{ "title": "COVID-19: Without Help, Low-Income Developing Countries Risk a Lost Decade", "publication": "IMF Blog, August 27, 2020", "sourceUrl": "https://www.imf.org/en/blogs/articles/2020/08/27/blog-covid-19-without-help-low-income-developing-countries-risk-a-lost-decade", "canonical": "https://www.imf.org/en/blogs/articles/2020/08/27/blog-covid-19-without-help-low-income-developing-countries-risk-a-lost-decade", "overlayPath": "/en/blogs/articles/2020/08/27/blog-covid-19-without-help-low-income-developing-countries-risk-a-lost-decade/index.md", "summary": "While the COVID-19 crisis is sending shockwaves around the globe, low-income developing countries (LIDCs) are in a particularly difficult position to respond.", "sections": [ { "heading": "Key findings and short-term outlook", "content": "- Growth in LIDCs is likely to come to a standstill this year, compared to growth of 5 percent in 2019.\n- Absent a sustained international effort to support them, permanent scars are likely to harm development prospects, exacerbate inequality, and threaten to wipe out a decade of progress reducing poverty.\n- The International Monetary Fund has provided emergency financing to 42 LIDCs since April." }, { "heading": "Multiple external and domestic shocks", "content": "- LIDCs entered the COVID-19 crisis in an already vulnerable position—for example, half of them suffered high public debt levels.\n- Since March, LIDCs have been hit by a confluence of external shocks:\n - sharp contraction in real exports;\n - lower export prices, especially for oil;\n - less capital and remittances inflows;\n - reduced tourism receipts.\n- Remittances:\n - exceeded 5 percent of GDP in 30 (out of 59) LIDCs in 2019.\n - Between April and May, they fell by 18 percent in Bangladesh, and by 39 percent in the Kyrgyz Republic, compared to the previous year.\n- Domestic containment and mobility:\n - From mid-March, many LIDCs implemented international travel controls, school closures, cancelation of public events and gathering restrictions.\n - Mobility—a proxy for domestic economic activity—declined sharply with further retreats as workplace closures, stay-at-home orders, and internal movement restrictions were implemented.\n - From late April/early May, containment measures have gradually loosened and mobility has recovered, but has yet to return to pre-crisis levels." }, { "heading": "Managing trade-offs with scarce resources and policy responses", "content": "- Constraints in LIDCs:\n - Large segments of the population live at near subsistence levels, making strict containment measures hard to sustain.\n - Large informal sectors, weak institutional capacity, and incomplete registries of the poor hinder targeted assistance.\n - Governments have only limited fiscal resources to support vulnerable populations.\n- Impact on food security: Recent surveys across 20 African countries reveal that more than 70 percent of respondents risk running out of food during a lockdown that lasts more than two weeks.\n- Policy stance:\n - Short, sharp front-loading of containment flattened the infection curve and bought time to build health-sector capacity.\n - LIDCs expended less fiscal support overall than advanced or emerging market economies, but the share of additional spending dedicated to health has been higher.\n - As broad-based containment becomes difficult to sustain, LIDCs should transition to more targeted measures, including social distancing and contact tracing (Vietnam and Cambodia cited as examples).\n - Policy support should focus on supporting the most vulnerable, including the elderly, and on limiting the health crisis’s long-term fallout.\n- Education protection: Protecting education is critical to avoid creating a “COVID generation who loses out on schooling and whose opportunities are permanently damaged.” (quote from a recent Letter to the International Community by a group of eminent persons)\n- Technology and administrative innovation examples:\n - Rwanda is leveraging its digital finance infrastructure to discourage the use of cash.\n - Togo employs the voter registration database to channel assistance to vulnerable groups." }, { "heading": "Long-term scarring and development risks", "content": "- Scarring mechanisms include:\n - mortality;\n - worse health and education outcomes that depress future earnings;\n - depletion of savings and assets that force firm closures—especially of small enterprises that lack access to credit—and cause irrecoverable production disruptions;\n - debt overhangs that depress lending to the private sector.\n- Historical precedent: In the aftermath of the 2013 Ebola pandemic, Sierra Leone’s economy never recovered to its pre-crisis growth path.