The International Monetary Fund has said low-income developing countries (LIDCs) entered the pandemic in a vulnerable position and faced the prospect of their progress in poverty reduction over the past seven to 10 years being wiped out.
Growth, which averaged 5% in 2019, was likely to come to a standstill this year, the IMF said, adding that previous pandemics had left permanent scars.
“LIDCs entered the Covid-19 crisis in an already vulnerable position – for example, half of them suffered high public debt levels,” the IMF said. “Since March, LIDCs have been hit by an exceptional confluence of external shocks: a sharp contraction in real exports, lower export prices, especially for oil, less capital and remittances inflows, and reduced tourism receipts. Despite the best efforts of LIDC governments, lasting damage seems unavoidable in the absence of more international support. Long-term ‘scarring’ – the permanent loss of productive capacity – is a particularly worrisome prospect.”
Scarring from past pandemics had included high death rates, worse health and education outcomes leading to weaker future earnings; a depletion in savings and assets that result in the closure of firms; and a legacy of debt that depressed lending to the private sector.
The IMF said that in the aftermath of the 2013 Ebola outreak, Sierra Leone never recovered to its pre-crisis growth path.
“Scarring would trigger severe setbacks to LIDCs’ development efforts, including undoing the gains in reducing poverty over the last seven to 10 years, and exacerbating inequality, including gender inequality,” the IMF said.