodiversity, forest conservation, protection and sustainable use of natural resources and climate change are key, given the zoonotic and ecological implications of this crisis.

• Maintain a rules-based, open multilateral system that ensures the smooth flow of goods and services, including medical supplies and drugs to developing countries, to maintain access and avoid the proliferation of counterfeits.

• Revisit innovative efforts to protect health as a global public good and to develop and promote access to vaccines in developing countries, such as through the Global Fund to Fight AIDS, Tuberculosis and Malaria, GAVI, and the UHC2030 initiative and the Global Health Security Agenda.

• Uphold respective commitments to address international migration and forced displacement, such as the Global Compact on Migration and the Global Compact on Refugees, to minimise the negative impact of the crisis on refugees, migrants and their families.

• The international community, with support from relevant international organsiations, could consider convening an international conference for developed and developing countries, public and private actors to discuss the actions required to offset the impact of the crisis on poverty and promote a global investment plan for a truly sustainable recovery.

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Notes

1.

This is the case of countries like Iraq, Kuwait, Nigeria and the Bolivarian Republic of Venezuela.

2.

The first group of projects, amounting to USD 1.9 billion, will assist 25 countries, and new operations are moving forward in over 40 countries using the fast-track process. In addition, resources worth up to USD 1.7 billion for existing projects will be redeployed to support the response to the crisis.