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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

IMF in JordanJordan, bordered by Saudi Arabia, Iraq, Syria and Israel, is an Arab country in the Middle East. The country is on the East Bank of the Jordan River yet relatively landlocked. It has accordingly received a massive influx of Palestinian and Syrian refugees. Recently, the International Monetary Fund (IMF) in Jordan provided two different forms of economic relief to people in light of the ratio of debt to its gross domestic product (GDP) and the current pandemic. Read more about the IMF in Jordan below.

The Effects of the Pandemic on Jordan

Jordan’s economy will experience contraction in 2020 due to the effects of COVID-19. The pandemic-induced lockdown significantly impacted 250,000 daily-wage workers and businesses facing a liquidity crisis. It also delayed foreign investment, trade and tourism. The latter industry generates $5 billion annually for Jordan.

Only 11.3% of respondents in a UNDP survey claimed that their income was unaffected by the pandemic, which has significantly impacted young adults. In the survey, 38.3% of respondents experienced challenges getting clean drinking water, and 69.3% struggled with accessing basic healthcare.

Countries in the Middle East and Central Asia, including Jordan, will experience a 4.7% drop in its constant-price GDP, adjusted for the effects of inflation, in 2020. Additionally, the average size of economic relief programs in the Middle East was smaller than in other regions in the world. The Middle East and North Africa (MENA) oil-importing countries’ ratio of debt to income will reach 95% in 2020. Thankfully, the IMF provided $17 billion in aid to the area since the beginning of 2020. It also helped catalyze $5 billion from creditors.

The IMF in Jordan

Jordan’s four-year Extended Fund Facility (EFF) is a partnership between the Jordanian government and IMF staff, which focuses its $1.3 billion on growth, jobs and social safety nets. The loan program, approved on March 25, 2020, will create more jobs for women and young people. EFF funds finance the general budget, including health, education and social support, while also providing support to Jordan’s Syrian refugees.

Although the IMF in Jordan created the EFF funds before the pandemic, it changed the program to support spending on emergency outlays and medical equipment. The IMF in Jordan also helped secure congressional grants to ease annual debt, as public debt increased in the past decade to an amount equivalent to 97% of its GDP.

In addition, the IMF in Jordan approved $400 million in emergency assistance under the Rapid Financing Instrument (RFI) to fight the COVID-19 pandemic in May 2020. Due to the fall of domestic consumption during the outbreak, these funds answer companies’ and consumers’ borrowing needs. The government will spend the RFI funds through the national treasury account, where specific budget lines track and report crisis-related expenditures.

The emergency economic assistance allows for higher healthcare budgets, containment and support to vulnerable households and businesses. Moreover, it will ease external financing constraints and avoid loss in official reserves. The $1.5 billion balance of payment gaps, however, will emerge with increased public debt and a widened fiscal deficit.

Moving Forward

Despite the challenges presented by the pandemic, Jordan’s tech start-ups, global supply chains and exporting masks have helped its economy. Tech literacy, in particular, has been especially vital for Jordanian youth to find remote jobs. Moreover, the EFF program can ensure support for the people in Jordan by easing access to basic needs. The program will also help reduce the impacts of poverty by increasing social protection coverage on poor families.

Monetary and fiscal authorities in Jordan have reduced interest rates and delayed bank loan installments and tax payments due to the outbreak, injecting over $700 million in liquidity. Additionally, the country implemented a cash-flow relief program for companies. It also activated the National Aid Fund cash transfer program for daily wage workers.

Jordan has prioritized human safety for its citizens and refugees in the fight against COVID-19. So far, it has only had low to moderate numbers of per capita COVID-19 cases. Thanks to the help of the IMF in Jordan, the country seems to be on track to recover from pandemic.