\n- Potential consequences:\n - Scarring would trigger severe setbacks to LIDCs’ development efforts, including undoing the gains in reducing poverty over the last 7 to 10 years, and exacerbating inequality, including gender inequality.\n - The Sustainable Development Goals (SDGs) will be even more difficult to achieve." }, { "heading": "International support priorities and policy recommendations", "content": "- Priorities for the international community:\n 1. guaranteeing essential health supplies, including cures and vaccines when they are discovered;\n 2. protecting critical supply chains, especially for food and medicines;\n 3. avoiding protectionist measures;\n 4. ensuring that developing economies can finance critical spending through grants and concessional financing;\n 5. ensuring that LIDCs’ international liquidity needs are met, which requires International Financial Institutions to be resourced adequately;\n 6. reprofiling and restructuring debt to restore sustainability where needed, which, in many cases, may require relief beyond the G20/Debt Service Suspension Initiative; and\n 7. keeping sight of the United Nations' SDGs, including by reassessing needs when the crisis subsides.\n- Overarching conclusion: The COVID-19 pandemic will be defeated only when it and its socioeconomic consequences are overcome everywhere. Urgent action by the international community can save lives and livelihoods in LIDCs.\n\nSource: IMF blog “COVID-19: Without Help, Low-Income Developing Countries Risk a Lost Decade” (Daniel Gurara, Stefania Fabrizio, Johannes Wiegand), August 27, 2020.\n\n---\n\n\n References\n\n- عربي\n- 日本語\n- Português\n\nSource: https://www.imf.org/en/blogs/articles/2020/08/27/blog-covid-19-without-help-low-income-developing-countries-risk-a-lost-decade" } ], "bullets": [ "[Markdown version](/en/blogs/articles/2020/08/27/blog-covid-19-without-help-low-income-developing-countries-risk-a-lost-decade/index.md)", "[Structured JSON version](/en/blogs/articles/2020/08/27/blog-covid-19-without-help-low-income-developing-countries-risk-a-lost-decade/index.json)", "[Bundle manifest](/en/blogs/articles/2020/08/27/blog-covid-19-without-help-low-income-developing-countries-risk-a-lost-decade/bundle-manifest.json)", "Authors: Daniel Gurara, Stefania Fabrizio, Johannes Wiegand", "Published: August 27, 2020", "Growth in LIDCs is likely to come to a standstill this year, compared to growth of 5 percent in 2019.", "Absent a sustained international effort to support them, permanent scars are likely to harm development prospects, exacerbate inequality, and threaten to wipe out a decade of progress reducing poverty.", "The International Monetary Fund has provided emergency financing to 42 LIDCs since April.", "LIDCs entered the COVID-19 crisis in an already vulnerable position—for example, half of them suffered high public debt levels.", "Since March, LIDCs have been hit by a confluence of external shocks:", "Remittances:", "Domestic containment and mobility:", "Constraints in LIDCs:", "Impact on food security: Recent surveys across 20 African countries reveal that more than 70 percent of respondents risk running out of food during a lockdown that lasts more than two weeks.", "Policy stance:", "Education protection: Protecting education is critical to avoid creating a “COVID generation who loses out on schooling and whose opportunities are permanently damaged.” (quote from a recent Letter to the International Community by a group of eminent persons)", "Technology and administrative innovation examples:", "Scarring mechanisms include:", "Historical precedent: In the aftermath of the 2013 Ebola pandemic, Sierra Leone’s economy never recovered to its pre-crisis growth path.", "Potential consequences:", "Priorities for the international community:", "Overarching conclusion: The COVID-19 pandemic will be defeated only when it and its socioeconomic consequences are overcome everywhere. Urgent action by the international community can save lives and livelihoods in LIDCs.", "[عربي](https://www.imf.org/ar/News/Articles/2020/08/27/blog-covid-19-without-help-low-income-developing-countries-risk-a-lost-decade)", "[日本語](https://www.imf.org/ja/News/Articles/2020/08/27/blog-covid-19-without-help-low-income-developing-countries-risk-a-lost-decade)", "[Português](https://www.imf.org/pt/News/Articles/2020/08/27/blog-covid-19-without-help-low-income-developing-countries-risk-a-lost-decade)" ], "alternates": { "markdown": "/en/blogs/articles/2020/08/27/blog-covid-19-without-help-low-income-developing-countries-risk-a-lost-decade/index.md", "json": "/en/blogs/articles/2020/08/27/blog-covid-19-without-help-low-income-developing-countries-risk-a-lost-decade/index.json", "bundleManifest": "/en/blogs/articles/2020/08/27/blog-covid-19-without-help-low-income-developing-countries-risk-a-lost-decade/bundle-manifest.json" }, "generatedAtUtc": "2026-08-27T16:16:15.791Z" }