How the Wealthy World Has Failed Poor Countries During the Pandemic
Despite pledges for debt relief and expanded programs, the World Bank and International Monetary Fund have delivered meager aid, say economists.
Women lined up to receive cash assistance in Hyderabad, Pakistan, earlier this month. Families have lost livelihoods and struggled to feed themselves in the pandemic.
Women lined up to receive cash assistance in Hyderabad, Pakistan, earlier this month. Families have lost livelihoods and struggled to feed themselves in the pandemic.Credit…Nadeem Khawar/EPA, via Shutterstock
Peter S. Goodman
By Peter S. Goodman
Nov. 1, 2020, 5:00 a.m. ET
LONDON — Like much of the developing world, Pakistan was alarmingly short of doctors and medical facilities long before anyone had heard of Covid-19. Then the pandemic overwhelmed hospitals, forcing some to turn away patients. As fear upended daily life, families lost livelihoods and struggled to feed themselves.
On the other side of the world in Washington, two deep-pocketed organizations, the World Bank and the International Monetary Fund, vowed to spare poor countries from desperation. Their economists warned that immense relief was required to prevent a humanitarian catastrophe and profound damage to global prosperity. Emerging markets make up 60 percent of the world economy, by one I.M.F. measure. A blow to their fortunes inflicts pain around the planet.
Wages sent home to poor countries by migrant workers — a vital artery of finance — have diminished. The shutdown of tourism has punished many developing countries. So has plunging demand for oil. Billions of people have lost the wherewithal to buy food, increasing malnutrition. By next year, the pandemic could push 150 million people into extreme poverty, the World Bank has warned, in the first increase in more than two decades.
But the World Bank and the I.M.F. have failed to translate their concern into meaningful support, say economists. That has left less-affluent countries struggling with limited resources and untenable debts, prompting their governments to reduce spending just as it is needed to bolster health care systems and aid people suffering lost income.
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“A lost decade of growth in large parts of the world remains a plausible prospect absent urgent, concerted and sustained policy response,” concluded a recent report from the Group of 30, a gathering of international finance experts, including Lawrence Summers, a former economic adviser to President Barack Obama, and Treasury secretary in the Clinton administration.
The wealthiest nations have been cushioned by extraordinary surges of credit unleashed by central banks and government spending collectively estimated at more than $8 trillion. Developing countries have yet to receive help on such a scale.
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The I.M.F. and the World Bank — forged at the end of World War II with the mandate to support nations at times of financial distress — have marshaled a relatively anemic response, in part because of the predilections of their largest shareholder, the United States.
During a virtual gathering of the two organizations this month, the U.S. Treasury secretary, Steven Mnuchin, urged caution. “It is critical that the World Bank manage financial resources judiciously,” he said, “so as not to burden shareholders with premature calls for new financing.”
The New York Times