Author: Development Matters

Enjeux et défis du financement du développement dans la zone de l’Union économique et monétaire ouest-africaine post-COVID-19

Development Matters Africa, Building resilience, Français, Reviving international co-operation , , ,

Par Alain Tchibozo, Chef Economiste, Banque Ouest Africaine de Développement – BOAD

Endettement accru par les dépenses liées à la Covid-19

Le recours à l’endettement pour financer les plans de riposte et de relance économique explique principalement le fait que le déficit budgétaire des pays de l’Union Économique et Monétaire Ouest Africaine (UEMOA) se soit accru. Au plan des finances publiques, même en tenant compte d’un redémarrage de l’activité autour de 5.5% cette année (contre 1,5% en 2020), le déficit budgétaire global représenterait en 2021 près de 5,0% du PIB, après 5,4% en 2020. L’accumulation de déficits publics liés au financement de dépenses de fonctionnement des États apparaît de fait comme le principal facteur d’endettement public. Or la détérioration des finances publiques restreint l’accès futur des États à de nouveaux financements. En 2021, le service de la dette intérieure (paiement des intérêts et amortissement du principal) représentera plus de 50% du service total de la dette dans sept des huit États membres de l’UEMOA. En outre, la part des recettes publiques consacrée au service de la dette représente depuis 2020 plus d’1/3 des recettes totales dans sept États. Aussi, la question de la soutenabilité de la dette sera un enjeu crucial pour les États de la zone ces prochaines années.

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What is Development in Transition? A blog compilation

Development Matters Development in Transition
A country’s level of development and its level of income are often seen as synonymous. Many, thus, understand development as poorer countries “catching up” with richer ones. Once the poorer countries catch up, they cease to be “developing” and become “developed”. A closer look, however, reveals a different story. First, development is more complex than getting from A to B: it is a continuous and never-ending process that is even reversible. It follows a wide diversity of pathways depending on a country’s specific geography and history. Second, the emergence of the Sustainable Development Goals (SDGs) reflects the fact that development has multiple economic, social and environmental dimensions, beyond income. Moreover, and as the COVID-19 crisis has illustrated all too well, shocks have become increasingly global in our hyper-connected world, reflecting the interdependence amongst national, regional and international levels.

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International co-operation practices and frameworks have not always recognised the multidimensional nature of development and the changing global context. We need a new approach to international co-operation and development, within a multilateral system that is able to take on increasingly shared global challenges whilst accounting for countries’ domestic realities and citizens demands. The global community must also support the design of national development strategies that are aligned with global goals and respond to the origins of increasing discontent. For several years now, the Development Centre has been pushing this paradigm shift forward through its work on Development in Transition (DiT), gathering countries at all levels of development around the same table and across a diverse range of policy communities, recognising the multidimensional and complex nature of development. A central premise of our work is that economic growth is not a good measure of human wellbeing and development. We need multidimensional indicators that enable us to measure what we treasure – people’s wellbeing and the health of our planet – beyond GDP.

The pandemic has exacerbated pre-existing inequalities and vulnerabilities among and within countries, exposing the flaws of a multilateral system that had already failed to address these issues after the global financial crisis of 2007-2008. We need a new model consisting in strategies and reforms that go beyond reconstruction and rebuilding, focusing instead on transforming globalisation and renewing the efforts and tools of our multilateral system to benefit the many rather than the few. We need to fundamentally rethink how countries – at all levels of development – interact with one another to design better policies, practices and partnerships adapted to the changing global landscape.

This compilation gathers a selection of blogs contributing to the Development in Transition framework since its emergence to lessons that we can begin to draw from the pandemic. The first blog sets the foundations of the approach, outlining the new metrics, partnerships and tools to shift from top-down, donor-recipient ties to inclusive co-operation among equals, reflecting the current global landscape. The second part of this compilation looks at the issue of graduation, demonstrating that the trajectories of developing countries are far from guaranteed linear paths. As countries are sometimes “rushed to graduate” from aid based on their GDP per capita, and despite still facing significant vulnerabilities, they are confronted with an array of challenges that can erode and even reverse hard-won development gains. The authors depict these challenges and offer solutions – through both national efforts and international support – to prevent countries from falling into the so-called “middle-income trap”. In the third part, the authors focus on the COVID-19 crisis, and its catalyst effect, exposing the failures of the multilateral system to respond to a crisis on a planetary scale and accelerating the need to reform and shift towards new sustainable and inclusive development models that strengthen
countries’ and communities’ resilience against systemic shocks, driven by principles of solidarity and co-responsibility among and between developed and developing countries.

