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. 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. In October 2020, the UN DESA referred to covid-19 as a “high-debt, low-growth trap”.
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. Oxfam referred to the situation as the “twin crises of health and economy”.
48.We heard broad calls for debt cancellation instead of debt relief. 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”. 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.
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. 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. 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”.
50.To mitigate the looming economic crisis in highly indebted developing countries, the Government advocated for debt relief at a multilateral level. 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. 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.
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. 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 Bank 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). The World Bank estimates that the total number of people living in extreme poverty could rise to 150 million by 2021 while UN DESA estimated that 71 million people could be pushed back into poverty in 2020. Furthermore, eight out of ten “new poor” are projected to be in middle-income countries by the World Bank.
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. 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.”
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). 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. 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. 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.
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. 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). Further, 79% of those women who are economically active in the poorest countries list agriculture as their top source of income.
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. 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.”
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. 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.
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. Contributors told us that in lower-income countries with less pronounced social security schemes, donor-funded livelihood support schemes, remittances, savings and access to credit from suppliers and from financial institutions 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. 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.
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. 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.
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. 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. 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. 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. 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.”
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.” Both DFID and the FCDO told us that they sought to strengthen social protection systems. 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”. 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”. 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”.
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.
“Communities have told Oxfam that they expect to die of hunger before getting sick from covid-19.” (Oxfam GB)
63.Covid-19 is exacerbating the ongoing food insecurity in developing countries. 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. It further estimated that up to 132 million more people could suffer from chronic food insecurity in 2020 due to covid-19.
64.Malnutrition is a growing concern for vulnerable groups. 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”. According to Concern Worldwide, “Families are faced with two choices: to change either the amount or type of food consumed”. 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”.
65.In Yemen, the largest humanitarian crisis in the world according to the United Nations Children’s Fund (UNICEF), 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”. 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”. 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.
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. 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. His worry was that “we address a health crisis, and then end up with a food crisis and a livelihoods crisis”.
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. The pandemic thereby increases the risk of stunting children and could derail efforts to reduce the number of stunted children to 82 million by 2030. Contributors were concerned about a potential “cliff edge” in UK financing for nutrition programmes from 2021, and urged the Government to renew its commitments to nutrition-sensitive programmes for 2021–2025, which expired at the end of 2020.
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. Gwen Hines said that “cash transfers are a very effective way” to respond to the ongoing crisis of poverty and malnutrition, 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”.
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”. To build resilience among vulnerable people and reduce the rate of malnutrition, the FCDO are also adapting programmes in agriculture, nutrition and food security. 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.
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. 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. In her evidence, Ms Morton stated that Nick Dyer was working closely with multilateral organisations and NGOs to “prevent an escalation”. 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. 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.
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.
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