Overview: Building resilience to global shocks
COVID-19 shaped and tested the course of development co-operation in 2020 and set the agenda for 2021 and beyond. This overview provides a snapshot of the financial and programmatic responses of development actors. It also outlines the funding and co-ordination challenges ahead as new needs compete for stretched international support for sustainable development. The chapter suggests ways forward for bold action and systemic reform by the international development community to build resilient national and international systems capable of coping with global shocks and providing global public goods while reinforcing the fundamental building blocks for sustainable development.
The pandemic – or a pandemic – was forecast,1 but the world was not prepared. At the time of writing, the virus has killed over 1.5 million people (WHO, 2020[1]), overwhelmed health systems, and brought economies and societies to a standstill. Global gross domestic product (GDP) is expected to decline 4.2% in 2020 (OECD, 2020[2]). Working hours lost equate to 495 million full-time jobs (ILO, 2020[3]). An estimated additional 115 million people could be pushed into extreme poverty, living at or below USD 1.90 a day (World Bank, 2020[4]) and 270 million people will go hungry this year as a result. These devastating impacts are harsh proof of the value of prevention, in both human and financial terms. Preparedness might well cost billions per year, but the costs of COVID-19 are already in the trillions and counting. Put another way, the amount the world is losing now due to a single crisis is costing as much as 500 years’ worth of investment in preparedness for global health crises (Global Preparedness Monitoring Board, 2020[5]).
International debates on the future of development co-operation reiterate the pressing need to work together to beat the virus and emerge from the pandemic better prepared and equipped to tackle and mitigate new pandemics and other global threats. By placing renewed emphasis on strengthening resilience – the ability to withstand, absorb and be transformed positively by shocks – in communities, institutions, and economic, social and environmental systems, international development actors can play a critical capacity-building role.
Achieving the Sustainable Development Goals (SDGs) by 2030 has suddenly become much more challenging (UN, 2020[6]). Financing gaps for sustainable and inclusive development have widened further and developing countries’ fiscal and policy capacities are too limited to match the scale of demand and needs (OECD, 2020[7]). The international development community has a critical choice to make between pushing boundaries to meet rising demands or trying its best within the boundaries it knows.
The pandemic’s silver lining might just be that people and leaders have grasped that livelihoods and the well-being of the planet are interconnected. This awareness could translate into greater international solidarity and action to deliver the long-discussed systemic reforms that can address other high-impact crises and existential threats.2 The international effort to ensure equitable access to a COVID-19 vaccine is a concrete case in point: only international solidarity to achieve a global purpose will protect everyone from the virus and ultimately beat it (See in My View by Berkley). Policy makers have a mandate to walk their talk on how international co-operation and solidarity benefit everyone: 81% of respondents to a 2020 survey in advanced economies think that countries should act as part of a global community (Bell et al., 2020[8]).
The myriad of problems and risks that spill across national borders are well documented. Whether impacts stem from climate change, loss of biodiversity, rising inequalities, violence and conflict, or growing divides in the global digital economy, they cause immense human suffering and physical damage. The path to recovery, as affirmed by the 2020 OECD Ministerial Council, must be strong, resilient, green and inclusive (OECD, 2020[9]).
Analysis of COVID-19 impacts and responses to date points to an array of critical issues for development strategies and pathways to the SDGs – some revealed by the pandemic and others created or made worse by it. For many of the world’s poorest and most vulnerable women, men and children, COVID-19 is not the primary threat to their lives and livelihoods. The crisis is exacerbating pre-existing economic and group-based inequalities between and within countries, earning it the moniker the “great revealer” (Nabarro and Atkinson, 2020[10]) (Box 1). Progress towards the SDGs had been slowing even before 2020 in the context of an increasingly complex and strained landscape for multilateral co-operation (OECD, 2019[11]). Pressure was also growing to mobilise and catalyse more public and private finance for sustainable development and introduce more stringent incentives for greater financial alignment to the SDGs and climate goals (OECD, 2020[7]; 2019[11]).
The global and multidimensional nature of the crisis raised expectations that it would trigger reforms in the development co-operation system (UNDP Seoul Policy Centre, 2020[12]; Wilton Park, 2020[13]; World Economic Forum, 2020[14]). Insights in this volume suggest that it has accelerated some reforms and clarified the importance of rigorously applying best practices and pursuing interventions that have proven effective in the past. For example, the humanitarian-development-peace nexus is making progress as an organising framework for emergency response, recovery and resilience building (See Chapter 7). Pursuing coherence between domestic and international policies, a practice long championed by the OECD,3 has also gained attention in the effort to mitigate the health, economic and societal crises (See Chapter 4). This moment of crisis presents a chance to re-evaluate the governance and role of international institutions in mitigating and tackling global challenges and delivering lingering reforms to be more resilient, responsive and inclusive of all relevant actors and voices (See Chapters 5 and 6).