Mario Pezzini
Director of the OECD Development Centre & Special Advisor to the OECD Secretary General on Development

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COVID-19 is a developing country pandemic

Development Matters Building resilience, Covid-19

By Indermit Gill, Nonresident Senior Fellow at Brookings and Philip Schellekens, Senior Economic Advisor at International Finance Corporation (World Bank Group)

“Has global health been subverted?” This question was asked exactly a year ago in The Lancet. At the time, the pandemic had already spread across the globe, but mortality remained concentrated in richer economies. Richard Cash and Vikram Patel declared that “for the first time in the post-war history of epidemics, there is a reversal of which countries are most heavily affected by a disease pandemic.”

What a difference a year makes. We know now that this is actually a developing-country pandemic—and has been that for a long time. In this blog, we review the officially published data and contrast them with brand new estimates on excess mortality (kindly provided by the folks at the Economist). We will argue that global health has not been subverted. In fact, compared to rich countries, the developing world appears to be facing very similar—if not higher—mortality rates. Its demographic advantage of a younger population may have been entirely offset by higher infection prevalence and age-specific infection fatality.

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The role of foundations in supporting sustainable peace

Development Matters New social contract , ,

By Sandra Breka, Member of the Board of Management, Robert Bosch Stiftung

The level of peace around the world in 2020 declined for the ninth time in twelve years. The coronavirus pandemic has led to a decrease in overall conflict levels, but roughly 120,000 people were killed by political violence and 45.7 million were internally displaced in 2020. Violent conflict has a profound impact on economies and impedes the reduction of poverty and hunger. Violence cost the world $14.5 trillion in economic activity in 2019 according to the Institute for Economics and Peace. 

The effects of violent conflict are devastating – and remain neglected by philanthropy. In 2020, only one percent of philanthropic funding supported peace and security, according to the non-profit sector tracker Candid. The share is even smaller according to OECD data, with only 0.11% of total philanthropic funding in 2019 dedicated explicitly to conflict, peace and security in developing countries.

There are multiple reasons for this: private foundations considered peacebuilding too political, too short on hard evidence on successes and too difficult to measure, according to Candid. Despite the persistent call for multi-stakeholder approaches to global issues, many philanthropic organisations also perceived it as an area reserved to governments and other official donors, and beyond the mandate and means of private foundations or civil society groups.

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The morning after

Development Matters New social contract , ,

By Pablo Ferreri, Public Accountant and former Vice Minister of Economy and Finance of Uruguay

Today, more than a year into the pandemic, we are still witnessing a humanitarian drama on a global scale. Mass vaccination offers a glimmer of hope at the end of the tunnel; however, that light is much further away for developing countries. While we see developed countries moving closer to herd immunity, we also see huge lags in the rest of the world. Moreover, beyond the health drama, the ensuing social and economic crisis will persist for a long time to come. We must focus on “the morning after”, as the health crisis recedes and as vaccination progresses. The morning after the pandemic ends, we will be left with an impoverished and, above all, much more unequal global economy.

Recovery to pre-pandemic levels of global gross domestic product can probably be achieved relatively quickly, but the effects on inequality will be much more long lasting. There will be clear losers in each society, with the poorest being hardest hit. Developing countries will suffer the most severe consequences, as their ability to return to pre-COVID levels of activity and wealth will be severely limited. To get an idea of the magnitude of this crisis, it is enough to recall a recent UN report calling it the worst recession in 90 years, resulting in the loss of 114 million jobs and pushing some 120 million people into extreme poverty. Moreover, by the time the market is in a position to reabsorb many of those who have lost their jobs, their skills will be outdated.

