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At the outset of the COVID-19 pandemic, many feared that the disease would hit the world’s poorest countries the hardest—that cases would overwhelm hospitals, health-care workers would run out of equipment and supplies, and the death toll would be devastating. Those eventualities, thankfully, have not yet come to pass. From available data, there appear to be fewer deaths per capita in low- and middle-income countries than in their richer counterparts.
But developing countries may have suffered more from the pandemic economically and politically than they have in the realm of public health. A recent International Monetary Fund (IMF) study has found that social unrest increased after the SARS, H1N1, MERS, Ebola, and Zika pandemics, particularly in countries with high levels of inequality. COVID-19 has more potential than all those past diseases combined to increase poverty, deepen social fractures, and intensify conflicts.
The likely scope and severity of the COVID-19 recession are worse than those of any global economic crisis since World War II. In October, the World Bank announced that the global poverty rate will rise for the first time in more than two decades: the pandemic could push as many as 150 million additional people below the extreme poverty line (defined as living on $1.90 per day) by the end of 2021, erasing years of progress. A Brookings Institution analysis has noted that this growth in poverty could persist until 2030, particularly in the most politically fragile, low-income countries.
Wealthy countries are weathering the economic storm far better than poor ones. The IMF has forecasted that global growth will rebound in 2021 as vaccinations and better COVID-19 testing help reopen many economies. But those gains will not be evenly shared. The poorest countries are disadvantaged several times over: their pre-pandemic growth rates were below the global average; they have had little fiscal and monetary flexibility during the crisis; their populations bear deep scars from hunger, disease, and missed schooling due to COVID-19; and they have limited access to vaccines. The International Crisis Group’s field research has suggested that these economic forces could fuel future instability.
Ending the pandemic is therefore not only a matter of supplying immunizations and other medical assistance. Wealthy countries must look beyond their borders and international financial institutions must redouble their efforts if they are to prevent COVID-19’s long tail from causing further disruption.
Like the pandemic itself, the economic crisis is both broadly global and highly localized. Most of East Asia, for example, has seen relatively modest economic fallout. Well-organized responses to the pandemic there have boosted hopes for a quick recovery. In Africa, by contrast, COVID-19’s economic impact is already serious: the continent is home to 70 percent of the world’s poor—more than 400 million people—who are particularly likely to lose jobs and go hungry during the pandemic. In Latin America, home to roughly one-quarter of the world’s current COVID-19 fatalities, the pandemic has pulled the rug out from under a rapidly growing middle class. In the Middle East and Central Asia, health systems are stretched thin, and large informal sectors have taken a battering, leading the typically staid IMF to warn of mounting social unrest.
Overall, COVID-19 has pushed many economic levers in poor countries in the wrong direction. The pandemic-induced recession has enlarged the ranks of the unemployed and increased dependence on weak state institutions. It has reduced tax revenues in many countries, leading governments to take on new debt or to squeeze public services and social programs. Some developing countries have responded to the crisis by depreciating currencies, with the effect of lowering real wages and raising the costs of living. Individually, each shock strains the system. Together, they are a recipe for instability.
For countries grappling with conflict, climate change, or both, the pandemic has hit at an especially inauspicious time. In February 2020, before analysts had meaningfully registered COVID-19’s impact, the World Bank projected that two-thirds of the extreme poor would live in fragile and conflict-affected situations by 2030. COVID-19 has darkened the economic picture in exactly those settings.
For countries grappling with conflict or climate change, the pandemic has hit at an especially inauspicious time.
In war-torn countries, for instance, the pandemic did not inspire states and armed groups to embrace UN Secretary-General António Guterres’s call for a global cease-fire. Instead, from Afghanistan to northern Syria to Yemen, the health and economic effects of COVID-19 have added to the human toll of war. In October 2020, the Food and Agricultural Organization and the World Food Program warned that in conflict settings, the pandemic was driving millions into food insecurity, raising the risk of famine in Burkina Faso, northeastern Nigeria, South Sudan, and Yemen. The pandemic has interfered with the transport of goods into war zones, and important funding appeals remain unmet—for example, the WFP had to cut the delivery of food rations in Yemen from monthly to once every other month in April 2020. Yemeni children are dying of hunger.
Politically fragile, oil-dependent economies have taken a beating during the pandemic. Already teetering from a price war between Russia and Saudi Arabia, the global oil market has collapsed. Oil-exporting countries have seen their public debts swell and their budgets shrink. Iraq, the third-largest oil exporter, is now particularly squeezed with a monthly deficit of $3.5 billion to $4.5 billion and currency reserves of only $53 billion in October 2020. In November, Prime Minster Mustafa al-Kadhimi warned that he was struggling to pay government salaries. Days later, protesting government workers clashed with security forces in northern Iraq in deadly violence. In late December, Iraq’s central bank devalued its currency by one-fifth, causing further agitation. More markdowns are expected.
