COVID-19 Poses Formidable Threat for Fragile States in the Middle East and North Africa

IMF News, May 13, 2020

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Remittances represent 14 percent of GDP in fragile countries across MENA and are expected to tumble by 20 percent as global incomes fall.
Real GDP in these countries is expected to shrink by 7 percent in 2020, relative to average growth of 2.6 percent in 2019.
GDP per capita is projected to decline from $2,900 in 2018–19 to $2,100 in 2020.
Countries identified as fragile and in conflict situations include Afghanistan, Djibouti, Iraq, Lebanon, Sudan, and Somalia.
Countries already in active conflict include Libya, Syria, and Yemen.

COVID-19 will trigger a sharp drop in household incomes as export earnings suffer and social distancing reduces domestic activity.
Informal and low-skilled workers, including large internally displaced populations and refugees, are expected to be especially affected.
Poverty rates and economic disruption will worsen in the absence of a fiscal response, but the scope for such action is limited by already-scarce and fast-depleting resources.

Fragile and conflict countries in MENA suffer a shortage of medical doctors: 8 per 10,000 people compared to 14 in emerging market and developing economies.
These countries face a lack of hospital beds and limited access to handwashing facilities, drinking water, and sanitation.
Shortages of medical equipment, exacerbated by reduced imports and international competition, will strain health responses further.

The countries on the edge have 17.2 million internally displaced people and host a total of 2.7 million refugees.
Many displaced and refugee populations live in camps or precarious conditions where overcrowding and lack of proper sanitation and water could result in rapid virus spread.
Only 10 to 20 percent of refugees in Djibouti and Sudan are assured access to basic services (water, sanitation, handwashing).
High levels of food insecurity are compounded by transport restrictions and climate shocks such as droughts, floods, and a desert locust swarm affecting production and prices.

Swift international support is essential to provide critical medical equipment, increase health spending, and deliver social protection and economic support to lessen human hardship.
International assistance should help fragile countries allocate extra resources across communities to reduce the risk that unequal distribution fuels tensions, insecurity, and localized violence—as observed in countries affected by the Ebola outbreak.
A thoughtful distribution of resources reduces the risk that refugees or the internally displaced may be accused of spreading the disease.
The United Nations has begun mobilizing resources for a $2 billion response plan and has called for a global ceasefire to allow a proper medical response.

Along with other international financial institutions, the IMF is providing policy advice and support to help address the economic challenges.
Afghanistan, Djibouti, and Yemen are already benefitting from emergency financing and/or debt relief.

Immediate priorities:
- Provide critical medical equipment and scale up health spending.
- Deliver social protection and targeted economic support to protect livelihoods, especially for informal and low-skilled workers, internally displaced persons, and refugees.
- Support food security through measures to mitigate transport restrictions and climate-related production shocks.
Governance and conflict mitigation:
- Ensure equitable allocation of assistance across communities and political factions to reduce risks of heightened tensions, insecurity, and localized violence.
- Support global and local efforts toward a ceasefire to enable medical responses in conflict-affected areas.
Longer-term structural opportunities:
- Use crisis response to establish basic health and social protection capacities and better integrate refugees.
- Accelerate digitalization to improve transparency, public service efficiency, and tax administration.
- Promote increased formalization of the economy to improve future access to commodities, services, finance, and markets.
Policy rationale emphasized by IMF leadership:
- “Forceful action now will protect hard-earned progress on reforms in some countries and avoid a new humanitarian crisis, reducing the twin risk of future demands for international aid and increased refugee flows,” said Jihad Azour, Director of the Middle East and Central Asia Department.

IMF News — May 13, 2020.