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Impact of COVID-19 on Poverty in EcuadorEcuador is a South American country with a population of more than 17 million. The country relies heavily on oil exports and was battling a global oil crisis when the first COVID-19 case broke out there in February 2020. Since then, the combined effects of the oil crisis and COVID-19 have created many problems for Ecuador. However, there are many sources offering aid to alleviate the impact of COVID-19 on poverty in Ecuador.

The Impact of COVID-19

As the COVID-19 pandemic spread across the world, Ecuador was one of the hardest-hit countries. Not only was it the first Latin American country affected but it also ranks ninth worldwide in confirmed deaths per million, according to the World Health Organization. The impact of COVID-19 combined with the effects of a global oil crisis could cause up to an 11% decrease in GDP for the nation.

Organizations Offering Aid

Despite the negative effects people across the world have felt and the impact of COVID-19 on poverty in Ecuador, organizations are helping the country recover.

  • U.S. Department of State – The Department of State/U.S. Agency for International Development sent almost $18 million in aid to Ecuador. This will fund improvements to the medical system, purchase rapid test kits and provide medical and personal protective equipment.
  • International Monetary Fund – On Sept. 30, 2020, the Executive Board of the IMF approved a “$6.5 billion Extended Fund Facility arrangement” with the goal of helping Ecuador recover from the economic impacts of COVID-19. By providing these additional funds, the Ecuadorian government will be able to spend more on health and education services. The government can also give cash transfers to Ecuadorians who lost their jobs because of the pandemic.
  • The World Bank – The World Bank provided a line of credit of $500 million to help the Ecuadorian government support families affected by COVID-19. In addition to this, it approved “$14.1 million in nonreimbursable resources from the Global Concessional Financing Mechanism” to provide additional support to the government for its admittance of a large number of refugees.
  • UNICEF – UNICEF reallocated $2.7 million in funds to help with the COVID-19 response. These funds were used to provide PPE, handwashing stations, nutritional supplements, hygiene materials and teachers to help distribute supplies and educate the population on proper sanitation techniques. In addition, UNICEF also provided funds to help cash transfers to Venezuelan refugees who have been unable to receive any from the Ecuadorian government.

There are also other non-governmental and international organizations that are providing aid to the people of Ecuador. The services provided range from telemedicine and hospital care to assisting with sanitation efforts. The U.S. Embassy and Consulate in Ecuador has a list of organizations that are active in Ecuador. It is working to help with the recovery.

Next Steps

As the country faces a difficult recovery, international support is vital to jumpstart the economy and support Ecuadorians. The government will need help to continue providing the necessary equipment, testing and social safety nets for the impacted population. Donating to organizations or urging representatives to continue supporting these forms of aid are great ways to help.

Despite this large impact of COVID-19 on poverty in Ecuador, aid increases recovery efforts. International organizations, foreign governments and non-governmental organizations are working hard to provide funding and supplies to help Ecuador.

Taryn Steckler-Houle
Photo: Flickr

Help Reduce Poverty
In light of the global pandemic, Pope Francis has kept busy advocating for poverty reduction around the world. Francis spent the year 2021 mending relationships between the Catholic Church and the Middle East and offering support to healthcare workers. Here are some of the most important things the Pope did in 2021 to help reduce poverty.

Advocation to Reduce the Debt of Impoverished Nations

Pope Francis delivered a statement in April 2021 at a meeting that the World Bank Group and International Monetary Fund (IMF) hosted. Mostly, he discussed how impoverished nations should receive a greater share in decision-making for the international market. He also pushed for debt relief and reduction for nations struggling during the pandemic. “The pandemic, however, has reminded us once again that no one is saved alone,” Francis wrote.

He also stated that “a spirit of global solidarity also demands at the least a significant reduction in the debt burden of the poorest nations, which has been exacerbated by the pandemic. Relieving the burden of debt of so many countries and communities today is a profoundly human gesture that can help people to develop, to have access to vaccines, health, education and jobs.” The Pope’s statement highlighted the “ecological debt” all nations owe to the environment. He also remarked that ecological degradation and biodiversity loss are manmade issues. He asserted that the issue could come to a resolution if impoverished nations, generally the ones environmental challenges most affect, can put their finances toward combating it.

Francis Became the First Pope to Visit Iraq

With the events of 9/11 and the Israeli-Palestinian conflict long exacerbating Islamophobia, Pope Francis’s arrival in Iraq marked a new beginning for Catholic-Muslim relations. Nostra Aetate, which Pope Paul VI issued in 1965, decreed that the Catholic Church must examine its relationships with non-Christian religions. The declaration contains a section dedicated to Islam, which urges mutual understanding in the name of peace and freedom. Pope Francis attempts to follow Nostra Aetate and continues to extend respect for the Islamic religion. He desires to mend the relationship between the two faiths.

