According to a report by the World Bank, extreme poverty fell to pre-COVID levels in late 2023. This is a much quicker turnaround than many economists had originally thought, with some expecting this would take 10 years. While we can rejoice that this was not the case, the recommendations of those same economists  -  that donor countries must increase their aid budgets to recommended standards  –  still ring true.

COVID-19 in the Developing World

For many in the developed world, the detrimental impact of COVID was limited to restrictions on social gatherings, school and office closures and the cancellation of music and sports events. Of course, there were many tragic cases of lives lost too early, leaving a lasting impact on many. But thankfully for the majority of those in the West, society had the structural and digital frameworks to overcome the enormous shock that was the pandemic.

In contrast, COVID-19 in the developing world brought about different levels of devastation. It may have taken longer for the virus to seep into these countries, but when it did eventually hit, populations were more financially vulnerable and health systems were not ready.

It was apparent even amid the pandemic, that the least-developed countries were more vulnerable socioeconomically than the rest of the world. Where governments, businesses and individuals in developed countries may have had savings to fall back on allowing them to self-sustain and support one another, this was less often the case among the poorest countries in the world.

Moreover, certain disadvantaged groups such as women and less-educated workers were disproportionately affected by COVID-19, in middle and low-income countries in particular. As an aftereffect, millions more were plunged into extreme poverty during the year 2020.

COVID-19 and Extreme Poverty

The World Bank states that extreme poverty will mean people ‘are more likely to be malnourished, they have less access to services like education, electricity, sanitation and healthcare, and they are more vulnerable to conflict and climate change.’

Last year, the World Bank found that those in extreme poverty worldwide increased from around 700 million to more than 760 million in the year 2020. While this may not seem a seismic change, consider that this set us back to extreme poverty levels not seen since 2016. Only last year was it found that extreme poverty fell to pre-COVID levels. Although positive, the World Bank points out that considering these measures, we have lost three years in the fight against poverty worldwide.

Low-Income Countries Behind on the Road To Recovery

In many ways, to say that efforts to eradicate extreme poverty are back on track would be false. This is because all of the recovery has taken place in high- and middle-income countries. Many low-income countries are still experiencing increases in extreme poverty due to their incapability to roll out social welfare programs to counter the effects of COVID-19. This poses a huge problem for the aid sector as donor countries look to cut fiscal spending following the pandemic, but much of the developing world is now in need of aid more than ever. With the worst impacts of the climate crisis still to come, some have gone as far as suggesting that the aid system is running empty.

Aid Can Go a Long Way – How Extreme Poverty Fell

Back in 2020, researchers recommended that one way to reduce extreme poverty is to allocate more aid to low-income countries (LICs). This is because lower unit costs in those countries mean that development aid can go further and benefit more people. The Borgen Project has identified numerous examples of aid being extremely successful at delivering the desired results in LICs. Take the case of Legacy Manufacturers Limited covered in an article from April last year. A small grant of $50,000 from The Visa Foundation helped this business overcome import and manufacturing difficulties, allowing them to successfully deliver their soya, corn and maize products to the national market in Zambia. Without smart investments in local organizations such as Legacy, LICs have few opportunities to make these kinds of developmental steps which will help them overcome external shocks going forward.

The Role of Official Development Assistance

Foreign aid in the form of grants has been classed as Official Development Assistance (ODA) since the late 1960s. To be classified as ODA, donations must fulfill certain criteria. The U.N. recommends that donor countries commit 0.7% of their gross national income (GNI) to ODA.

Since the onset of COVID-19, there has been an overall increase in ODA, largely due to the worldwide refugee crisis. In 2022, the figure hit a record high of $204 billion. However, there has not been a unanimous move towards the U.N.’s 0.7% target. U.S. ODA still languishes at 0.23% of GNI. The U.K.’s ODA/GNI% fell from 0.7% to 0.5% from 2020 to 2022, amounting to around $3 billion in aid lost. Moreover, the number of countries meeting the U.N. target of giving 0.7% of GNI in aid fell from six countries to four in the same period.

Improved ODA figures can go a long way in combating extreme poverty conditions globally.

– Alex Finch
Photo: Flickr