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Coronavirus could cause calamity for poor countries

Published : Monday, 6 April, 2020 at 12:00 AM  Count : 1020
Ismail Ali

Ismail Ali

Ismail Ali

The interconnected nature of the global economic system means everyone will be affected by the coronavirus crisis. It is creating mayhem in some of the world's most advanced nations. However, in the long-term, it could cause a calamity in poor countries - both health and economic terms. Although rich countries are in the epicentre of the current outbreak, throughout history, the poor have been hardest-hit by pandemics. Most people who die of AIDS are African. The 1918 Spanish flu wiped out 6 per cent of India's entire population.   
In one estimate, without effective social distancing, between 25 per cent and 80 per cent of population in poor countries will be infected by coronavirus. Yet it is practically impossible in places like a crowded slum in Mumbai Orin war-torn Syrian province of Idlib. Enforcing a lockdown means their families will not be able to eat. As Imran Khan, Pakistan's prime minister says, "if we shut down the cities�.we will save (people) from corona at one end, but they will die from hunger."
Poor countries are woefully ill-equipped to cope with covid-19. Sub-Saharan Africa has about one doctor for every 5,000 people, compared with one per 300 in Europe. The average American hospital has more intensive-care beds than most African countries. Health spending per head in Pakistan is one two-hundredth the level in America. Hitherto their health system is already overwhelmed by sudden influx of Coronavirus patient.
Authorities in many low-income countries are worryingly clueless about the consequence of coronavirus and are still in denial. Street markets in Myanmar are packed. Brazil's populist president Jair Bolsonaro has dismissedcovid-19 as just "a sniffle." Ministers in Bangladesh continue talking irresistibly.  Globally, while the International Monetary Fund (IMF) has confirmed a historically deep recession is approaching, the World Bank says "significant economic pain seems unavoidable." Hence, 25 million jobs worldwide will be eradicated, according to the International Labour Organisation.
However, the effects of Covid-19 in poor countries will be both colossal and different from the rich nations. They have to make difficult choice: save lives, from the virus, of more than two billion extreme poor living only on $2 a day or minimise economic damage. These economically fragile states will face a declining foreign investment. As the Institute of International Finance has revealed about $83 billion of funds have left from emerging economies. This outflow is greater than during the 2008 financial crisis.
Remittances may tumble soon as migrants in rich countries lose their jobs. In 13 African countries this money is worth more than 5 per cent of Gross Domestic Products (GDP).The overall effect is "more serious than 2008", says Albert Zeufack, the chief economist for Africa at the World Bank.
Tourism, from which many poor countries benefits enormously, is in turmoil as travel industry meltdown. More than 1 million people in each of Kenya, Tanzania, Ethiopia and South Africa, involve in the sector are at severe risk.
Orders have dried up for clothes exporters in, e.g., Ethiopia, Ghana and Lesotho. The demand for commodities - from crude oil to fresh flowers - upon which many developing countries depend, has collapsed. Above all, these countries must also grapple with the domestic spread of the virus and the weakening of their own domestic demand. Thus, the ability to manage these internal and external pressures is limited and the outcome could be a huge social and economic disaster. The IMF itself already faces 80 requests for emergency financial support.
In the perspective of Bangladesh, a country hugely expose to external shocks as discussed above, may have to reconsider its whole development policy. Being the world's biggest readymade garment exporter after China, this sector employs more than 4 million people and accounts for 13 per cent of GDP. However, Bangladesh's major export destinations are some of the countries hardest hit by coronavirus: USA (accounting for 16.9 percent of Bangladesh's total exports), Germany (15.2 percent), UK (10.2 percent), Spain (6.3 percent), observes Professor Mustafizur Rahman of the Centre for Policy Dialogue.
Among the European and U.S. buyers Primark alone have cancelled about £2.4 billion of Bangladesh garments orders, according to The Guardian. Marks & Spencer, Next, Zara and Tescoare considering for taking similar steps as the coronavirus outbreak roils demand. Aruna Kashyap, senior researcher at Human Rights Watch said that situation in Bangladesh has already been catastrophic and will spell disaster for millions of families involved.
This justifies JPMorgan Chase & Co, one of America's influential investment banks, predictions that coronavirus-inflicted slowdown in the USA and Europe may delay Bangladesh's goals of doubling total exports to $72 billion by 2024. Meanwhile, the flow of remittance, another pillar of Bangladesh economic growth, will decline significantly.
Moreover, those domestic migrants who left cities to villages due to lockdown how long they can stay out of work. In rural economy where families' ability to eat depend on daily wages, concern many. As Asif Saleh, executive director of BRAC, notes, "economic shock will push majority of them into food insecurity within weeks."
Covid-19 is a shared challenge and the demands of solidarity substantiate generous help. The good news is that international institutions and many development partners are extending their helping hands. The IMF says it is ready to deploy its $1 trillion lending capacity with 10 billion for low-income countries at zero interest rates. Similarly, after a 2 hours video-summit on March 26th the G20 leaders committed a$5tn stimulus through targeted fiscal schemes.
The current edition of The Economist argues that supporting poorer nations is not just about the moral imperative of caring for the world's poorer populations, but a matter of self interest for richer countries. Coronavirus inflicted economic disaster, for instance, in India or Sub-Saharan Africa could rebound on the developed world if travellers from these regions cause additional waves of infection. Likewise, writing in the India Express, Abhijit Banerjee and Esther Duflo, two of the Nobel Prize winning economists in 2019, emphasise the need for more aid assistance for poor.
To weathered coronavirus pandemic, co-operations between countries is urgently required. For aid recipient governments it is important that the money is being well spent for both: moving their economies and saving lives.
Ismail Ali is a development activist based in London

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