Covid-19 in developing countries: secondary impacts Contents

4Economy and livelihoods

Public debt

46.On 30 March 2020, the UN warned of a “looming financial tsunami” for developing countries due to the covid-19 pandemic and the ensuing global recession.110 The International Monetary Fund (IMF) projected global growth at -4.4% in 2020 and stated that this reversed progress made since the 1990s in curbing global poverty and decreasing inequality.111 In October 2020, the UN DESA referred to covid-19 as a “high-debt, low-growth trap”.112

47.Contributors told us that high levels of public debt and falling government revenues could reduce public investment in healthcare systems. We heard that dwindling revenues from the export of commodities such as copper and oil (on which many low- and middle-income countries heavily depend), following the commodity price shock in 2014, and a sudden, record capital outflow from emerging markets in the early months of covid-19 have compounded the challenge of debt service payments for highly-indebted countries.113 Oxfam referred to the situation as the “twin crises of health and economy”.114

48.We heard broad calls for debt cancellation instead of debt relief.115 Tim Jones, Head of Policy at Jubilee Debt Campaign, told us that the cancellation of $500 million of debt service payments by the IMF for the most vulnerable countries was “a drop in the ocean”.116 Furthermore, while 73 lower-income IMF member states were eligible for a $5 billion suspension of debt service payments as part of the G20’s Debt Service Suspension Initiative (DSSI) in April 2020, $33 billion were still being paid, according to Mr Jones.117

49.Moreover, we heard that private lenders and English law play an important role in debt service payments. According to a coalition of UK NGOs, private lenders hold 27% of all foreign debts owed by the 73 countries eligible for the DSSI.118 In a written answer to a parliamentary question, John Glen MP, Economic Secretary to the Treasury, stated that 45% of all outstanding international sovereign bonds is governed by English law.119 Mr Jones told us that English law governs 90% of the international sovereign bonds owed by countries eligible for the DSSI, adding that “If they stop paying the debts, they get sued in UK courts”.120

50.To mitigate the looming economic crisis in highly indebted developing countries, the Government advocated for debt relief at a multilateral level.121 The FCDO wrote that “with UK support”, multilateral development banks were making over $200 billion available to governments and businesses over 15 months to stabilise the economy, support sustainable recovery and strengthen health systems.122 In his letter to campaigners for debt relief in July 2020, James Duddridge MP, Minister for Africa at the FCDO, wrote that the Government was committed to helping developing countries through UK contributions to the IMF’s Catastrophe Containment Relief Trust (CCRT), the DSSI, and by calling on private lenders to join the DSSI.123

51.We welcome the UK’s role in extending the G20’s Debt Service Suspension Initiative to 30 June 2021, the measure to temporarily suspend debt service payments for the poorest countries. As the majority of these outstanding debts are governed by English law, the UK Government is in a unique position to send a global message on debt service payments by suspending or cancelling repayments. We urge the Government to extend the Debt Service Suspension Initiative beyond June 2021 and to use its influence to persuade private lenders to join this scheme. Furthermore, the Government should consider options for the cancellation of debt and provide this Committee with the rationale behind its decisions on debt relief versus debt cancellation for low- and middle-income countries.


52.Covid-19 is significantly impacting the livelihoods of people in developing countries. Evidence by the WHO suggests that almost half of the global workforce of 3.3 billion people could lose their livelihoods.124 Global extreme poverty—i.e. the rate of people living on less than $1.90 per day—is set to rise in 2020 for the first time since 1998 according to the World Bank125 while global human development is “on course to decline” for the first time since the measurement’s inception, according to the UN Development Programme (UNDP).126 The World Bank estimates that the total number of people living in extreme poverty could rise to 150 million by 2021127 while UN DESA estimated that 71 million people could be pushed back into poverty in 2020.128 Furthermore, eight out of ten “new poor” are projected to be in middle-income countries by the World Bank.129

53.We were told by Oxfam and Lamis al-Iryani, Head of Monitoring and Evaluation at the Social Fund for Development—Yemen, that the secondary impacts of covid-19 on income are a greater concern for vulnerable groups than the virus itself.130 This was reiterated by Donal Brown who told us that