Three of Africa’s top oil producers have also experienced growing unrest since the onset of the pandemic. In November, police in the Angolan capital, Luanda, used live bullets, tear-gas, and dogs to disperse a peaceful demonstration against the rising cost of living and the postponement of municipal elections due to the pandemic. In Nigeria, which is facing its worst economic recession in four decades, enormous protests have erupted against both police brutality and economic mismanagement and corruption, leading the IMF to warn that surging unemployment and poverty during the pandemic are fueling social instability. Algeria has used COVID-19 lockdowns to limit public protests as socioeconomic indicators continue to deteriorate.
The pandemic threatens to push already precarious political and economic systems over the edge. Take Lebanon, for example. For more than a decade, the Lebanese state has spent more than it received in revenues while failing to deliver basic services, such as electricity and garbage disposal. A fiscal and monetary crisis came to a head in October 2019, when protests brought the country to a standstill. By January 2020, the protests had turned violent, with more than 150 people injured in clashes with the police.
Then came COVID-19 in March 2020, and a three-month lockdown. Lebanon’s economy entered a tailspin. By May, more than half the population had fallen below the poverty line, nearly double the previous year’s rate, and by July, inflation had soared past 100 percent (it had been below 20 percent back in March). The economic crisis compounded political gridlock, as politicians deflected blame onto one another, delaying the reforms that the IMF required for a bailout. Throughout the turmoil, the Lebanese state has receded dangerously: crime has soared, but the real wages of security forces have fallen, and competing armed factions have engaged in a growing number of deadly incidents. As one military officer told Al Arabiya in September, “all of Lebanon is armed, we can’t do much about it.”
Lebanon offers a cautionary tale for other countries struggling to deal with unrest at a time when they lack economic flexibility. In Latin America, COVID-19’s death toll exceeds 570,000, and its economic consequences threaten to force tens of millions of people into poverty. Social unrest has flared in Guatemala, Peru, and elsewhere in response to the failure of governments to protect lives and livelihoods from the pandemic. Where states have fallen short, armed criminal groups seek to fill the gap: such has been the case in Colombia, El Salvador, Guatemala, Honduras, and Mexico.
COVID-19’s economic fallout is also complicating delicate political transitions. In Sudan, inflation reached record highs of 212 percent in September and 230 percent in October, running down the country’s reserves of foreign exchange and forcing the government into a state of economic emergency. Demonstrators have demanded action, closing off streets with burning tires in August, October, and again last week. In Tunisia, ten years after a popular revolt over economic conditions toppled the old regime, a wave of violent protests over growing poverty and unemployment has swept through at least 15 cities this month, prompting authorities to ban further demonstrations.
COVID-19 isn’t responsible for the precarious economic balance in many countries at risk of conflict, but it almost certainly increases the likelihood of strife. Just as a health crisis can trigger an economic collapse, economic crises can trigger political instability in the societies least able to weather the storm. But this looming problem has so far attracted too little attention from international donors.
Because wealthy countries have also suffered shocks from the pandemic, they are understandably focused on their own recovery. On average, advanced economies have spent nearly 20 percent of annual GDP on fiscal stimulus, ten times the two percent of annual GDP that low-income countries have spent. But without additional resources and support, the aftershocks of COVID-19 in low-income countries could become ever more severe. The pandemic has pushed tens of millions into poverty, and their governments may soon have to grapple with their increasingly urgent demands, even while struggling to fill security vacuums before criminal and armed groups do so instead.
The governments of developing countries need to protect the sick and the poor until vaccines arrive and economies stabilize. Economists and public health experts agree that every country, regardless of wealth, should stave off the collapse of health-care systems, transfer cash to vulnerable citizens, and test enough people for COVID-19 to determine when and where reopening is possible. All that is easier said than done in low-income countries short on funds, long on debt, and wary of credit downgrades. Local leaders may be reluctant to challenge the international and domestic forces that promote economic austerity. But if austerity hurt wealthy economies after the 2008 financial crisis, it is not likely to help poor ones now.
Wealthy countries ought to take the long view and act boldly to forgive the debts of poor countries and expand emergency financial assistance. The Biden administration could start by reversing former U.S. Treasury Secretary Steve Mnuchin’s call for the World Bank “not to burden shareholders with premature calls for new financing.” The White House should make clear that an extraordinary global crisis calls for an extraordinary response. With interest rates at historic lows, such an effort doesn’t require new aid money—the World Bank’s donors could agree to tap financial markets to expand lending capacity and to more swiftly replenish funds for grants and low-interest loans for the world’s poorest countries. Likewise, U.S. President Joe Biden could quickly authorize $650 billion in new reserve assets at the IMF, known as special drawing rights, and back proposed legislation to further expand this total. With new resources and clear policy guidance to mitigate the risks of conflict, international financial institutions could boost efforts to protect the lives and livelihoods of the world’s most vulnerable populations.
The United States and Europe are still in the midst of a winter COVID-19 surge and their own economic crises. They may feel it unwise or premature to direct attention beyond their borders. But although vaccine distribution and economic stimulus offer advanced economies a path to recovery, the same cannot be said for poorer countries, where the most at-risk populations live and where the possibility of conflict and war is greatest. In the years ahead, many Western priorities—such as climate change, migration, terrorism, and infectious diseases—will require cooperation with the countries currently most threatened by COVID-19’s long tail. The aftershocks that the world doesn’t deal with today may have destabilizing consequences for decades to come.
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