Helping developing countries become more resilient
The effects of the coronavirus crisis are hitting developing countries hard. The multilateral development banks and the organisations of the United Nations (UN) have adopted emergency measures together with Switzerland. At the spring meeting of the World Bank in mid-April 2020, it was decided that in the short term, the priority will be to mitigate the consequences of the pandemic. In the long term, poorer countries will be supported in stabilising their economies and reducing their vulnerability to shocks. Thanks to Switzerland’s international cooperation strategy, the country is well positioned to make a difference.
The COVID-19 crisis has a strong grip on developing countries. Healthcare in these countries is rudimentary. The crisis has a significant impact on their economies, reducing their resilience to shocks. Measures to combat the pandemic entail a massive decrease in production, consumption, investment and trade. This in turn results in many job losses.
Developing countries do not have the means to give companies and employees the support they need. Public institutions and economic framework conditions are relatively weak , debt levels high. People, companies and governments are thus unable to absorb such extreme shocks. In addition, the effectiveness of public measures is reduced due to the large informal sector in developing countries. The cumulative impact of these challenges jeopardises past achievements in poverty reduction.
Unfortunately, this is not a new phenomenon. The financial and debt crises of the noughties confronted developing countries with difficult, sometimes insurmountable challenges. Since then, international organisations, together with Switzerland, have contributed to reduce their vulnerability to shocks. This work is still ongoing and is now being challenged by the current crisis.
Economic crises also cost lives
Developing countries must carefully weigh the direct effects of a pandemic in terms of mortality against the social, economic and, ultimately, health consequences of a targeted response strategy. Without savings, public safety nets or subsidies, the well-being and survival of many people depend on their everyday work. Furthermore, as a result of lower economic activity, states will collect even less tax, which further reduces their scope for providing public services and support measures. Economic history has shown that economic shocks also lead to an increase in mortality and a decline in many indicators of well-being.
Solidarity is a key motive for supporting developing countries in overcoming this challenge. Switzerland also has a substantial interest in ensuring that these countries overcome the crisis. Because the virus spreads so quickly, any success in combating it in Switzerland could be cancelled out by a strong spread elsewhere. In addition, when societies in developing countries are more resilient, this improves economic and social prospects in those countries and thus indirectly combats the causes of displacement and irregular migration.
Development cooperation alleviates poverty and increases resilience
International development cooperation can make an important contribution to supporting developing economies. This is why international development organisations have switched to crisis mode and are working hard to analyse the situation and define emergency measures. For these efforts to be effective, the organisations must coordinate their work. The aim is to provide a quick response where the need is greatest achieve maximum impact, and lay the foundations for future economic recovery.
The multilateral development banks and UN organisations have adopted a package of emergency measures together with Switzerland. The World Bank Group, for example, will provide 14 billion dollars in fast, simple loans and grants to developing countries. Additional 160 billion dollars have been earmarked for longer-term measures to support people in need and strengthen resilience over the next 15 months.
World Bank emergency measures, which are being coordinated with the World Health Organization (WHO), are helping developing countries to contain the COVID-19 virus. The aim of these measures is to increase testing capacity, introduce social distancing and communication measures and strengthen health systems. The World Bank is also supporting measures to mitigate the social impact of the crisis. Thanks to the interventions of the International Finance Corporation (IFC), banks in developing countries will be able to continue to provide the private sector with loans in order to safeguard jobs.
Swiss international cooperation is well positioned to contribute and shape international efforts
Through its membership in the development banks, Switzerland is playing an active role in determining such measures. Switzerland ensures that all processes are coordinated and harmonised and that standards are upheld despite the urgency. After all, effectiveness is key.
With the current international cooperation strategy for the years 2021–2024, which was approved by the Swiss Federal Council in February 2020, and the dispatch on the capital increases at the World Bank and the African Development Bank, Switzerland is well positioned to contribute and shape existing and future international efforts. Through its long-term commitment, it mitigates the negative impact of the crisis, strengthens resilience to future crises, and thereby contributes to the achievement of the UN Sustainable Development Goals. Swiss bilateral cooperation is currently assessing where and how it can adapt or complete ongoing projects, programmes and forms of cooperation with partners and what additional measures can be taken to help tackle this unprecedented situation.