“the majority of our target group are less concerned with Covid, per se. The health crisis is not really what they worry about. They will often say, “We have been through Ebola. We have been through much worse things. We have malaria, and so on. Covid is just another issue for us, and in some ways not that big an issue”. What really concerns them is the impact on their livelihoods and the impact on, literally, their day-to-day survival.”131

Impact upon farmers and agricultural workers

54.Among those with their livelihoods under threat are small-holder farmers and agricultural workers. Around 63% of the world’s poorest people work in the agricultural sector, with the majority of them working on small farms, according to the UN International Fund for Agricultural Development (IFAD).132 In Bangladesh, movement restrictions to curb the spreading of covid-19 had a severe impact on agricultural supplies as farmers could not get seeds, fertilisers or vaccines for their livestock or input for the planting season because “literally things had shut down”, according to Donal Brown.133 Dr Louisa Cox, Director of Impact at the Fairtrade Foundation, told us that, due to supply chain disruptions, flower growers in Kenya were “chucking out about 50 tonnes of flowers every day” as they could not get their produce out of the country.134 She added that flower plantations in Kenya were seeing losses of around €300,000 per day as their sales fell to around 20% of pre-covid-19 levels.135

55.According to the Fairtrade Foundation, market disruptions affect women in the agricultural sector particularly as they already often earn less than men in the sector.136 Women comprise 43% of the agricultural labour force on average in low-and middle-income countries and account for two-thirds of the 600 million poor livestock keepers in the world according to estimates by the UN’s Food and Agriculture Organization (FAO).137 Further, 79% of those women who are economically active in the poorest countries list agriculture as their top source of income.138

Impact upon other low-income workers

56.The pandemic highlights the exposure of workers in the informal sector and of low-income, self-employed workers to a sudden loss of income, and the weaknesses of current social protection systems in developing countries. According to the UN World Food Programme (UN WFP), 55% of poor people worldwide do not have access to a safety net–be it in the form of reliable cash transfers, food, in-kind support, subsidies or service fee waivers.139 UN SDG target 1.3 states that signatories should

“implement nationally appropriate social protection systems and measures for all, including floors, and by 2030 achieve substantial coverage of the poor and the vulnerable.”140

57.Such is the secondary impact of covid-19 that even people who are considered extremely poor but survive due to daily wages or selling their produce are now at risk of becoming a case for humanitarian assistance.141 The Fairtrade Foundation and International Justice Mission UK told us that the pandemic-induced recession also increased the risk of forced labour and child labour, especially in the agricultural sector.142

58.We heard calls for the expansion of social protection schemes to support people that do not receive government assistance and to build the economic resilience of vulnerable groups.143 Contributors told us that in lower-income countries with less pronounced social security schemes, donor-funded livelihood support schemes,144 remittances,145 savings and access to credit from suppliers146 and from financial institutions147 provided essential safety nets for vulnerable groups. We heard that people with disabilities, refugees and internally displaced persons, the elderly, and women, adolescents and children were often among the most vulnerable as they were often already overly represented in the informal sector.148 Furthermore, contributors told us that access to credit and remittances was becoming more difficult due to the recession, prompting people to increasingly use their savings to make ends meet.149

UK ODA spending on mitigating impacts on livelihoods

59.UK aid partners are trying to mitigate covid-19’s secondary impact on livelihoods. We heard of heartening interventions on the ground. In Togo, repurposing of UK ODA has helped the NGO Compassion UK train mothers in the production of hygiene masks to protect communities and provide them with further income-generating skills during the pandemic.150 Furthermore, the Social Development Fund-Yemen, the country’s largest national development agency, benefits from £44.48 million in UK ODA to co-run the £75 million “Yemen Social Protection Programme” (YeSP). YeSP includes the provision of microfinance to small and medium-sized enterprises, cash-for-work programmes providing temporary livelihoods for the development of local areas and cash-based social safety nets for vulnerable groups.151