While in Iraq, Francis met with Ayatollah Ali Al-Sistani, the leader of Iraq’s Shiites, twice nominated for the Nobel Peace Prize. The Pope also met with Daesh’s terror survivors and called for peace between Christians and Muslims. Pope Francis urged that Christians and Muslims let go of their past and work toward rebuilding Iraq.

Pope Francis has Continued to Donate Around the World

Throughout the pandemic, the Pope continued his charity work for healthcare workers and affected families. During his trip to Iraq, Francis donated $250,000 to families in Baghdad. Francis also extended support to a women’s healthcare center in India. In May 2021, Francis donated 20,000 euros to the Shanti Ashram women’s health and social center in Coimbatore, India, which supports around 50,000 women and children. The center had hosted an international online conference with a goal of raising 60,000 euros, but it fell short. Pope Francis donated 20,000 euros to make up the difference.

Pope Francis did not just donate financially, he also supplied several medical facilities with medical equipment. The Apostolic Nuncio in Colombia confirmed that the Pope sent PPE and four respirators to the San Francisco de Asis Hospital and the Santiago Clinic. The pandemic hit their area particularly hard. The Pope donated respirators to eight other countries as well, including Bolivia, Syria and South Africa.

Moving Forward to Help Reduce Poverty

Pope Francis has shown that generosity always comes first, especially in a global pandemic when poverty is on the rise. Under his leadership, the Catholic Church will continue to promote charity work and peace in the Middle East and help reduce poverty.

Camdyn Knox
Photo: Pixabay

The Impact of COVID-19 on poverty in South SudanAs the world’s youngest country, South Sudan faces many obstacles to economic and political stability. Continued conflict, natural disasters and COVID-19 further exacerbate the developing nation’s economic strife in the aftermath of years of civil war. Outside of foreign aid, South Sudan’s economy heavily relies on two main sources: oil production and agriculture. Both these sources experienced the impact of the COVID-19 pandemic, negatively affecting economic growth and livelihoods in the country. The impact of COVID-19 on poverty in South Sudan calls for the support of foreign aid in order for the country to successfully recover.

South Sudan’s Oil Industry

South Sudan is one of the most oil-reliant countries in the world. More than 90% of its revenue and more than 70% of its GDP stems from its abundant oil fields. Since gaining its independence, South Sudan produces nearly three-quarters of former Sudan’s entire oil output, equating to almost 500,000 barrels per day. However, the volatile oil industry is experiencing a lower demand and a decline in prices due to the pandemic. Regarding the global oil demand, “containment measures and economic disruptions related to the COVID-19 outbreak have led to a slowdown in production and mobility worldwide, producing a significant drop in global demand for oil.”

COVID-19’s Effects on Agriculture and Food Security

The agricultural sector accounts for 15% of GDP in South Sudan and employs roughly 80% of South Sudan’s population. With more than 80% of the population residing in rural areas, agriculture, livestock farming and fishing make up the livelihoods of many households.

A devastating combination of flooding, drought, locust swarms and the pandemic created high levels of food insecurity in South Sudan. More than 6 million people are facing crisis-level food insecurity and roughly 1.4 million children under 5 may suffer from acute malnourishment in 2021.

The IMF Assists

In response to the worsening humanitarian crisis, the world continues to reaffirm its commitment to eliminating poverty in South Sudan. The International Monetary Fund (IMF) approved a disbursement of  $174.2 million in March 2021 for emergency assistance to South Sudan in the wake of COVID-19. The assistance aims to provide economic relief due to the collective impact of plummeting oil prices, floods and the pandemic in general. According to the IMF, the funding will “finance South Sudan’s urgent balance of payments needs and provide critical fiscal space to maintain poverty-reducing and growth-enhancing spending.”

World Bank Projects in South Sudan

On June 8, 2021, the World Bank announced two new projects equating to $116 million to curb poverty in South Sudan by committing to “strengthen the capacity of farmers, improve agricultural production and restore livelihoods and food security.” The first project, the South Sudan Resilient Agricultural Livelihoods Project (RALP), amounts to $62.5 million and commits to training farmers to better manage their businesses, utilize new agricultural technology and implement climate-smart practices to improve agricultural output. The project will also assist farmers with “tools, machinery and seeds required to improve productivity.”

The second grant of $53.7 million supports the Emergency Locust Response Project (ELRP). The grant will fund South Sudan’s response to desert locusts. The project will provide income opportunities to vulnerable people to assist them in producing more food and improve their economic situation. The project also encourages “the restoration of pasture and farming systems” in the region.

The Road Ahead

The World Bank expects levels of poverty in South Sudan to remain high for the time being due to food insecurity and the lack of access to essential goods and services. The impact of COVID-19 on poverty in South Sudan is harsh. Data as of April 2021 indicates that 82% of the population lives below the poverty line. However, the recent aid to South Sudan gives the country’s oil industry and agricultural production an opportunity to recover to pre-pandemic levels. The government’s priorities lie in addressing the lingering conflict and stabilizing its economy amid an economic, humanitarian and public health crisis. With continued aid and support, South Sudan can successfully recover and achieve stability.

