It is just over a year since COVID-19 was declared a global pandemic and it is increasingly clear that children are among the worst impacted, particularly the poorest and most vulnerable, living in the poorest countries. For example, while children all over the world lost precious time in school last year, the poorest children living in the low-income developing countries lost half of their school year compared to a quarter lost for the poorest children in the richest countries. This is likely due to differences in household income needed to support children’s education but perhaps more crucially, it can be attributed to the ability of governments to support citizens through the crisis. This is starkly shown by comparing the additional spending to respond to COVID-19 by governments in advanced economies, which spent an average of $9000 per person, compared to $26 per person in low-income developing countries.
Despite the lack of resources to scale up financial support in the poorest countries, to governments’ credit they did look to at least maintain spending in 2020 on health, social protection and education. However, maintaining spending is simply not enough in the short term to get the poorest and most marginalised children safely back to school and learning. Without increased investment the poorest countries will find themselves increasingly off-track on the road to achieving the Sustainable Development Goals (SDGs).
The latest data from the International Monetary Fund (IMF) casts a worrying picture of the progress that will be made this year and in years to come. Revenue and spending in low income developing countries in sub-Saharan Africa are not expected to rise in the next two years, and debt burdens will continue to be higher than in 2019, meaning more money that could be invested in children will go to paying debts (Figure 1).
Figure 1 – 2013 Government revenue, expenditure, and debt in sub-Saharan Arica, 2019 to 2022
This outlook presents a challenge not only to governments and children living in the poorest countries but also a growing concern for governments in the largest economies, as a less prosperous world with widening inequalities threatens global growth and security. Therefore, It is no surprise that supporting the world’s poorest and most vulnerable countries was high on the agenda of recent G7 and G20 finance ministers’ meetings, as well as at the World Bank and IMF Spring Meetings. However, the announced policy responses following them raise as many questions as answers as to whether they will deliver for the world’s poorest children.
Supporting liquidity (supply of money) is welcome, but without clear commitments the poorest countries could get just 1% of the $650 billion in assistance
The G7 and G20 have signalled their support for the IMF to issue a new Special Drawing Rights (SDR) allocation of $650 billion to its members, to support government spending and economic stability. While this seems positive, any new allocation would be split according to voting rights at the IMF, which favour wealthier countries. As little as 1% would go to low-income countries. That $7 billion is clearly insufficient to meet needs.
We welcome G7 and G20 countries’ encouragement for the IMF to explore ways for governments to voluntarily re-allocate their share to the poorest countries. Yet it is disappointing that no country, or group of countries, has said they intend to make any re-allocation. There is also a risk that re-allocations could be counted as aid, providing a fig leaf for reductions in levels of aid to directly support children.
The jury is therefore still out on whether this policy response will do much to help the poorest countries. It will certainly be too late to provide relief for the majority of 2021, while the logistics of re-allocation are thought through. However, it will be essential that governments in the poorest countries play an active role in SDR discussions, as well as the IMF’s work on reallocation options, to enable the countries that need it most to plan effectively and make best use of these resources when they become available.
More effective debt relief could free up funds for investment in children
The G20 has played a leading role in supporting debt relief to the world’s poorest countries since the COVID-19 crisis began, including through its Debt Service Suspension Initiative (DSSI) and the Common Framework for Debt Treatment Beyond DSSI. Some G20 countries have also been significant donors to the IMF’s Catastrophe Containment Relief Trust, which provides debt relief to the world poorest countries from their IMF loans.
The G20 Finance Ministers Meeting however, provided no new proposals for making the DSSI and Common Framework more effective. While the DSSI was extended to the end of 2021, signalling that this is the ‘final’ extension was premature and not based on needs of the poorest countries. This decision needs an urgent rethink. Progress on the Common Framework also continues to be shrouded in mystery with no detailed public documentation on the agreed process or the countries that have applied – information essential for accountability.
The G20 could make these initiatives more effective by ensuring private creditor participation and helping resolve Government concerns about credit rating downgrades for requesting relief. One tangible step in in the right direction would be to announce that legislative options are being explored to support private creditor engagement. The UK government did just this in 2010 The Debt Relief (Developing Countries) Act to support the Heavily Indebted Poor Countries initiative.
Scaling up aid and ensuring it is transformative
Even with improvements, short and long term transformative aid will be essential to fill the huge financing gap for children growing up in the world’s poorest countries. G7 and G20 communiques signalling their support to an early replenishment of the World Bank’s International Development Association (IDA) is welcome news. The 20th IDA replenishment has the potential to triple donor contributions and substantially increase investment in children. Moving forward it will be critical that this initial support is matched in financial contributions to enable IDA to scale up support to the world’s poorest countries over the next four years.
Recent OECD’s data also presents a positive picture. Broadly aid flows were maintained by G7 and G20 governments through 2020, with some notable exceptions. Whilst the UK has announced cuts to its 2021 aid budget, this will hopefully continue to be the exception rather than the rule. This sustained level of international public finance, targeted in the right ways, will be critical in supporting the world poorest children through COVID-19 and in the recovery.
G20 actions need to start speaking louder than its words
Statements by the G7, G20, the IMF and World Bank, including at this year’s World Bank Spring Meetings all stressed the need to support the poorest countries. This is a good sign for children growing up in those countries and important recognition of the threat to global prosperity and security pose by COVID-19, its human and economic consequences. Yet with recent opportunities to improve the effectiveness of current initiatives missed and new initiatives at the drawing board stage these statements ring hollow. COVID-19 recovery does not sit on the shoulder of the G20 alone but there are tangible actions – non-financial and financial – that need their leadership to provide for the world’s poorest children need now, and in the years ahead.