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Regularisation of informal settlements in Latin America: when civil society influences policy-making processes

Development Matters Latin America and the Caribbean, New social contract , ,

By Felipe Bosch, Editor at Le Grand Continent and Co-founder of the Groupe d’études géopolitiques’ Americas Programme

The pandemic has shed light on the unavoidable need for concrete answers to the challenges of urban informality. The “best practices” discourse tends to oversimplify policy-making processes aimed at providing such answers. While regularisation policies are mainly associated with technical prescriptions imposed from a top-down perspective by international organisations, a detailed study of them in Latin America, based on a comparative case study of Mexico and Argentina[1], elucidates how bottom-up solutions to development problems might arise.

It is true: since the 1970s, through their recommendations, international organisations have had an incredible influence on policy-making processes for the regularisation of informal settlements. With the rise of neoliberal restructuring, these processes evolved from an exclusive focus on granting legal security of tenure to comprehensive packages of urban integration measures. However, it is essential to understand regularisation policies at the national level in relation to their specific socio-political contexts; in other words, to understand them as governance strategies. As such, the challenges of urban informality acquire a privileged position on the public and political agenda when threats emerge to the political system’s stability and/or when the latter endures low levels of legitimacy. It is possible to discern how civil society might take an active role (or not) in (re)formulation by building an initial theoretical model of the fragmented and conflictive institutional environments in which these kinds of policies are constantly (re)formulated.

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Do resource rich economies have better or worse human development outcomes?

Development Matters Natural Resources, New social contract ,

By Antonio Savoia, Senior Lecturer (Associate Professor) at the University of Manchester and a Non-Resident Senior Research Fellow at UNU-WIDER and Kunal Sen, Director of UNU-WIDER

Although increasingly challenged, we often hear that being resource rich can adversely affect growth prospects. Here we concentrate instead on a lesser-known aspect: how resource rich economies fare in terms of education, health, income inequality and poverty. The IMF classifies over 50 developing and emerging economies as resource rich. Many are in Africa, where a significant share of the world’s poor lives. With the increasing prices of many internationally traded commodities in the post-COVID recovery, resource revenues could provide a welcome boost to development spending for such governments.

A look at the data suggests that countries with greater income from natural resources do not seem to have a clear relationship with human development outcomes. The scatter plots in the figures 1-3 below show that there is a weak negative correlation for education and health outcomes and no correlation for poverty and inequality measures. The data also show significantly varying experiences among resource rich countries. For example, in Figure 1, Chad and Malaysia have very similar levels of resource rents as a ratio of GDP, but Malaysia’s school enrolment rate is over 70 percent while the corresponding figure for Chad is approximately 20 percent. Likewise, Somalia and Egypt have similar levels of resource abundance, but Egypt’s under-five mortality rate is less than 30 per 1,000 live births, while the corresponding figure for Somalia is about five times bigger (Figure 2). This suggests that countries with similar levels of resource rents can end up with significantly different achievements in terms of poverty, inequality, health, and education. The challenge is to explain why.  

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Divergent recoveries from COVID-19 in Africa require intentional action

Development Matters Africa, Building resilience, Covid-19, New social contract ,

By Anzetse Were, Senior Economist FSD Kenya

Accra, Ghana, during regional lockdown, March 2020. Photo: Shutterstock

The COVID-19 pandemic has had divergent impacts within and between economies. 2021 is already being defined by multispeed and divergent recoveries. Rich economies with USA in the lead, and China, are set for a strong recovery, mainly linked to their willingness to support incomes and deploy unprecedented fiscal and monetary support and quick COVID-19 vaccine rollouts. Low-income countries however face grimmer economic prospects due to limited access to COVID-19 vaccines and weak public finances; they will suffer more significant medium-term losses, especially affecting countries that rely on tourism and commodity exports, and those with limited policy space to respond.

In Africa, the AfDB estimates that real GDP contracted by 2.1% in 2020 with projected growth at 3.4% in 2021. Although all African economies have been affected by the pandemic, tourism-dependent economies, oil-exporting economies and other-resource intensive economies have been hit especially hard. Within countries, the sectoral impacts of COVID-19 have been varied, and women continue to be disproportionately affected by the socio-economic effects of the pandemic. This has led to divergent impacts at sector, firm and household levels. Many African households have had to resort to coping mechanisms such as reducing food consumption, dipping into savings, selling assets, looking for new forms of work, and accruing debt, with millions falling into poverty.