60.Given the importance of supporting farmers in developing countries, we welcome the FCDO’s initiative entitled the “Vulnerable Supply Chains Facility” (VSCF). To mitigate covid-19’s impact on supply chains and vulnerable workers in the agriculture and garment sectors, the FCDO co-funds the £6.85 million “Vulnerable Supply Chains Facility”, a joint intervention between the FCDO, UK private businesses, and civil society organisations.152 Launched in August 2020, this programme aims to help nearly one million people by increasing the capacity of vulnerable workers and suppliers to respond to covid-19’s economic and social impact.153 Grant holder and co-designer the Fairtrade Foundation received £700,000 from the FCDO and £780,000 from commercial partners and implements the programme in Ghana and Kenya.154 Dr Louisa Cox told us that the VSCF reached 25,000 out of 800,000 insecure cocoa farmers in Ghana and 6,000 out of 150,000 insecure flower workers in Kenya.155 Hence, although the mere launch of such a programme was a good first step, it needed to be scaled up significantly as “the need is huge.”156

61.In her article on covid-19 in the Daily Telegraph on 9 April 2020, the Rt Hon Anne-Marie Trevelyan MP wrote that “The epidemic’s socio-economic consequences will be devastating” and that “We must ensure populations hit the hardest get immediate assistance to develop social protection as well as accessible, quality health and nutrition services.”157 Both DFID and the FCDO told us that they sought to strengthen social protection systems.158 In April 2020, DFID stated that their response was intended to help governments and partners “maintain and scale up social protection systems including social safety nets and humanitarian cash transfers”.159 In October 2020, the FCDO told us that they were “protecting the most vulnerable from the economic impacts of COVID-19 through our social protection programmes and are supporting jobs and supply chains”.160 At our oral evidence session on 24 November 2020, Rachel Turner, Director of Economic Development at the FCDO, told us that the FCDO has “particularly tried to protect the people who were immediately and seriously affected, as their livelihoods unravelled during the crisis”, in part through the adaptation of 25 social protection programmes, continued support for small-scale farmers in accessing markets and input, and support for parts of the “new urban poor”.161

62.Livelihoods in developing countries have been devastated by the pandemic. Workers in economically precarious sectors, such as agriculture, are especially vulnerable to the economic shock and instability caused by covid-19. We believe that protecting these jobs is central to enabling people to lift themselves out of poverty. We request that the FCDO write to us on a quarterly basis, outlining how the Government’s economic and trade interventions which form part of the Strategic Framework for ODA will strengthen the economic resilience of low-income groups in developing countries. We ask the Government to fund long-term, multi-year programmes, designed to foster employment opportunities, and ask the FCDO to work closely with recipient countries, aid partners and local NGOs in identifying those activities which have the greatest, long-term beneficial impact on the livelihoods of vulnerable people, and to allocate resources accordingly to support such activities.

Food security

“Communities have told Oxfam that they expect to die of hunger before getting sick from covid-19.” (Oxfam GB)162

63.Covid-19 is exacerbating the ongoing food insecurity in developing countries.163 The number of people going hungry has gradually increased in the past years with nearly 690 million people being undernourished in 2019, according to the UN.164 It further estimated that up to 132 million more people could suffer from chronic food insecurity in 2020 due to covid-19.165

64.Malnutrition is a growing concern for vulnerable groups.166 Bond told us that “more people are eating less, and less often, cutting back on meat, fresh fruit and vegetables, selling livestock or other assets, or going into debt”.167 According to Concern Worldwide, “Families are faced with two choices: to change either the amount or type of food consumed”.168 Concern Worldwide also told us of an instance where parents were diluting milk for children to stretch the amount for longer and of a man in Bangladesh on low-income who stated that “I am in a lot of trouble with the children. I can’t feed them what I could before, not even half”.169

65.In Yemen, the largest humanitarian crisis in the world according to the United Nations Children’s Fund (UNICEF),170 affordability of food is a great concern. Lamis Al-Iryani told us that more than 14 million people in Yemen “don’t know where their next meal is coming from”.171 Sultana Begum, Advocacy Manager in Yemen for the Norwegian Refugee Council, told us that “there is food in the markets, but people simply cannot afford to buy the food”.172 According to the International Rescue Committee, the price of the minimum food basket increased by up to 35% between the outbreak of covid-19 and July 2020, prompting low-income families to borrow money or apply distress measures such as reducing their food intake or sending children to work.173