Isabella Thorpe
Photo: Flickr

Healthcare in Sudan
Located in northeastern Africa, Sudan has long been a diverse region of interaction between continental Africa and the Mediterranean. The country is home to hundreds of sub-Saharan African ethnic groups, and political and security challenges in recent decades have impacted it. In addition to displacement, the scattered population has recently suffered several outbreaks of cholera, dengue fever, Rift Valley fever (RVF), chikungunya and malaria.

Healthcare in Sudan faces both unique geographical and financial barriers to access. Improvements in health indicators are difficult to measure since they vary by region. Additionally, efforts to improve healthcare access have met with challenges. These include ineffective implementation of policies and poor coordination between the health and education sectors.

Financial Barriers

Postcolonial Sudan had free access to healthcare until the 1990s when the government gradually withdrew healthcare service provision. To retain healthcare access, Sudanese people often relied on borrowing money from relatives, working more and reducing expenditure on other vital living expenses. Many resorted to buying partial recommended treatments, resulting in further health complications.

Despite reducing support for healthcare, the Sudanese government also invested in higher medical education around the same time. It opened 30 new medical schools and made Sudan the country with the highest number of medical schools in Africa. This investment was an important step in the sustainable progress of healthcare in Sudan. It ensured a steady increase of healthcare professionals for the growing population of 42 million. Consequently, the physician-to-patient ratio improved from 0.1 per 1,000 people in 1996 to 0.41 per 1,000 people in 2015.

In 1997, in an effort to compensate for reduced government spending on health, the Ministry of Health introduced social health insurance (SHI). By 2017, SHI covered most of the population in Khartoum state and a few others. Despite internal efforts, healthcare in Sudan receives little international support. Compared with 50% of healthcare expenditure in Rwanda, only 5.4% of Sudan’s healthcare expenditure comes from external aid. The Sudanese government spends a comparable amount on healthcare to other sub-Saharan countries. However, the cost of healthcare for Sudanese citizens remains high, and many are uninsured.

Current Challenges

Sudan is struggling to retain healthcare workers, many of whom leave the country for better living and working conditions. To reduce physician migration, the Sudanese government has offered various incentives to specialists, such as generous salaries, leading positions, housing, transport and free education for offspring. However, the government cannot afford to sustain these efforts in the long-term or extend these benefits to all physicians.

Michelle Bachelet, a U.N. High Commissioner for Human Rights, argued that sanctions that the U.S. imposed have barred Sudan from receiving international funding for healthcare and COVID-19 relief. Sudan is on the U.S. State Sponsors of Terrorism list, which makes it ineligible to access any of the International Monetary Fund-World Bank’s $50 billion Trust Fund. This fund is currently assisting vulnerable countries to fight COVID-19. Sudan’s health minister Akram Ali Altom has also confirmed that the healthcare system is in urgent need of funding.

Geographical Barriers

As in many African countries, the main challenges to healthcare in Sudan are in rural areas. There, conflict, lack of transport and uneven distribution of resources reduce the availability of healthcare workers. An estimated 70% of the total healthcare providers are in the capital city Khartoum, serving just 20% of the population.

One way that some Sudanese states have addressed the problem has been through the use of telemedicine. Telemedicine has the potential to break down geographical barriers and increase access to high quality, specialist care to patients. A two-year pilot program in Gezira introduced electronic health records into the area for the first time. More than 165,000 new patients were able to register for consultations.

Sudan has many challenges to overcome before telemedicine can become a national success. Consultants located in the Khartoum center were not responsive. Additionally, issues involving software licensing and equipment maintenance have hindered smooth operations. As Salah Mandil, who led the first telemedicine project in Khartoum, noted, poor collaboration between scattered telemedicine projects has hindered efficiency and growth. For instance, projects such as the Surveillance project (FMOH) and the eHealth project have begun independently in various areas. However, they do not communicate or coordinate efforts.

Despite challenges to stability and safety, Sudan has made steps toward improving healthcare access in the past decade. To ensure equal and sustainable healthcare in Sudan, it must address the remaining challenges through better cooperation, management and funding from the government and international aid organizations.

