The International Monetary Fund has warned that a decade of development will be lost for the poorest countries of the world because of the novel coronavirus pandemic unless there is concerted and urgent help provided to those countries.
There is a prospect of progress in poverty reduction made by low-income developing countries (LIDCs) over the past seven to 10 years being wiped out because of the pandemic as the countries had entered the pandemic already in a vulnerable position, said the Washington-based IMF.
A call to the international community to adopt a seven-point plan was given by IMF economists in the blog, so that the poor countries could cope with the pandemic and quickly recover. The IMF said that there would likely be no growth this year which averaged 5 per cent in 2019 and added permanent scars were left by previous pandemics.
Calls for a more ambitious programme of debt relief for the poor countries was given previously by the World Bank president, David Malpass, so in a manner that it is not limited to repayment holidays but actually be in the form of a a reduction in the stock of debt.
“LIDCs entered the Covid-19 crisis in an already vulnerable position – for example, half of them suffered high public debt levels,” the IMF said. “Since March, LIDCs have been hit by an exceptional confluence of external shocks: a sharp contraction in real exports, lower export prices, especially for oil, less capital and remittances inflows, and reduced tourism receipts.
“Despite the best efforts of LIDC governments, lasting damage seems unavoidable in the absence of more international support. Long-term ‘scarring’ – the permanent loss of productive capacity – is a particularly worrisome prospect.”
The IMF pointed out a number of long lasting impacts on the poor countries from previous pandemics such as high death rates and a worse health and education outcomes resulting in weaker future earnings. It also resulted in depletion in savings and assets that cause shutdown of companies and a legacy of debt that considerably reduced lending to the private sector. For example, Sierra Leone never recovered to its pre-crisis growth path because of the 2013 Ebola outbreak, the IMF said.
“Scarring would trigger severe setbacks to LIDCs’ development efforts, including undoing the gains in reducing poverty over the last seven to 10 years, and exacerbating inequality, including gender inequality,” the IMF said.
A number of ambitious sustainable development goals have been set by the United Nations aimed to be achieved by 2030 and any economic scarring would make it difficult for the world to achieve those targets, the IMF said.
“The Covid-19 pandemic will be defeated only when it and its socioeconomic consequences are overcome everywhere. Urgent action by the international community can save lives and livelihoods in LIDCs,” the IMF said.
(Adapted from TheGuardian.com)