Gene Kang
Photo: Flickr

Globalism Reduces PovertySeveral factions surround globalism, some cite statistical reduction in poverty, while others decry effects on local communities. As in all reductive thinking, oversimplification misstates the complexity, succumbing to the facility of a universal perspective. What is absolutely clear, however, is the initial decades of global trade created categorical winners and losers — the most impoverished 5% gained $.07 in daily income, while the top 1% averaged $70. The theory that globalism reduces poverty is multifaceted, and such, globalism is best described as a “two-way street.”

Global Inequality

As the global pool of wealth undeniably grows, financial resources are increasingly concentrated among a powerful economic cadre, actually increasing global inequality. Subsequently, inter-national economies are seeing more parity, but intra-national wealth distribution is increasingly unequal.

Absent the economic investment from global trade, however, developing nations struggle to modernize. Lacking foreign capital investment to create sustainable industries, an estimated 95% of Indian youth are forced into informal child labor. In the nation-state equivalent of “Sophie’s Choice,” governments are forced to participate while the premise that globalism reduces poverty remains dubious.

Relative and Absolute Poverty

Early returns from globalism showed a reduction in extreme poverty from 36% to 19% between 1990-2008 and capitalists trumpeted imminent eradication of poverty by the benevolent “invisible hand” of market forces. Undoubtedly a monumental achievement, millions have benefited from access to foreign markets.

As always, the devil is in the details. Poverty is an indiscriminate measure, a theoretical categorization defines the powers that be. For the World Bank, poverty is a function of daily income. But, between 1990-2018, the threshold indicating extreme poverty has preposterously risen a mere $0.90 while global GDP grew by $60 trillion during the same period. Given such disproportionality, it is difficult to see how globalism reduces poverty.

Global Poverty or Global Inequality

Ambiguous poverty metrics belie a true consequence of globalism, that the top percentile claimed more than 60% of growth. To retain these substantial gains, it is the providence of influential international corporations and institutions to promote globalism. Exceedingly fungible, poverty metrics become a prism through which various interests and policymakers justify exploitative agendas, often accompanied by stifling conditionalities.

As the International Monetary Fund and European Union counsel draconian measures to fledgling economies, local “governments often find it politically easier to cut the public expenditures for the voiceless” impoverished as connected wealthy classes are “disinclined to share in the necessary fiscal austerity.”

Equally as true in developing nations, entrenched hegemonies have little incentive to shoulder the burden of globalism and frequently siphon economic growth for personal enrichment. Irresponsible stewardship of finances and resources, as always, disproportionately affects voiceless and impoverished communities.

Generations after the ouster of foreign monopoly United Fruit Company from Latin America, indigenous farmers’ share of profit is essentially stagnant as corrupt domestic entities pocket revenue. Globalism reduces poverty only when sufficient protection is guaranteed to populations most at risk of exploitation and achieved only when international, federal, corporate and municipal institutions communicate with disenfranchised communities.

Paternalism in South Africa

Under the best of circumstances, sudden inundation of investment and foreign influence is devastating. For countries without robust legislative institutions, it is cataclysmic. The hyper-racialized-apartheid bureaucracy of South Africa was particularly ill-prepared for the rapid modernization required by globalism.

Despite democratic revolution, political bodies could not address the dual responsibilities of erasing paternalistic and racist policies while simultaneously reentering international trade. After centuries of protectionism and isolation, South African society was a manicured house of cards temperamentally opposed to foreign influence.

The draconian society, which enslaved the Black majority, created a delicate homeostasis and the post-apartheid government was manifestly incapable of protecting the citizenry as globalism began in earnest. A systematically underprivileged class was ripe for exploitation.

Skills-Based Bias

During apartheid, underpaid, low-skill labor provided the engine for economic growth in South Africa. Known as “lumpenproletariat,” these peri-urban shantytown workers relied on the largesse of landed aristocracy for survival.

As a matter of course, economic opportunities through education represented an existential threat to White hegemonies. Because “it is surely the lack of opportunities of the less advantaged that is the real concern” in reducing poverty, undereducated South Africans were dispositionally unable to profit from economic growth.

Compounded by exclusion from land ownership, Black South Africans possessed neither the capital nor the skills for socio-economic gain. Various policy initiatives for Black Economic Empowerment (BEE) have targeted inequality, but generations of subjugation cannot be erased during the short lifespan of South African democracy.

Case Study: South African Winemakers

Overregulation and heavy subsidies throughout the 20th century created an extremely inefficient South African wine industry. Traditional focus on bulk production for domestic markets encouraged widespread plantation of high-yield, low-quality cultivars that were antithetical to international demand for higher quality. With a contorted supply chain entirely unfit for global competition, South African winemakers responded by replanting 50% of vineyards between 1990 and 2005.

To finance these changes, producers required foreign investment. At the behest of multinational distributors, conglomeration through a spate of mergers destabilized traditional market structures — the consolidation of Distillers and Stellenbosch Farmers Winery eliminated 2,000 jobs alone.