– Beti Sharew
Photo: Flickr

Covid-19 Crisis
The COVID-19 crisis or coronavirus pandemic continues to grow as the number of global cases rises. With U.S. President Donald Trump approving a fiscal stimulus package of $2.2 trillion, the dire economic ramifications of the COVID-19 crisis grow more significant. Yet, there are disproportionate economic impacts on the world’s poor that highlight the implications of COVID-19 on global poverty.

What the COVID-19 Crisis Means for Global Poverty

Unfortunately, the aftershocks of COVID-19 will destabilize the world economy even further during the beginning of 2020 and beyond. The Asian Development Bank already estimates that the collective global impact of the COVID-19 crisis will be between $77 billion to nearly $347 billion in economic output costs worldwide.

The World Economic Forum calls the COVID-19 crisis a “pandemic in the age of inequality” as it especially impacts countries lacking universal health care or adequate health care systems. Many workers have lost work and are cannot even take paid sick leave of any kind.

“[I] fear hunger will kill us before coronavirus,’’ says Momanned Sabir, a young street entrepreneur in Delhi who owns a yogurt-based drink shop. Her words come in response to the three-week lockdown that Indian Prime Minister Narendra Modi imposed. Poverty and unemployment impact many daily wage earners and workers in informal and unorganized sectors. This is particularly evident in nationwide lockdowns from India, China, the Philippines, the Middle East and European countries.

Among the 50 countries under the United Nations’ Least-Developed Country Status (LDC), more than 900 million remain vulnerable to the risk of COVID-19. This is due to the poor health care infrastructure and resources to support a large-scale health crisis. Most importantly, many countries continue to be in short supply of testing kits.

U.N. Secretary-General Antonio Guterres has appealed for $2 billion to help the world’s poor who have been impacted by COVID-19. World Health Organization director Tedros Adhanom Ghebreyesus implores G20 nations to offer aid and support low and middle-income countries.

Future Course of Action

Indian Finance Minister Nirmala Sitharamn has proposed an economic stimulus package for financial relief to women and vulnerable groups. For example, there are welfare systems that distribute free gas cylinders, wheat and rice for up to three months. For women in India’s Jan Dhan banking system, the government offers compensation of 500 rupees for the next three months. In addition, India has issued a bailout package of $22 billion to help cushion the economic impacts of its lockdown, especially as several daily wage and unorganized workers have lost out on work and pay during this period.

The number of testing kits will also increase soon due to the invention of a new working test kit by Dr. Minal Dhakave Bhosale. India will thus rely less on more expensive imported kits. There will be a distribution of more than 100,000 kits every week from now on.

Moreover, the International Monetary Fund (IMF) has provided $50 billion to control the COVID-19 crisis in low-income countries that seek support through its emergency financing facilities. Along with the IMF, the World Bank is also providing debt relief to poor countries through loans and grants. The group is also working with more than 35 countries to address the economic implications of the pandemic. The World Bank also plans to spend a whopping $160 billion over the next 15 months and is already securing fixed amounts for wide-scale mitigation efforts and projects.

Oxfam International is working on ways to use its knowledge and expertise in public health to better address the ongoing crisis, especially after its work during other outbreaks like Ebola and the Zika virus. Oxfam is also assisting in the delivery of sanitation services and offering accurate information to people.

Looking to the Future

To help those who have lost jobs due to COVID-19, the Asian Development Bank recommends focusing on strengthening social assistance. It also urges attention to upgrading labor market policies and programs.

The COVID-19 crisis could also impact the way the world addresses global poverty going forward, especially given the potential global impacts. It will take long-term development strategies to get low-income workers and poorer communities back on their feet.

Shivani Ekkanath
Photo: Flickr

Corruption in Ukraine
Massive corruption in the Ukrainian government has left Ukraine and its people in a state of developmental stagnation for decades. Despite this, in recent years, Ukraine has demonstrated its willingness to reform and change for the better through countless efforts to expose and clean up these corruptions. These 10 facts outline the specifics of corruption in Ukraine.

