Saving the developing world from COVID-19

Saving the developing world from COVID-19

Decreasing rates of infection with coronavirus disease (COVID-19) and plans to begin easing blocking measures in some parts of the developed world have provided a glimmer of hope after weeks of unrelenting sadness. But for many developing countries, the crisis may have only just begun, and the human cost of a major COVID-19 outbreak would be an order of magnitude greater than in any advanced economy. Since the USA USA They recently recorded over 2,000 deaths in a single day, this is not a trivial matter. If the international community does not act now, the results could be catastrophic.

Sub-Saharan Africa is a good example. Several countries would face significant challenges in enforcing social distancing rules and other measures to flatten the contagion curve. Already weak health care systems in the region could quickly be overwhelmed by an outbreak, especially in a high-density area.

Africa has long suffered from a severe shortage of health workers, with just 2.2 workers per 1,000 people (compared to 14 per 1,000 in Europe) in 2013. And few African countries have a significant supply of ventilators, a tool crucial to treat serious cases. of COVID-19. Nigeria is reported to have fewer than 500 in total, while the Central African Republic may have no more than three.

Furthermore, sub-Saharan African governments have little fiscal and monetary space (or operational capacity) to follow advanced countries to counter the massive impact of containment measures on employment and livelihoods. Spills from Asia, Europe and the US USA, including depressed commodity incomes (due to declining demand and prices), rising import costs, collapse of tourism, decreased availability of basic goods, lack of foreign direct investment and a sharp reversal in the financial portfolio flows – these limitations have already been exacerbated. For those who had access to international capital markets, the terms have become noticeably more onerous.

While sub-Saharan Africa is not without some defenses, including strong family networks and cultural resistance, as well as the lessons learned from the Ebola crisis, there is a real risk that this COVID-19 crash will block you in a race between deadly hunger and Deadly infections. Some states, which have already been made fragile by decades of weak political leadership or corrupt authoritarianism, may even fail, potentially fueling violent unrest and creating fertile ground for extremist groups.

The risks are not limited in the short term. Countries are also vulnerable to large future losses of productivity, both through labor and capital. Prolonged school closings and unemployment could contribute to increased domestic violence, teen pregnancy, and child marriage, especially in countries that lack basic infrastructure for remote education.

In short, sub-Saharan Africa may be about to face a human tragedy so profound that it could leave a generation adrift in some countries, with consequences that extend far beyond the region’s borders. Two examples perfectly illustrate the multifaceted spill risks.

First, by drastically reducing Africans’ current and future economic prospects, the COVID-19 crisis could eventually further fuel migration than current forecasts anticipate. Second, by triggering a series of corporate and sovereign debt defaults, an uncontrolled outbreak of COVID-19 could exacerbate the financial market instability that the US Federal Reserve. USA And the European Central Bank have taken such strong measures to suppress. This increases the chances of reverse pollution from the financial sector to the real economy.

The scale of the threat is not lost on the International Monetary Fund (IMF), which, through enormous ongoing effort, has moved quickly and boldly to increase emergency financing. More than 90 developing countries have already approached him for financial assistance. Along with the World Bank, the IMF has also called on official bilateral creditors, including China, which has become a major creditor in recent years, to suspend debt payments from the poorest developing countries. Leading the way here too, the IMF is providing immediate debt relief to 25 of its low-income member countries, using grant resources to cover its multilateral debt service obligations for six months.

Meanwhile, some countries, such as China, have offered large in-kind medical donations (what less charitable observers have described as “face mask diplomacy”).

But, to avoid disasters in vulnerable regions, the international community must do much more. Advanced economies, in particular, should complement the origin bias that has (understandably) characterized their responses thus far with a broader assessment of the global effects, including the indirect effects and the pullback of Africa. They must expand official financial assistance, facilitate broader debt relief, and urgently establish an international solidarity fund that other countries and the private sector can join.

Furthermore, developed countries should do more to share best practices for pandemic containment and mitigation. To facilitate this process, the World Health Organization needs to do a better job of centralizing and disseminating relevant information. The leadership of advanced economies, one hopes, will soon extend to the universal deployment of more effective medical treatments, or even a vaccine.

The scale of the threat is not lost on the IMF, which has moved quickly and boldly to increase emergency funds.

Mohamed A. El-Erian

Finally, the international community must do much more to pool resources from the private sector. As in developed countries, the private sector can play an important role in crisis response in vulnerable regions, both directly and through the proliferation of public-private partnerships. While pharmaceutical and technology companies will do a lot of heavy lifting, private creditors can help by working in an orderly manner to reduce the immediate debt burden in the most challenged developing countries.

But, again, this will require a greater emphasis on enabling mechanisms. A major change of mind will be required by multilateral lenders and other international agencies (including the World Bank).

The COVID-19 pandemic threatens to devastate large parts of the developing world. Only with a concerted, cooperative and holistic approach, the international community can avoid a large-scale humanitarian tragedy and protect the rest of the world from destabilizing setback.

• Mohamed A. El-Erian, chief economic adviser to Allianz, was president of the Global Development Council of the president of the United States, Barack Obama. Most recently, he is the author of “The Only Game in Town: Central Banks, Instability and How to Avoid the Next Collapse.” Copyright: Project Syndicate, 2020.

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