Moreover, a weak currency forced producers to rely on foreign capital for infrastructure improvements to replace apartheid-era slave labor. As South African winemakers became increasingly dependent on external financing, mechanization reduced permanent employment by 60%.

The Unequal Distribution of Benefits

Nonetheless, foreign investment allowed the wine industry to grow. Exports increased tenfold during the 90s, and by 2002, South Africa was the fastest-growing sector in the all-important British market. Representing 45% of domestic exports, the fortunes of South African winemakers were existentially linked to unpredictable foreign markets.

But, native producers have seen little benefit. As of 2018, the average return on investment for those costly infrastructure upgrades is an abysmal 2%. And after three decades of democratic rule and countless land reforms, Black ownership in the wine industry is 3%. However, a goal of 20% by 2025 was established in 2007.

A Two-Way Street

In the hyper-competitive wine trade, “survival is not made any easier by the fact that globalization is a two-way street.” The South African wine industry is just one example of countless local communities at the mercy of free markets.

Nonetheless, increased trade and economic growth from globalism affect poverty. The 21st century will be judged by how well the fruits of international wealth are distributed to the most vulnerable populations. As early growing pains subside, poverty eradication is within grasp if the world so chooses.

Kit Krajeski
Photo: Flickr

New Deal for Africa There is a growing international appeal for “A New Deal for Africa and by Africa” in the wake of slow pandemic recovery and a growing debt crisis. French President Emmanuel Macron hosted a Paris-based summit on May 18, 2021, calling for a new way forward for Africa. Joined by African and European leaders, the summit aimed to address the worsening debt crisis across the African continent.

A Call for International Camaraderie

Highlighting recovery from the COVID-19 pandemic as a key issue, Macron urged leaders to foster a sense of international camaraderie. Macron argued that for there to be a steady return to normal, there must be a collective effort to repair the global economy. Additionally, he advocated that countries adopt a new perspective recognizing the interconnectivity of regional economies. In short, Macron stressed that the health and stability of Africa will determine the health and stability of the world.

As the pace of recovery becomes glaringly disproportionate between nations of varying economic status, Macron stressed that it would not only be unethical to leave Africa behind, it would also be to the detriment of the greater international community. Macron explicitly called for a waiving of patents on COVID-19 vaccines to speed up Africa’s recovery.

Africa’s Debt Crisis

The International Monetary Fund (IMF) warned that Africa’s debt crisis, now nearing $300 billion, will increasingly burden the continent. This crisis will continually arrest economic development in Africa and African nations will fall further behind other nations.

The pandemic has greatly exacerbated this issue. Slow vaccine distribution and lack of pandemic relief packages have led many African nations to fall further behind in development. If the situation continues, experts warn that up to 39 million Africans could fall into poverty before the year ends. Macron highlighted how an increase in poverty rates among Africans will ultimately threaten both international market growth opportunities and international security.

In 2021, the IMF recognized the sub-Saharan region of Africa to be the slowest growing on the planet in terms of GDP. The IMF voiced concern that the pandemic has undone years of economic construction and development for the region. The organization, comprised of 190 countries, fears that the pandemic’s effects will harm poverty reduction efforts for years to come.

A New Deal for Africa

After defining the severity of Africa’s debt crisis, the summit moved on toward establishing solutions. World leaders at the summit agreed a two-pronged approach toward economic recovery was necessary.

Firstly, the summit agreed that the slow vaccine rollout must be addressed. To do this, patents forbidding African manufacturers from concocting their own supplies of effective vaccines must be lifted. The patents had forced African nations to purchase their doses from the patent holders, such as Pfizer, only deepening the debt crisis. Macron states that he hoped to have 40% of all Africans vaccinated by the end of 2021. Secondly, members of the summit agreed to allocate more than $30 billion worth of relief from the IMF to nations in Africa.

In some areas of Africa, vaccine supply is so low that the World Health Organization recommended prioritizing the first dose only in order to partially vaccinate as many people as possible. As of early May 2021, six nations in Africa still had not received any doses and eight other African nations had already exhausted their supply.

Macron advocated for $100 billion to be allocated to the “New Deal for Africa” and wants wealthier nations to donate their IMF relief to Africa. Some members of the summit pushed for even more. For instance, the prime minister of Italy, Mario Draghi, stressed the need for a total restructuring of the debt system in Africa. The summit paved the way for further discussions to help support Africa.

Jack Thayer
Photo: Flickr

5 Efforts Toward Reduction of COVID-19 Effects in Developing CountriesSince the end of 2019, the spread and containment of the novel coronavirus have been on many people’s minds. Throughout the pandemic, it has become clear that money and access to the resources necessary to combat this virus are a privilege that not all countries can afford. However, the needs of impoverished countries in relation to the COVID-19 pandemic have not gone unheard. Various foundations, organizations and governmental leaders from developed countries have made efforts to combat the effects of  COVID-19 in populations that need assistance the most. Here are five COVID-19 relief efforts in developing countries.