66.Contributors were concerned about the Government’s response to the growing food crisis. Dr Louisa Cox said that the regular meetings on covid-19 between UK NGOs and DFID, and later the FCDO, which were chaired by Baroness Sugg CBE, then Parliamentary Under-Secretary of State for Overseas Territories and Sustainable Development, had been focused on public health rather than food security.174 Donal Brown told us that the food and livelihood crisis was a “bit of a forgotten area” despite the likelihood of more people dying from the impact of the food and livelihood crisis than from the direct impact of covid-19.175 His worry was that “we address a health crisis, and then end up with a food crisis and a livelihoods crisis”.176

67.We were told that covid-19 challenges the effective delivery of nutrition programmes as they are usually provided through health services and involve gatherings of large groups of people.177 The pandemic thereby increases the risk of stunting children178 and could derail efforts to reduce the number of stunted children to 82 million by 2030.179 Contributors were concerned about a potential “cliff edge” in UK financing for nutrition programmes from 2021,180 and urged the Government to renew its commitments to nutrition-sensitive programmes for 2021–2025, which expired at the end of 2020.181

68.Furthermore, witnesses called for the expansion of cash-based interventions. Sultana Begum told us that cash support was an effective way of enhancing people’s food security as it could be used to access medical care and education, and thereby gave people more options to respond to their individual contexts.182 Gwen Hines said that “cash transfers are a very effective way” to respond to the ongoing crisis of poverty and malnutrition,183 something that the International Rescue Committee echoed, adding that “having cash would mean people affected by the covid-19 crisis would not be forced to sell their few assets or fall further into debt”.184

UK ODA spending on food security

69.The FCDO told us that “as part of the wider £1 billion spend, we have committed £145 million to UN appeals, including £15 million to the World Food Programme”.185 To build resilience among vulnerable people and reduce the rate of malnutrition, the FCDO are also adapting programmes in agriculture, nutrition and food security.186 Interventions include the adaptation of their “Commercial Agriculture for Smallholders and Agribusiness programme” to increase the resilience of smallholder farmers, and co-chairing the Global Agriculture and Food Security Programme (GAFSP), a global financing instrument to increase investment in agriculture and food security.187

70.One of the FCDO’s new seven global priorities for UK ODA, announced in late November 2020, is to spearhead a stronger international response to famine.188 On the day of the creation of the FCDO, the UK Government announced two measures to mitigate covid-19’s impact on food security: the appointment of Nick Dyer, the former Permanent Secretary at DFID, as the first UK Special Envoy for Famine Prevention and Humanitarian Affairs; and a £119m “aid package” to mitigate covid-19’s impact on food security and child mortality.189 In her evidence, Ms Morton stated that Nick Dyer was working closely with multilateral organisations and NGOs to “prevent an escalation”.190 His first tasks included building consensus with implementing partners and other donor governments and “pressing” others to match UK funding for programmes on food security.191 The measures come ahead of the UK’s presidency of the G7 and are meant to strengthen the UK’s capacity to build consensus among governments in their responses to covid-19.192

71.While we welcome the appointment of a Special Envoy for Famine Prevention and Humanitarian Affairs and the £119 million aid package to support food security, we ask the FCDO to update us on a quarterly basis on the performance and achievements of its measures to counter food insecurity. We also recommend that the UK Government renew its nutrition commitments, which expired at the end of 2020, as a matter of urgency. We further ask the Government to expand funding for programmes addressing malnutrition and food insecurity, especially those addressing the issues through cash transfers as they can help different groups to respond effectively to the secondary impacts of covid-19 according to their individual needs.

