Since the onset of COVID-19, national borders have been restricted, businesses have been forced to close, hospitals capacity has been overwhelmed, and global citizens have been finding a new way of living during this unprecedented time. The UN has designated 47 countries as Least Developed Countries (LDCs) based on per capita income and a human assets index. Similar to the climate crisis that impacts LDCs disproportionately, this global pandemic has added an extra burden and shock to the present challenges faced by LDCs. Many countries have introduced economic stimulus packages and recovery plans, known as the Green Recovery, that potentially create jobs and reboot economies while accelerating environmental goals which will enhance the resilience in the community. Alas, many of these stimulus plans are lacking policies that provide aid to LDCs which risks widening the global inequality between the Global North and Global South.
LDCs deserve international attention to weather this time of adversity as well as build a more equitable and resilient future. International organisations such as the UN and the World Bank Group have proposed possible recovery pathways and funding such as the COVID-19 Response and Recovery Trust Fund, a blended finance approach and Debt Service Suspension Initiatives which are aligned with the prime value of SDG: Leave No One Behind.
The Economic Impact of COVID-19 For Least Developed Countries
The global pandemic and climate crisis are a shock to the global economy as they continue to threaten livelihoods, albeit at different rates and impact across the world. LDCs are at the risk of suffering the most severe economic and social damages due to the global recessions and domestic measures taken by the respective governments. The pandemic led to a decrease of foreign direct investment (FDI) in LDCs by 40% in 2020, impacting their ability to achieve the 2030 Sustainable Development Goals.
Additionally, foreign trade shock was experienced in LDCs due to the steep decrease in demand for goods and services produced which also led to depressed prices of the exports. Countries such as Myanmar, Cambodia, Haiti, Ethiopia and Bangladesh that are driven mainly by the manufacturing sector have been heavily impacted due to mandated factory closures as well as the drop in demands from the global market. The estimated reduction in global export was $50 billion in February 2020 when COVID-19 just started to spread around the world, severely impacting LDCs’ economies due to their dependence on international trade. Consequently, the unemployment rate escalated when production halted and demand for migrant workers was reduced. Tourism was also impacted.
The lack of LDCs economic and financial capacity to cope with both climate change crisis and a global pandemic highlights the intricate global relationship between Annex I countries and the LDCs that have contrasting emissions, vulnerability and adaptive capacity.
Challenges in Achieving SDGs
The targets defined by the UN Sustainable Development Goals are especially challenging for LDCs when the ongoing climate crisis adversely affects all 17 goals in these vulnerable regions. The pandemic has threatened LDCs’ progress in meeting the SDGs and may reverse some of the progress already made.
Vulnerable populations often lack access to a social protection system that is widely available in developed countries. Strategies to test, trace and isolate are not feasible for many LDCs due to the lack of testing capacities, technology to trace the infected individuals as well as space to social distance, particularly those who live in overcrowded homes or refugee camps. The ratio of hospital beds to population is alarmingly low (1.13 hospital beds per 1,000 population) which could easily overwhelm the system in LDCs during a pandemic or climate crisis.
Measures such as lockdown and travel bans have been estimated to increase poverty (SDG 1) and decrease food security (SDG 2) as 32 million people plunge under the $1.90 per day poverty line as well as moving further from SDG 3 due to the underdeveloped health support and decreased intake of healthy and nutritious food, drop in education as more than 200 million children are being taken out of school (SDG 4). Gender equality (SDG 5) was also undermined due to structural marginalisation and women being over represented in the vulnerable work categories that were hit the hardest such as manufacturing and tourism. 2.2 billion people lack access to water and sanitation which exacerbates the transmission of the virus and health crisis (SDG 6). Climate change has undermined the ability of these vulnerable countries to achieve all the SDGs, with the additional burden from the pandemic, international cooperation and assistance as well as major structural changes in LDCs long term direction are crucial to achieving SDGs by 2030.
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Recovery Systems for LDCs
The global pandemic has shown what is possible in terms of shifting lifestyles to reduce emissions and the importance of resilience. In the meantime, Antarctic ice shelves are calving, the US encountered its greatest wildfires since 1983, monsoon flooding displaced families in Bangladesh, Arctic sea ice recorded the second lowest extent and volume, to list a few of the many climate extreme events that occurred in 2020.
