The COVID-19 pandemic has created unparalleled disruption for the global health and development community. Organizations fighting infectious disease, supporting health workers, delivering social services, and protecting livelihoods have moved to the very center of the world’s attention. But they find their work complicated by challenges of access, safety, supply chain logistics, and financial stress like never before. The short-term implications of this global challenge are evident everywhere, however, the long-term consequences of the pandemic; how it will reshape health and development institutions, occupations, and priorities as well as the global economy and geopolitics are still difficult to imagine. In fact, every single day, people are losing jobs and income, with no way of knowing when normality will return. Small island nations that are heavily dependent on tourism, have empty hotels and deserted beaches. The International Labour Organization (ILO) estimates that 195 million jobs could be lost as a result of this global COVID-19 pandemic.
The global economy is invigorating for a recession as the COVID-19 pandemic has for the past few months, moved from Wuhan-China to the rest of the world especially the United States and Europe. As such, it is my candid opinion that there could be a diminution in foreign aid to less developed economies as the COVID-19 pandemic continues to damage the global economy and erodes the reserves of developed nations from where most of the aid flows.
For instance, according to the recently published Development Cooperation Report, some developing and underdeveloped nations received foreign aid totaling an average of about $1.79 billion from multilateral and bilateral donors, and international Non-Governmental Organizations (NGOs) in the 2018-19 fiscal year. Of the total aid, an average of about $1.57 billion was given by the multilateral and bilateral benefactors, whilst international NGOs contributed about $215 million. According to the report, bilateral donors accounted for about 60% of the foreign aid received by poor nations in the last fiscal year, and multilateral donors doled out the rest.
With the global economy bracing for a recession as the developed economies of the U.S. and Europe have become the epicenters of the pandemic after Wuhan, China, it is evidently clear that foreign aid from the developed economies and for that matter the multilateral agencies could go down, and individual contributions to charities could also shrink. There might be aid cuts to both the developing and underdeveloped nations due to the COVID-19 pandemic. But to what extent the assistance will diminish will only depend on how much economic impact the pandemic has on the economies of developed nations, and how much moral responsibility these nations will feel to help the poor nations. Nonetheless, it is my opinion that donor assistance through funds created for specific purposes, such as aid to promote green technology, might remain the same or possibly go up as such funds will be given for particular purposes only.
It is worth remembering that in 1970, the United Nations (UN) set a target for developed nations to contribute about 0.7% of their Gross Domestic Product (GDP) as development aid; however very few of these nations have been able to meet this goal. The COVID-19 pandemic crisis would give the developed nations a valid reason not to fulfill this commitment.
However, this may be, senior economists like Poshraj Pandey are of the strong belief that foreign aid from multilateral organizations such as the World Bank to developing and underdeveloped economies will not be affected by the pandemic. I, therefore, share a contrary view to this assertion because even if the World Bank decides to continue to provide aid to developing and underdeveloped nations, it wouldn’t be able to offer much in no time since the bank also gets its funding from borrowing on the international capital markets, which are obviously being hit badly by the pandemic.
Foreign aid is a key funding source for the development efforts of developing and underdeveloped nations. In the last fiscal year, official development aids constituted an average of about 24% to 45% of the national budgets of developing and underdeveloped economies, according to the Development Cooperation Report.
While developing and underdeveloped nations face a higher prospect of a slowdown in foreign aid receipts in post-COVID-19 pandemic periods, governments in these poor economies continue to have a hard time meeting their revenue collection or mobilization targets. This will make foreign funding even more vital in the post-COVID-19 pandemic periods. Bilateral and multilateral aids come mostly for infrastructure development, capacity development, social services (such as healthcare, education, sanitation, etc.) and poverty reduction. If aids meant for these purposes are cut, it will affect the growth and development efforts of developing and underdeveloped economies.
Although some developing and underdeveloped nations have adopted a policy of discouraging foreign aid for capacity development and directing more funding toward the infrastructure development, social services, and poverty reduction, building capacity has also become important as the provincial and local governments sectors of most of these poor nations lack the expertise to perform their constitutional duties. So an aid reduction in capacity development will not be good for these poor nations at this moment.
I also expect a fall in aid from international Non-Governmental Organizations. In fact, foreign NGOs have been working in partnership with local NGOs in the areas of Local Economic Development (LEC) and poverty reduction; and they are also providing support to service delivery, advocacy, raising awareness and strengthening accountability. I, therefore, believe that there will be a massive change in funding these landscapes in the post-COVID-19 pandemic periods. In addition, due to the impact on employment and incomes of the general populace in the developed economies, there might be a significant decline in the resources of international NGOs which depend on funds from individuals who contribute to charities.