10 Facts About Corruption in Ukraine

  1. Corruption: According to Transparency International (TI), as of 2018, Ukraine ranked 120 out of 182 countries in TI’s Corruptions Perception Index, making it the second most corrupt country in all of Europe. A survey from Freedom House also indicated that the level of corruption in Ukraine had only slightly alleviated since the fall of the particularly corrupt Yanukovych presidency in 2014.
  2. Tax Reforms: Tax reform continues to be a major barrier in the fight against corruption in Ukraine. Outrageous tax schemes and gross misuse of funds led to a 35 percent VAT compliance gap in the 2012-2013 fiscal year, compared to the 6 percent gap recorded in 2011. In 2014, new authority investigations found that $37 billion of the country’s overall budget disappeared due to fraudulent tax schemes. Experts speculate that during Yanukovych’s presidency, a total of $9 billion went unaccounted for and at least $2 billion of that went into the pockets of Yanukovych’s family coffers.
  3. Banking: Another major contribution to the corruption in Ukraine lies within its banking sector. The severity of corruption within Ukrainian banks became especially apparent during the 2014 banking crisis. Most banks involved themselves in the money-laundering Ponzi schemes. The banking systems were so corrupt that out of 182 of the nation’s banks, 98 of them have been or are in the process of being completely liquidated. Strict anti-money-laundering laws and tighter control over cash-flow have helped alleviate some of this corruption. In addition, banks that survived the crisis are now liable for any losses their clients suffer due to fraudulent banking practices.
  4. Government Accountability: Quintagroup aimed to reach a higher level of government accountability by creating a transparent electronic procurement system for officials to use. The system, ProZorro, allows users to view all procurements, government contracts and funds from electronic platforms, ensuring the transparency of public funding and procurement procedures. The Ministry of Infrastructure, Ministry of Defense and Ministry of Economy are among some of the government entities currently in the system. Since its 2014 launch, the system has saved Ukraine $1.1 billion in costs to the state, annually.
  5. Gas and Natural Resources: Ukraine’s elite took advantage of the discrepancy between subsidized and market gas prices, skimming billions of dollars from state funding. One major gas company, Naftogaz, is largely responsible for creating a domestic reliance on Russian-imported gas by penalizing domestic gas production and discouraging efficient energy methods. To combat this type of corruption in Ukraine, the IMF (International Monetary Fund) stepped in and insisted that the country equalize household and commercial gas tariffs and sought to improve transparency in the gas markets. With the reforms implemented by new officials, Naftogaz became a profitable contributor to the state budget and in 2018 accounted for 19.3 percent of state revenue. That revenue allowed UVG (a gas production subsidiary of Naftogaz) to boost domestic production by 4.2 percent in 2017.
  6. De-Monopolization: During Yanukovych’s presidency, the oligarch’s established formal and informal monopolies, both locally and nationwide. These monopolies formed under informal business agreements that provided corrupt officials total control over a sector of their choosing. In 2015, the State Anti-Monopoly carried out an examination of the condition of Ukraine’s various markets. The results indicated that only 42.7 percent of all markets were still competitive and 9.8 percent of them were still completely monopolized by corrupt government officials.
  7. Justice Systems: Distrust for the justice system in Ukraine is widespread. In fact, Ukraine ranked 101 out of 109 countries in the 2017 Index of Public Integrity. Opinion polls taken in 2016 recorded that only 3 to 5 percent of the population had any trust in the country’s justice system. In the same year, Ukraine took its first steps towards judicial improvement with the establishment of a new Supreme Court. This did little to gain public trust, however, as recruitment of new judicial officials was only half-way transparent. The Public Integrity Council of Ukraine found that 25 out the 113 new judges were unfit.
  8. Higher Education: Surprisingly, another major facet of corruption in Ukraine lies within the country’s institutions of higher education. Bribery demands from professors, deans and department boards have increased in recent years and show no sign of slowing down. According to a student/teacher violation monitoring website, students attending these institutions reported more than 400 violations, 41 percent of them being related to bribery. To combat this widespread corruption, the Ukrainian Parliament passed a law in 2012 that required institutions to post all financial documents online. Despite this effort, only a very small portion of universities actually complied with the new requirement.
  9. Deregulation: Since the Maiden Revolution of 2014, Ukraine has abolished several corrupted agencies and costly, dated regulations through deregulation. Among the various government agencies that Ukraine abolished for high levels of corruption were the Price Inspectorate, Traffic Police Inspectorate and the Real Estate Registration Agency. Between 2014 and 2015, the country also got rid of price regulations while it reassessed and updated others accordingly.
  10. Law Enforcement: Reform in Ukraine’s law enforcement sector is slow-moving and still largely operates under communist influence. But, in 2014 an organization known as the patrol police emerged. The patrol service has developed a positive reputation for recruiting and training officials according to a much higher standard than officers working under the country’s primary police force. In the years since its creation, the patrol service has enlisted 13,000 officers in 33 different cities nationwide. The organization accounts for only a small portion of the country’s law enforcement, but its continuing growth, increased backing from international partners and civil society organizations have proven it to be an entity dedicated to ending corruption in Ukraine.