5 COVID-19 Efforts in Developing Countries

  1. The Bill and Melinda Gates Foundation has long fought against global poverty by making healthcare and education accessible to those in need. This foundation has responded to the global health crisis by donating approximately $2 billion to combat the novel coronavirus worldwide. The money that the Bill and Melinda Gates Foundation has donated is used for a variety of measures to combat the pandemic and its effects. Support for the endeavor of creating accurate tools to diagnose individuals with the virus within populations is one such measure. Another is the support of healthcare systems within developing countries with medical resources and front-line working personnel. A third measure is an increase in the availability of digital learning technologies within countries that are suffering further due to a lack of educational resources. The creation of a COVID-19 vaccine was also supported by the Bill and Melinda Gates Foundation.
  2. Developing nations have come together to assist developing countries struggling with the pandemic’s secondary effects through the G20 Debt Pact. G20 countries created a debt pact in which it was agreed to write off debts that developing countries owed. Due to the expenses of the pandemic, many nations are struggling to repay debts to developed countries. This pact eased the financial burden of countries already suffering from the novel coronavirus.
  3. Gavi, the Vaccine Alliance is an organization that works to vaccinate populations in developing countries with limited medical resource access. As the novel coronavirus has become a present worldly concern, Gavi has recently been working to make the COVID-19 vaccine available to countries without the necessary resources to purchase vaccine doses independently. Developed countries have thus far obtained the majority of vaccines produced as a result of a monetary advantage. Gavi has urged that the vaccine be more widely distributed as the pandemic will not cease if vaccines are only available in select areas of the world. Its hope is that, by the end of 2021, efforts will allow one billion vaccines to be available to the vulnerable in developing countries.
  4. The Papal Foundation is a Catholic-based organization working to offer a helping hand to global communities. Part of the mission of the foundation is to assist those who are most vulnerable in the world, regardless of age. This foundation has fulfilled its mission with respect to COVID-19 reduction by donating $1.8 million to the impoverished in the face of this pandemic. Overall, this money goes toward providing individuals in impoverished countries with basic needs and care, as the pandemic has made resources like food and hygienic materials scarce for many.
  5. The International Monetary Fund (IMF) found that increased COVID-19 testing can be one of the most effective ways for impoverished countries to fight the effects of this pandemic. Increased testing allows for fewer lockdown measures put into place, which can greatly help the economies of these countries. Rapid tests are an inexpensive and effective way of testing mass amounts of people. Moreover, increased testing can help COVID-19 relief efforts by both decreasing the spread of COVID-19 in impoverished countries and increasing desperately needed funds and resources.

The needs of individuals in impoverished countries are still drastic, as many of the economies and medical systems remain underdeveloped amid COVID-19. While the effects of COVID-19 have hit developing countries harder than in other areas of the world, these COVID-19 relief efforts, along with many others, have made a positive impact in combating the virus and its secondary effects.

– Olivia Bay
Photo: Flickr

Argentine Debt AgreementArgentina has been facing a long-lasting economic crisis, further amplified by the COVID-19 pandemic. Close to half of the population lived in poverty in the second quarter of 2020, reaching an all-time high during the months of mandatory lockdowns. Due to the pandemic, the country also experienced a loss of 3.5 million jobs and unemployment rose to 13.1% in the second quarter since the closures hit small businesses hard. As a result, the impact of COVID-19 significantly hurt the domestic market. The Argentine debt agreement hopes to improve the financial crisis in Argentina.

The Argentine Debt Agreement

To help Argentina with its growing financial crisis, the Ad Hoc Group, Argentina Creditor Committee and the Exchange Bondholder Group have come to an agreement that will provide Argentina with financial relief in terms of its national debt. This relief is a major advancement in expanding Argentina’s access to international capital markets. The agreement lays the foundation for future sustainable fiscal policies that support the economy. Moreover, the debt agreement entails a lift of sovereign bonds by an average of 8.7%. Ultimately, Argentina is actively working toward providing sufficient cash flow within the economy to address rising economic concerns. This agreement also allows Argentina to avoid “protracted and costly legal proceedings with bondholders.”

Restructuring the Economy

The three creditor groups developed the debt agreement to restructure $65 billion worth of accumulated Argentinian debt. The creditors involved will receive 55 cents on the U.S. dollar. Originally, the president of Argentina, Alberto Fernandez, desired to pursue 39 cents. The Argentine debt agreement covers 20% of the public debt of Argentina, which amounts to $323 billion. This presents only a partial solution to Argentina’s financial crisis but will certainly help the country move toward economic stability.

If Argentina defaults on the debt, there are possible consequences. By defaulting, creditors will not be eager to invest in Argentina. Diminishing debt through repayment shows commitment but will lead to less investment in the domestic development of the country through social programs, pension benefits, unemployment packages and more. However, the agreement is a step toward solving the rest of the economic dilemma. It utilizes the restructuring method, which provides Argentina with a long-term plan for rebuilding the economy.

