Tracking covid-19 – new research reveals flaws in crisis financing
by Dani McCarthy and Michèle Plichta [1]
World Bank / Ousmane Traore (MAKAVELI)
Earlier this week, and a year on from the World Health Organisation first declaring the covid-19 pandemic, world leaders called for a global pandemic treaty, encouraging nations to work together to better prepare for the increased risk of pandemics.
Central to these discussions will be the issue of crisis financing and how to ensure that funding is available for release at the first sign of a possible pandemic – especially if that takes place in a poorer country where resources to contain outbreaks are less and other dynamics such as conflict can make efforts more challenging.
For the past year, the Centre for Disaster Protection has tracked funding via the multilateral system intended to support the covid-19 response in low- and middle-income countries. This research demonstrates some of the challenges that any new treaty will need to address if the financing response to a future pandemic is to be improved.
The upcoming 2021 Spring Meetings by the World Bank Group and the International Monetary Fund – the two institutions that have provided the largest amounts of covid-19 response funding – offers the first opportunity to reflect on what covid-19 has taught us about how crises are currently funded and the changes that must be made for the system to be fit for a future which some experts have described as ‘the era of pandemics’.
The first thing to make clear is that (while comparisons are challenging due to a lack of similar research) funding for the pandemic appeared admirably swift and substantial in comparison to other crises. US$125 billion has been committed and 64% of these funds have been disbursed.
However, there remain a number of substantial challenges in how the funding was dispersed. Below we have set out these findings and our recommendations for how world leaders, international financial institutions, and the crisis financing and response system as a whole can address them:
1. Pre-arranged financing should be the primary method of funding crises - only 2% of the funds for covid-19 were pre-arranged
Only 2% of the total covid-19 response was pre-arranged, despite experts warning of a pandemic long before covid-19 hit. If we’re to save lives, protect livelihoods, and uphold the dignity of those caught up in disaster, pre-arranged funding needs to be the primary method for funding crises. This way, money is set aside beforehand and is available to communities when it matters most.
2. If pre-arranged funding isn’t in place, preparedness is critical to ensure a fast response – by April, only 20% of covid-19 funding had been disbursed
Although the covid-19 response was quite fast in comparison to other crises, it still came too late, with most of the funding arriving after the initial impacts of the virus had been felt. By the end of April only 20% of the total covid-19 funding had been disbursed. With the exception of some pre-arranged funding, almost none of the money was able to disburse early on.
Without this quick access to funds, the start of the crisis came with immediate and huge impacts on economies and livelihoods, mainly caused by national lockdowns. It was found that in April, household incomes in urban Bangladesh had declined by an average of 75% (BRAC 2020), and in Nairobi, Kenya, 80% of survey respondents had experienced partial or total income losses (Population Council 2020).
3. Proper planning must prioritise the most vulnerable, especially people living in poverty
Countries where poverty is expected to increase the most have received the least per capita: US$41 per capita, compared to US$108 per capita in countries with minimal extreme poverty increases. This is in part because most of the funding is given as loans (92%). However, poorer countries are likely to face debt distress, so they cannot borrow and need to rely on grants to meet needs. A rethinking of the system of crisis response is needed to overcome the fact that countries have to rely on their ability to borrow to protect people from the impacts of crises.
Covid-19 has shown we need a smarter system
Our research into covid-19 financing shows flaws in the current system to pay for disasters, which is slow and not always able to support response where need is the greatest. With climate change, population shifts, and more conflict, meaning the world’s disaster risk is increasing, not abating, we must address these structural problems in the crisis financing system.
The good news is that there are a number of opportunities in 2021 for policy-makers to make agreements on how to better structure the system we use to pay for disasters. The World Bank Spring Meetings next week, the IDA20 replenishment discussions, the G7 summit in June and the UN Climate Change Conference in November, all provide an opportunity for urgent and timely discussions on these agreements.
You can learn more about the work of the Crisis Lookout coalition, which the Centre has convened, and its work to drive a G7 agreement on these issues via www.crisislookout.org
[1] Author order has been randomised using the AEA Author Randomization Tool.