Despite endemic corruption in Ukraine, its people have clearly not given up on improving their quality of life through reform. Since 2014, Ukraine has taken strides, big and small, to combat corrupt systems and has proven that it is capable of change.

Ashlyn Jensen
Photo: Flickr

erasing tax havens
Currently, about 50 percent of countries have poverty rates that are lower than 3 percent. Despite the declining rate of global poverty, poverty rates in poor countries remain high. The existing global system allows for both wealthy companies and individuals to benefit within the global economy through tax avoidance with the use of tax havens, but erasing tax havens and having corporations pay more legitimate and realistic taxes could eliminate global poverty and inequality.

What are Tax Havens?

Tax havens are countries or territories where corporate houses register and operate. According to tax laws, these corporate houses do not have to pay taxes on the profits they make in the area where they operate. The corporate houses do not pay taxes based on the overall group economic performance of the companies but rather based on individual entity. The multinational companies also have an element of secrecy in that tax havens share limited to no information regarding finances with foreign tax authorities.

Effects of Tax Havens

The use of tax havens is not just unique to multinational companies; some wealthy individuals utilize the system as well. The mass amounts of unpaid taxes are denying the world’s poorest governments billions of dollars. In February 2015, a few rich individuals with ties to Kenya were storing more than $560 million in bank accounts in Switzerland. The hidden wealth in tax havens could salvage the lives of four million children and 200,000 mothers in African countries. The gap between the wealthy and the poor in the world grows wider every year, and tax havens primarily fuel it. This is considering that $7.6 trillion of personal wealth hides in offshore accounts that tax havens run. This negatively impacts the fight to eliminate global poverty.

In the 1990s, 5 to 10 percent of global profits from multinational companies shifted, meaning that the jurisdictions where the economic activity took place proclaimed the profits for tax purposes. By the early 2010s, 25 to 30 percent of multinational companies’ global profits shifted. According to the International Monetary Fund, the active practice of corporate tax avoidance around the world has put the global revenue losses between $200 billion and $600 billion and lower-income countries make up around $200 billion of the global revenue loss. There are approximately 650 million poor people globally who live beneath the international poverty line of $1.90 per day. If a new country emerged with a Gross Domestic Product of the $200 billion revenue from low-income countries due to tax havens, the country could eliminate global poverty just by giving $2 every day to those 650 million people.

The Unitary Tax Approach

One way multinational companies are trying to curb tax avoidance is through the apportionment reform programs or the unitary tax approach. Through the unitary tax approach, global governments would assess tax havens’ profits as a group rather than as individual entities. This method would apportion the profits that the tax havens make as a group to each of the countries where the companies operate based on how much economic activity took place in the respective countries.