110UN calls for $2.5 trillion coronavirus crisis package for developing countries”, United Nations Conference on Trade and Development, 30 March 2020; Coronavirus: Mounting debt crisis for the world’s poorest countries, Insight, House of Commons Library, 3 June 2020

111 International Monetary Fund, World Economic Outlook, October 2020: A Long and Difficult Ascent, accessed 19 January 2021

112COVID-19 legacy: a high-debt, low-growth trap”, UN Department of Economic and Social Affairs, 1 October 2020

113 Global Justice Now (COR0023), Jubilee Debt Campaign (COR0055); UN Department of Economic and Social Affairs, UN/DESA Policy Brief #59: Corona crisis causes turmoil in financial markets, 1 April 2020

114 Oxfam GB (COR0058)

115 Bond (COR0026), Save the Children UK (COR0037), Jubilee Debt Campaign (COR0055), Oxfam GB (COR0075)

116 Q252 [Tim Jones]. On 13 April 2020, the IMF executive board announced that it had approved immediate, grant-based debt relief of about $500 million - which includes $185 million from the UK - for the IMF’s 25 poorest and most vulnerable member countries under its Catastrophe Containment and Relief Trust (CCRT). Provided for an initial period of 6 months, the aim was to help those countries cover their IMF debt obligations and focus on responding to covid-19, according to the IMF. See: “IMF Executive Board Approves Immediate Debt Relief for 25 Countries”, International Monetary Fund, 13 April 2020.

117 Q252 [Tim Jones]. According to the IMF, about 60% of eligible countries had requested support through the DSSI as of late October 2020. Based on data about G20 creditors as of 23 October 2020, the IMF estimates that this equates to $5 billion in deferred debt service payments for 2020. See International Monetary Fund, Questions and Answers on Sovereign Debt Issues, last updated on 18 November 2020.

118 Catholic Agency for Overseas Development (CAFOD), Christian Aid, Global Justice Now Jubilee Debt Campaign and Oxfam, Under the radar: Private sector debt and coronavirus in developing countries, 14 October 2020

119 PQ 45237 [on debts: developing countries], 18 May 2020

120 Q244 [Tim Jones]

121‘We must work together to fight Covid-19 outbreak’”, Department for International Development, 11 April 2020

122 Foreign, Commonwealth and Development Office (COR0136)

125 The World Bank Group, Poverty Overview, last updated on 7 October 2020, accessed on 19 January 2021

127COVID-19 to Add as Many as 150 Million Extreme Poor by 2021”, The World Bank Group, 7 October 2020

128UN report finds COVID-19 is reversing decades of progress on poverty, healthcare and education”, UN Department of Economic and Social Affairs, 7 July 2020

129COVID-19 to Add as Many as 150 Million Extreme Poor by 2021”, The World Bank Group, 7 October 2020

130 Q249 [Lamis Al-Iryani]; Oxfam GB (COR0058)

131 Q274 [Donal Brown]

132 International Fund for Agricultural Development, COVID-19, accessed 19 January 2021

133 Q274 [Donal Brown]

134 Q274 [Dr Louisa Cox]

135 Q274 [Dr Louisa Cox]

136 Fairtrade Foundation (COR0146)

137 The Food and Agriculture Organization of the United Nations, Policy Brief: The Impact of COVID-19 on Food Security and Nutrition, June 2020, page 9, accessed 19 January 2021

138 Ibid

139 United Nations World Food Programme, Social protection and safety nets, accessed 19 January 2021

140 International Labour Organization, Relevant SDG Targets related to Social Protection Floor, accessed 19 January 2021

141 Q274 [Dr Louisa Cox]; Bond (COR0026); Fairtrade Foundation (COR0146); ARISE Consortium (COR0168); The Food and Agriculture Organization of the United Nations, Policy Brief: The Impact of COVID-19 on Food Security and Nutrition, June 2020, page 9, accessed 19 January 2021

142 International Justice Mission UK (COR0148), Fairtrade Foundation (COR0146)

143 Q269 [Lamis Al-Iryani], Q273 [Sultana Begum], Q318 [Gwen Hines], Bond (COR0157), Gender and Development Network, Nawi-Afrifem Macroeconomics Collective (COR0166), Save the Children UK (COR0037), VSO (COR0160)