Moreover, the agreement modifies the dates of payment for certain bonds. The modification that will be implemented “will improve the value of the proposal for creditors.” Multifarious investors are interested in the profit restructuring will produce and are betting on a boost in the economy.

Negotiating Future Monetary Policies

Argentina’s debt restructuring does not end there. Argentina and the International Monetary Fund (IMF) will discuss Argentina’s plans on refinancing its $45 billion debt to the IMF. The focus will mostly be on loans maturing between 2021 and 2024. During this period, the International Monetary Fund will hold Argentina accountable for certain economic obligations. This accountability entails that Argentina must utilize “credible economic data” as proof of Argentina’s economic recovery path.

The Road Ahead

Debt relief is an effective solution to addressing Argentina’s financial crisis and rebuilding a resilient economy. Negotiations with creditors involve the nation requesting reasonable interest rates from now on, which will allow Argentina to truly stabilize. The agreement is very desirable as Argentina is also navigating the added impacts of COVID-19. In general, this revamped economic plan will not solely benefit Argentina but also the international financial system. By setting new precedents, Argentina can effectively re-enter the global market, ultimately contributing to global economic growth as a result.

Lauren Tabor
Photo: Flickr

Post-pandemic debt crisis
With the 2020 onset of the COVID-19 pandemic came a drastic slow in economic activity and collapse in government revenue, prompting a widespread increase in both government and private debt levels. Currently, at the beginning of 2021, with no concrete prediction for the end of the COVID-19 pandemic, businesses and the private sector continue to accumulate great foreign currency debt. There is a steady increase in government loans for funding and there has been at least a 20% reduction in 2020 remittances from global citizens and diasporas. Developing nations report skyrocketing borrowing needs that are usually that advanced economies can usually only manage. Additionally, central bank purchases of corporate bonds to boost the money supply of local firms have stifled the debt ratings of local firms in emerging markets and developing economies. As a result, our world is facing rising budget pressures, which a wave of sovereign debt downgrades that are likely to lead to a post-pandemic debt crisis are accompanying.

Context and the Role of the IMF

In comparison to the end of 2019, in addition to already unusually elevated figures and debt distress, expectations have determined that 2021 debt ratios will increase by 20% GDP in advanced economies, 10% in emerging market economies and 7% in low-income economies. Unfortunately, the emerging and developing world have much smaller borrowing capacities, and so for some, a post-pandemic debt crisis appears imminent.

In the past, debt crises have set the global economy into long-lasting instability. In order to prevent such an economic downfall on top of a global health crisis, many of the leading international organizations such as the International Monetary Fund (IMF) have prepared to help keep nations afloat. While the IMF has provided over $30 billion in emergency funding to its member countries in a response to the pandemic, it has also given direct attention to implementing measures that contribute to debt-service relief. Here are some of these measures.

4 Measures to Contribute to Debt-Service Relief

  1. Catastrophe Containment and Relief Trust (CCRT): Undergoing establishment in 2015 as a response to the Ebola outbreak and receiving modification in March 2020 for the COVID-19 pandemic, CCRT allows the IMF to provide grant funding for debt relief to the poorest and most vulnerable nations that a natural disaster or public health crises have hit. The purpose of the CCRT is to aid eligible low-income member countries to meet the balance of payment needs that disasters create. This stops the reassigning of resources to debt service, preventing a post-pandemic debt crisis.
  2. Debt Service Suspension Initiative (DSSI): In a collaboration between the IMF Managing Director and the President of the World Bank, a call emerged for the bilateral creditors to suspend debt service payments from the poorest member countries until the end of 2020, extended to June 2021. Accepted in April 2020, this debt suspension allows 73 low and lower-middle-income countries to temporarily receive relief from their debt service payments. In addition to releasing the countries’ resources to COVID-19 relief, this initiative prompted the International Institute of Finance (IIF) to also call for private-sector creditors to grant debt payments forbearance to their debtors in a similar way. Many private firms have volunteered to aid in debt relief as a result.
  3. Short Term Liquidity Line (SLL): With the increase in global uncertainty, the IMF has established a short-term liquidity line (SLL) with the unique design of being a liquidity backstop for its member countries who have superior policy and fundamentals, but are in need of increased immediate liquidity needs as a result of the external shocks that came with this global pandemic. This liquidity line has a lower cost structure than other typical IMF lines of liquidity such as the Flexible Credit Line (FCL). This allows for a country to retain cost savings relative to reserves, and benefits related to lower yields on public debt.
  4. Capacity Development: In addition to its financial support, the IMF is also offering real-time policy guidance and capacity development to more than 160 of its 190 member countries. This advice is for specifically navigating debt management strategies, cash management, financial supervision, cybersecurity and economic governance through the pandemic. The IMF has collaborated with tax administrations and budget officers to restore and support halted or slowed business operations. It has also launched online learning platforms available to government officials, members and the general public for the widespread reach of solutions to aid in economic recovery during and post-pandemic.