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COVID-19 impact on higher education in Africa

Development Matters Africa, Building resilience, Covid-19, Education, New social contract , ,

By Peter Koninckx, Strategic and Commercial Advisor, Cunégonde Fatondji, Analyst Intern, and Joel Burgos, Senior Project Manager, ShARE

Beyond the death toll and illness of millions of people due to COVID-19, businesses, healthcare, culture and education have had to cope with severe disturbances. But in our opinion, one could argue that higher-education students are amongst the most affected populations, particularly those in Africa. Although Africa is the continent with the least reported cases, the closure of higher education institutions was more widespread, and mitigation measures less effective than in other regions, according to a survey we conducted with more than 165 students across 21 African countries. No quick-fix solution exists, but the current crisis has highlighted the weaknesses in higher education in Africa, indicating where governments, international institutions, NGOs, and the private sector should focus their efforts.

Strong initial reaction to the COVID-19 crisis…

According to the Association of African Universities (IAU) Global Impact Survey on COVID-19, university closures in Africa in response to the pandemic were very effective: 77% of African universities compared to around 55% in Europe, Asia, and the Americas. However, while the percentage of higher education institutions where teaching was entirely cancelled remains low in all other regions (~3%), in Africa it is currently reported to be at 24%. Furthermore, over 40% of institutions in Africa were still developing alternative solutions at the time of the study, while other regions had already implemented them. Based on our own study, 88% of the surveyed students said that their school had discontinued in-person classes because of COVID-19.

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Migración urbana y COVID-19: Las ciudades están en la primera línea de una respuesta inclusiva y de la recuperación

Development Matters Migration, New social contract, Reviving international co-operation , ,

Por Samer Saliba, Líder de Proyectos, Mayors Migration Council1

Foto: Manoej Paateel / Shutterstock

Read this blog in English

La comunidad internacional no está haciendo suficientes esfuerzos para apoyar económicamente a quienes más hacen por las personas migrantes, refugiadas y desplazadas durante la pandemia global: los Gobiernos de las ciudades. Aunque numerosas Alcaldías tienen el mandato de atender a las personas en situación de vulnerabilidad, tales como migrantes y residentes desplazados, frecuentemente las ciudades no cuentan con suficientes recursos económicos para responder a las crecientes necesidades de quienes van llegando. Asimismo, los Gobiernos locales de las ciudades han dejado de percibir ingresos debido a los impactos económicos del COVID-19, lo cual este año limita aún más su capacidad de brindar servicios fundamentales a los residentes. Según algunas estimaciones, los Gobiernos de las ciudades experimentarán una pérdida de ingresos de hasta un 25 % en el 2021, precisamente cuando necesitan incurrir en un mayor gasto para impulsar la recuperación y para atender a una población que crece continuamente. En una encuesta reciente, 33 funcionarios a cargo de las finanzas municipales de 22 países de todos los continentes expresaron que ya se observa una disminución del 10 % en el ingreso total y un aumento de aproximadamente 5 % en el gasto. Este “efecto tijera” de los ingresos y gastos de los Gobiernos locales tendrá un mayor impacto en las ciudades de países en desarrollo. Las ciudades africanas, por ejemplo, podrían dejar de percibir hasta un 65 % de sus ingresos en el 2021.      

Si bien la comunidad internacional está cada vez más atenta a las finanzas municipales en relación con el cambio climático, el desarrollo sostenible y el desarrollo urbano en general, no puede decirse lo mismo respecto a la migración y al desplazamiento urbanos. Pocos mecanismos de financiamiento municipal se centran exclusivamente en la atención de personas migrantes y desplazadas en las urbes, a pesar de que la mayoría de ellas reside en las ciudades. Además, muchas veces las agencias donantes con baja tolerancia al riesgo no toman en cuenta a los Gobiernos de ciudades en países de medianos y bajos ingresos.  Atendiendo a estas necesidades no satisfechas de las ciudades, mi organización, el Mayors Migration Council (MMC), lanzó recientemente el Fondo de Ciudades Globales para una Respuesta Inclusiva a la Pandemia, con el fin de apoyar a cinco Alcaldías en la implementación de programas de respuestas inclusivas y recuperación diseñados por ellas.

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