144 International Committee of the Red Cross (COR0169)

145 Norwegian Refugee Council (NRC UK) (COR0144)

146 Q296 [Sultana Begum], Concern Worldwide UK (COR0155)

147 Q274 [Donal Brown]

148 ADD International (COR0164), Save the Children UK (COR0037), UNHCR, The UN Refugee Agency (COR0028)

149 Q274 [Donal Brown], Q289 [Sultana Begum], ActionAid UK (COR0158), Concern Worldwide UK (COR0155), Norwegian Refugee Council (NRC UK) (COR0144)

150 Compassion UK (COR0151)

151 Q240 [Lamis Al-Iryani]; Development Tracker, Addendum to the Business Case 300527 (Published - September, 2020), Yemen Social Protection Programme (YeSP) (Phase 1), last updated on 7 December 2020, accessed 19 January 2021

152 Foreign, Commonwealth and Development Office (COR0136); “UK aid to protect high street supply chains”, Press Release, 14 August 2020

153 Fairtrade Foundation (COR0146)

154 Fairtrade Foundation (COR0146)

155 Q277 [Dr Louisa Cox]

156 Q295 [Dr Louisa Cox]

157‘We must work together to fight Covid-19 outbreak’”, Department for International Development, 11 April 2020. The Rt Hon Anne-Marie Trevelyan MP was a co-author of the article together with fellow ministers with international development portfolios: Peter Eriksson (Sweden), Gerd Müller (Germany), Rasmus Prehn (Denmark), Ville Skinnari (Finland), Gudlaugur Thór Thórdarson (Iceland), and Dag Inge Ulstein (Norway).

158 Department for International Development (COR0060), Foreign, Commonwealth and Development Office (COR0136)

159 Department for International Development (COR0060)

160 Foreign, Commonwealth and Development Office (COR0136)

161 Q350 [Rachel Turner]

162 Oxfam GB (COR0058)

163 UN Statistics Division, End hunger, achieve food security and improved nutrition and promote sustainable agriculture, ‘The Sustainable Development Goals Report 2020’, accessed 19 January 2021

164 Ibid

165 Ibid

166 ADD International (COR0164)

167 Bond (COR0157)

168 Concern Worldwide UK (COR0155)

169 Concern Worldwide UK (COR0155)

170 The United Nations Children’s Fund, Yemen crisis, accessed 19 January 2021

171 Q261 [Lamis Al-Iryani]

172 Q272 [Sultana Begum]

173 International Rescue Committee (COR0152)

174 Q293 [Louisa Cox]

175 Q278 [Donal Brown]

176 Q278 [Donal Brown]

177 RESULTS UK (COR0032)

178 RESULTS UK (COR0073) and UN Statistics Division, End hunger, achieve food security and improved nutrition and promote sustainable agriculture, The Sustainable Development Goals Report 2020, accessed 19 January 2021

179 UN Statistics Division, End hunger, achieve food security and improved nutrition and promote sustainable agriculture, ‘The Sustainable Development Goals Report 2020’, accessed 19 January 2021

180 RESULTS UK (COR0073), Save the Children (COR0139), Concern Worldwide UK (COR0155)

181 Q229 [Aaron Oxley], Q318 [Gwen Hines], RESULTS UK (COR0073) and (COR0161), Save the Children (COR0139)

182 Q289 [Sultana Begum]

183 Q312 [Gwen Hines]

184 International Rescue Committee (COR0152)

185 Foreign, Commonwealth and Development Office (COR0136). As regards the £1 billion spend, the FCDO told us in the same written evidence that “we have so far committed over £1 billion of UK aid to counter the health, humanitarian, and socio-economic risks, and to support the global effort to find and distribute a vaccine.”

186 Foreign, Commonwealth and Development Office (COR0136)

187 Foreign, Commonwealth and Development Office (COR0136)

188Changes to the UK’s aid budget in the Spending Review”, News Story, published 25 November 2020, last updated on 26 November 2020

190 Q329 [Wendy Morton MP]

191 Q329 [Wendy Morton MP]

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