Cause for Optimism

With the measures above, as well as the collaborative effort of the entire globe, according to the IMF Managing Director Kristalina Georgieva, “the global economy is beginning to climb back from the depths of the crisis, but this calamity is far from over.”

Thankfully, the IMF continues to show its commitment to providing financial support, capacity development and debt relief, especially for its poorest, most affected and vulnerable member countries in this unprecedented time, as the world works to stave off an impending debt crisis.

Rebecca Harris
Photo: Flickr

Extreme Poverty in MoldovaFrom 1999 to 2015, Moldova went from a 36% extreme poverty rate to zero, effectively ending extreme poverty in Moldova. By analyzing Moldova’s poverty reduction strategies, organizations such as the International Monetary Fund (IMF) and the World Bank can form a blueprint to fight extreme poverty globally.

IMF Focus on Poverty Reduction

In 2000, the IMF instituted a three-pronged approach for ending extreme poverty in Moldova, which involved major reforms in governance and the public sector. Economic development, healthcare changes, educational developments and social safety nets were the primary focus to kickstart growth in the country.

  • The IMF’s focus on economic development revolved around public spending and lack of private business. Aside from ensuring fiscal responsibility from the government, government retirement plans and debt were swallowing the countries budgetary resources. The IMF advised Moldova to revise its tax system to be more equitable while strengthening its private sector by easing regulations and tax burdens on small and medium businesses.
  • Education was a foundational part of the reform process. The IMF ensured Moldova improved its education system through guidance from the World Bank. The primary focus was on improving education standards and increase the availability of secondary education to needy students.
  • The health sector developed more substantial healthcare access to reduce long-term expenses and to involve the private sector.
  • Developing better social safety nets was a key pillar for the IMF in Moldova. Most importantly, the goal of the program is to keep children out of poverty. This included food security and funding to access human development services. Also on the agenda was reforming the nation’s pension system to protect aging populations.

Impact of Changes in Moldova

These changes were to be implemented by no later than 2003 and most changes are ongoing. How well did the changes work? In 2000, Moldova’s GDP per capita was at $1,439 and by 2019 the GDP per capita rose to $3,715, doubling the nation’s economic growth. The secondary education enrollment rate was 48% in 1999 and grew to an 86% enrollment rate by 2019. Though absolute poverty remains high, these strategies were instrumental in ending extreme poverty in Moldova. Even by 2006, the extreme poverty rate was down to 4.5%.

The World Bank’s Evaluation

The World Bank processed an analysis from 2007 to 2014 using data to determine how ending extreme poverty in Moldova was effective. Compared to most of Europe, Moldova is still impoverished, but extreme poverty no longer plagued the country by 2014. There were four primary factors that the World Bank determined to be the cause of this success. Economic expansion, advanced opportunities for workers, better retirement fiscal responsibility for aging populations and international work being funneled back into Moldova’s economy, were the most effective tools for alleviating extreme poverty.

  • Despite a setback during the financial crisis in 2009, Moldova has seen steady GDP growth up until the COVID-19 pandemic. Of significant note is that Moldova showed continued growth rather than ups and downs experienced in most impoverished nations. Moldova’s commitment to attaining the United Nation’s Millennium Development Goals and effectively using guidance from the World Bank and IMF are reasons for this growth. Responsible governance and low corruption were instrumental in ending extreme poverty in Moldova.
  • Moldova’s workforce lowered from 2007 to 2014, primarily due to migration; however, wage growth was significant in jobs outside of the agricultural sector. Growth in food processing, manufacturing and ICT industry jobs increased wages exponentially, while the agricultural sector still struggled. These higher-skill jobs are attributable to the country’s focus on improving secondary education access, as outlined by the IMF, providing upward mobility.
  • Responsible pension disbursement was a chief agent for ending extreme poverty in Moldova. The significant increase in distributions to aging rural citizens living in extreme poverty was an essential investment by Moldova’s government.
  • The World Bank also found that after the economic crisis, remittances from Moldovan migrant workers sent back disposable income. Most of these migrants were from low-income rural areas of Moldova. From 2007 to 2014, rural households’ disposable income from migrant transfers rose from 16% to 23%. In Moldova, remittances played a considerable role in poverty reduction.

Using Moldova as a Blueprint Worldwide

Evaluating the success in ending extreme poverty in Moldova helps pave the way to implement similar strategies globally. So, what is the blueprint for ending extreme poverty?

  • The most crucial aspect is government accountability and a strong commitment to attain Millennium Development Goals. Strong oversight to prevent corruption and ensure fiscal responsibility to follow through with plans laid out by organizations like the United Nations, the World Bank and the IMF.
  • A commitment to make secondary education more accessible, especially in rural areas, advances what a nation’s workforce is capable of and helps create job and wage growth.
  • Protecting vulnerable populations by distributing funds where they are most needed reduces extreme poverty.
  • The success of remittances in Moldova is a necessary imperative. An analysis across countries worldwide shows the significant poverty reduction effects of remittances

Ending Extreme Poverty by 2030

The U.N. aims to end extreme poverty by 2030, and when looking at Moldova’s success, it is not an outrageously unrealistic goal. With fiscal oversight, dedication to protecting the impoverished and the world’s willingness to engage, extreme poverty can be eradicated.