The adverse impacts in LDCs requires urgent action from international policymakers to rebuild a sustainable, resilient and equitable community. The UN Secretary-General established a COVID-19 Response and Recovery Trust Fund to aid low and middle income countries from socio-economic shock, in line with the UN framework for the immediate socio-economic response to COVID-19. The fund aims to invest in three main categories which are to enable governments to suppress the transmission of the virus, mitigate the socioeconomic impact and safeguard livelihoods as well as to strengthen countries to recover better and achieve sustainable, inclusive economies.
This fund that has raised over $76 million from over 20 partners and countries was appropriately distributed to over 86 projects in more than 67 LDCs and SIDS. In response to the proposed statement from the World Bank Group (WBG) and the International Monetary Fund (IMF), G20 economies have launched the Debt Service Suspension Initiative (DSSI) which temporarily suspends debt service payments from the eligible 73 poorest countries that require the suspension. This initiative aims to lighten the financial burden of these countries for the sake of mitigating the economic and human health impacts during the COVID-19 crisis.
Blended finance opportunities in LDCs as part of the Integrated National Financing Frameworks (INFFs) are highlighted in the UNCDF-OECD Report. This blended finance should be distributed accordingly to rebuild a sustainable LDC economy and societies with SDG focused initiatives.
A few domestic fiscal measures have been taken by local governments in order to offer emergency lifelines to households, especially those involved in the informal economy, via cash transfer programmes. For example, Ethiopia’s Productive Safety Net Programme, which aims to strengthen food insecure households in the rural areas, and Lesotho’s Child Grant Programme, which aims to improve the living standards of vulnerable children. On the other side of the world, developed countries such as countries in the EU and US as well as rapidly developing countries such as China, South Korea and India have announced various amounts of fiscal stimulus in response to the health and economic crisis. Analysis has shown that the stimulus spending is likely to hurt the environment as 30% of the stimulus is directed to sectors such as the fossil fuel, coal and aviation industries.
The lack of policies or finance that benefits developing countries, extensive financing towards carbon intensive industries and lack of bailout conditions on companies for a climate action plan towards net-zero carbon are threatening the vulnerable LDCs. The Green Recovery that is leaving the LDCs behind while the Global North starts to recover from the global pandemic might force these countries to use cheaper sources of energy, like coal.
More efforts to pursue such a green recovery should include investments in renewable energy (France and Italy) which will lead to job creation, retrofitting buildings to be more energy-efficient (Canada), subsidising sustainable transportation such as electric cars, public transportation, EV charging infrastructure and clean hydrogen (Germany), larger scale afforestation and forest management (India and China), decarbonising by shifting towards a circular economy (South Korea and Singapore) as well as incorporating stringent emissions targets for polluting companies that were bailed out (Sweden and France).
The global pandemic has severely impacted all countries in many ways. Similar to the vulnerabilities of LDCs to climate change, the pandemic also disproportionately affects the LDCs the greatest. A combination of fragile health systems, lack of financial resources, high debt levels and heavy reliance on external demand such as manufacturing exports and tourism pose an unprecedented challenge for LDCs to recover from the pandemic. There is a long recovery road ahead for all countries, but projections show that LDCs will return to the projected economic path under the baseline scenario in about 4 to 5 years (2020-2024).
Uncertainties of the future course of COVID-19 is real, whether there will be successive waves of infections, whether the vaccines will be made widely available to the Least Developed Countries and whether or when the global economy will recover. Hence, swift assistance from the international community is essential in order to preserve the health and wellbeing of the LDC population. The UN, WBG, IMF, G20 countries and many private sectors are at the forefront of providing financial relief to LDCs. Green recovery plans in developed countries require a greater focus on financing sustainable renewable energy industries and developing funding policies that are not restricted within the domestic borders. The future direction of an equitable, just, sustainable world post COVID-19 is in the hands of all countries, leaders in both the public and private sector, NGOs, policymakers and the local communities. Let’s leave no one behind.
Featured image by: Flickr