In using the unitary tax approach, multinational companies would receive taxes where employees do the actual work rather than where the ledgers hide. Due to the fact that the economic activity that the tax havens are carrying out in countries would be more authentic, a greater deal of the global shares of the corporation’s profits would distribute to the countries, and then each country would have more reign to exercise their taxing rights and tax its shares of global profits at a more reasonable rate. A global shift to the unitary tax shift approach overall would benefit not just the U.S., but also low-income countries in the fight to eliminate global poverty.

Erasing tax havens is necessary as they are detrimental to the global system in that they rob governments of the opportunity to eliminate global poverty and socioeconomic inequality by depriving governments of needed public service resources such as health and education. Erasing tax havens is vital to eliminating global poverty, and global tax laws need to modify to benefit many, not just a few.

– Cydni Payton
Photo: Flickr

Agriculture in North Korea
A massive famine struck North Korea in the 1990s with a death toll of more than one million. While grain production has nearly doubled since the famine, many agricultural scientists and international humanitarian aid liaisons believe it is not enough to sustain the nation. According to the World Health Organization, two out of every five North Koreans were undernourished in 2017 and 28 percent of North Korean children are stunted in growth due to a “largely irreversible outcome of inadequate nutrition and repeated bouts of infection during the first 1,000 days of their life.”

After Kim Jong Un took power in 2011, the government is more willing to admit its administrative shortcomings in perpetuating food insecurity across the country. In 2018, Former Premier Pak Pong Ju, a member of the ruling Korean Worker’s Party and longtime member of the political elite hierarchy, admitted an agricultural crisis had formed a chokehold on the North Korean economy. In a report, he mentioned that “Some have failed to conduct seed production and management in a responsible way and also fell short of doing proper strain distribution in line with climatic conditions and characteristics of fields.” With lower food production, many locals are going hungry and the poorest are affected the most.

North Korea has many tactics underway in order to improve agricultural conditions in their nation. Here are three strategies for improving agriculture in North Korea.

  1. A 5-Year Strategy – North Korea’s 5-year strategy for improving agricultural development is already underway. The plan includes increasing fruit, vegetable and mushroom cultivation along with improving domestic animal breeds. Furthermore, North Korea plans to upgrade fishing boats and farm equipment in order to use modern scientific methods. As 2018 came to an end, North Korea has already improved plant species with high-yield, created agricultural machinery and scientific farming, increased greenhouse farming production and increased livestock and development of fish aquaculture. They are also in the second stage of constructing the South Hwanghae Province waterway.
  2. Juche Farming Method –  The Juche Farming Method uses the nation’s government style ideals to give farmers a plot of land and a house to live in on collective farms in exchange for the food they produce. Additionally, in just six months after the method was implemented, 650 greenhouses were built across the country allowing for four to five harvests a year. Without greenhouses, locals say the soil is too salty and not sufficient enough for growing crops. Salt increases the acidity in plants which results in poor harvests.
  3. International Aid – International Aid can improve agricultural development in North Korea significantly. The American Friends Service Committee’s Publication and Advocacy Coordinator, Daniel Jasper, says his organization is working on multiple techniques to improve North Korea’s agriculture. For example, one of the organization’s projects is rice cultivation and the introduction of plastic trays. The project has been very successful, raising yields 15 to 20 percent in some farms. North Korea is also interested in joining institutions such as the International Monetary Fund (IMF) and the World Trade Organization (WTO). These institutions would allow North Korea to gain additional international aid.

Agriculture in North Korea has greatly improved since the famine in the 1990s, but the nation’s mountainous geography still makes farming difficult. With 11 million North Koreans malnourished, it is vital that the nation continues to correct the problems within its agricultural industry.

– Maura Byrne

Photo: Unsplash