– Zachary Kunze
Photo: pxfuel

natural resources in equatorial guineaEquatorial Guinea, which lies on the central west coast of Africa, has seemingly abundant resources. Natural resources in Equatorial Guinea range from its tropical climate and arable land to its minerals and labor. However, widespread socioeconomic development spurred by its discovery of petroleum in the 1990s hindered the country’s progress. It has led to issues including political corruption, resource misuse and human rights abuses. As such, natural resources in Equatorial Guinea affect poverty in the country.

The History of Natural Resources in Equatorial Guinea

Equatorial Guinea declared independence from Spain in October 1968. However, the regime of post-independence president Francisco Macias Nguema saw declines in quality, maintenance and labor. As a result, previously booming industries of cocoa and coffee exports almost completely disappeared. After Teodoro Obiang Nguema Mbasogo overthrew Nguema in 1979, Equatorial Guinea seemed to be moving toward economic revitalization. In the 1980s, the country joined the Customs and Economic Union of Central Africa and replaced its currency with one linked to the French franc. However, it was not until the discovery of offshore petroleum and natural gas reserves in 1996 that its GDP skyrocketed.

The IMF estimated that oil production increased from 17,000 barrels per day (b/d) in 1996 to its peak at 280,000 b/d in 2004 before beginning to steadily decline. Real GDP grew by 150% in 1997. Equatorial Guinea remains the third-largest oil producer in Sub-Saharan Africa. Along with GDP growth, Equatorial Guinea became a trading partner with China, Portugal, India, the U.S. and Spain. This accounted for an increase in government revenue, and the country’s per capita income became the highest in Africa. Natural resources in Equatorial Guinea created this economic transformation. However, today about two-thirds of the population still lives in extreme poverty.

Why the Poverty Level Hasn’t Decreased

Despite the wealth of natural resources in Equatorial Guinea, poverty remains an issue. Human rights abuses and corruption during the Obiang’s regime have raised criticism internationally. As of 2015, only half of citizens in Equatorial Guinea have access to clean water. Newborn immunization rates for polio and measles are among the lowest in the world. Also, government expenditures on health and education are merely 2% to 3% of the total budget. In 2018, the United Nations designated the country 144 out of 189 on its Human Development Index. This measures dimensions including life expectancy, education access and standard of living.

Corruption contributes to poverty in the country. Although Equatorial Guinea has held multi-party elections since 1993, Obiang won his fifth presidential term in 2016 with 94% of the vote. His party also occupies every parliamentary seat. Furthermore, about 80% of the government’s revenue from oil went toward spending sprees on public infrastructure. Construction contracts, however, went to companies partially owned by government officials, including Obiang. Obiang’s son further compounded evidence suggesting government corruption by provoking money-laundering investigations with overseas spending. Thus, the wealth resulting from natural resources in Equatorial Guinea goes not to the people but to the government.

An Unsustainable Future

Many natural resources in Equatorial Guinea also face misuse and exploitation. For example, timber is one of Equatorial Guinea’s most abundant agricultural resources and its main export after oil. The IMF, however, indicated an unsustainable level of timber production in 2001. This resource composed most of the non-oil GDP that grew by 21% in 1999. Environmental damage in the Bioko region, where most of the timber grows, also supports claims of unsustainable exploitation. Despite this boom in timber, the country has mineral deposits that remain untouched due to a lack of extraction and refining equipment. This gold, titanium, manganese, iron ore and uranium could provide balance to the country’s resource exports with the right material.

Furthermore, the 2014 international drop in oil prices reversed GDP growth and caused a recession in Equatorial Guinea. Experts predict that its oil will also run out by 2035. This emphasizes the need for reform and sustainable sources of revenue from natural resources in Equatorial Guinea.

Partnering with the IMF

Recently, Equatorial Guinea partnered with the IMF to recover its economy by promoting sustainable, inclusive growth. The  $283 million program focuses on anti-corruption efforts and economic diversification. This will help monitor public finances, increase social spending and improve governance.

While this partnership with the IMF indicates progress, reform needs to be more widespread and supported internationally. The State Department names U.S. corporations ExxonMobile, Marathon Oil and Noble Energy as among the largest investors in Equatorial Guinea. These corporations and other international entities can use their influential positions to support economic reforms to sustain the country’s resources. They can also support political and social reforms to improve living conditions.

By investing more oil revenue into social programs, legitimate infrastructure projects and the agricultural sector, Equatorial Guinea could build a stable economic future and better living conditions for its citizens. Policy reform like this would also decrease poverty and preserve natural resources in Equatorial Guinea. This way, the country’s natural wealth will exist for generations to come.

Isabel Serrano
Photo: Flickr