Developing country responses and international support evolved significantly over the course of 2020. Early in the pandemic, statements by the OECD Development Assistance Committee (DAC) and other bodies recognised that COVID-19 was amplifying and expanding existing levels and forms of human suffering, particularly for the most vulnerable (OECD, 2020[15]; 2020[16]). This was especially so for informal workers and women and girls on the front line of care economies, thus posing a risk of increased gender inequalities (OECD, 2020[17]); (Box 1). Containment measures affected operations of development actors worldwide, requiring them to make major management and delivery adjustments and to rely more on local partners and staff (See Chapter 4). Avoiding a health crisis in developing countries was an urgent priority, but it became quickly apparent that development co-operation should safeguard and ensure continuity of support for pre-existing development, basic human needs and delivering the SDGs.
Development losses were swift and severe, while other crises compounded needs
The COVID-19 socio-economic crisis caused swift, severe development losses touching all sectors and policy areas (UN, 2020[6]; Bill & Melinda Gates Foundation, 2020[18]). Human development will decline sharply and progress could be set back by three to ten years, according to estimates based on the United Nations Development Programme’s Human Development Index (See Chapter 2). Impacts have varied across regions. For example, schoolchildren in low- and lower-middle-income countries have already lost nearly four months of schooling since the start of the pandemic, compared to an average of six weeks among high-income countries (UNESCO, 2020[19]). Positive GDP growth in 2020 is expected only in the region comprising the People’s Republic of China and the Association of Southeast Asian Nations, though Asia is projected to see the highest number of people falling below the poverty line in the short term (World Bank, 2020[4]); GDP is likely to decline by 3% in Africa and by 5% in Latin America and the Caribbean. Long-term regional impacts are also likely to vary. For example, it is projected that the Latin America and the Caribbean region, where the virus itself has had a comparatively bigger direct and economic impact, is unlikely to recover quickly due to pre-pandemic debt and moderate growth (See Chapter 1).
As international political attention shifted to the pandemic, crises and issues that were important before the outbreak were deprioritised (OECD, 2020[20]). Wars are still being fought in Libya, the Syrian Arab Republic, Yemen and elsewhere (OECD, 2020[20]). But with United Nations (UN) special envoys unable to travel, diplomatic work was curtailed and mediation initiatives (e.g. in the Bolivarian Republic of Venezuela) were cancelled. Global refugee resettlement was put on hold (UNHCR, 2020[21]), leaving forcibly displaced people even more vulnerable (OECD, 2020[22]). Unresolved crises in fragile and conflict-affected contexts were at risk of being forgotten or worsening in 2020.
The crisis is having ramifications for extreme poverty, hunger, multidimensional and intersecting inequalities, and access to healthcare
An additional 88 million to 115 million people will fall into extreme poverty. Nearly 700 million people were already living in extreme poverty, measured as living on less than USD 1.90 a day, before the pandemic (OECD, 2019[11]; World Bank, 2020[4]). Now, the pandemic-caused spike will require national and international strategies to adjust to take into account the millions more people who will become poor, including the estimated 170-220 million additional people who will fall below the poverty line of USD 3.20 a day (Lakner et al., 2020[23]). Nine of the ten countries likely to see long-term impact of COVID-19 on extreme poverty by 2030 are in Africa (Kharas, 2020[24]). The geography and demographics of extreme poverty may also change, as those affected are more likely to be urban, have higher levels of education and are less likely to work in agriculture than those in extreme poverty before COVID-19 (World Bank, 2020[4]).
Hunger is expected to increase again in 2020, with COVID-19 creating new hotspots. The number of countries on the Global Hunger Index with alarming or extremely alarming levels of hunger grew from 5 in 2019 to 11 in 2020 (Global Hunger Index, 2020[25]; von Grebmer et al., 2019[26]). Natural disasters and emergencies such as desert locust infections in East Africa, droughts and floods in all developing regions from South Sudan to the Philippines and Guatemala are reducing food security. But the pandemic could drive up the number of people faced with acute food insecurity from 135 million before COVID-19 to 270 million people in 2020 (UN, 2020[27]). New hunger hotspots are emerging, particularly in middle-income countries hit hard by the pandemic and containment measures, among them Brazil, India and South Africa (Oxfam, 2020[28]).
Intersecting gender and other inequalities have exacerbated impacts. Women make up 70% of the professional healthcare workforce, and provide the majority of unpaid care, putting them at greater risk of infection than other groups (OECD, 2020[17]). They also face higher risk of income loss and increased domestic violence, with estimates of an additional 15 million cases for every 3 months of movement restrictions (OECD, 2020[17]). A survey in Bangkok found that many informal workers who worked during the crisis and received cash grants nonetheless had to sell assets, borrow or spend savings to survive, leading to an erosion of capital that limits their recovery capacity (See case study by Roever and Tulaphan). Rohingya refugees in Bangladesh were not only more susceptible to the virus due to cramped living conditions, but could not access official or trusted health advice due in part to an Internet ban that made the camps breeding grounds for misinformation about the virus (See case study by Mahmud).
Health systems are under strain, with consequences for access to primary healthcare and other life-saving treatments. The UN projects increases in maternal deaths and rates of adolescent pregnancies due to reduced access to sexual and reproductive healthcare (2020[29]). There is some evidence as well that higher death rates have resulted from difficulty accessing treatment for HIV/AIDs (WHO, 2020[30]), cholera (UNICEF, 2020[31]) and non-communicable diseases (WHO/UNDP, 2020[32]).
Developing countries had limited fiscal capacity and policy options
Though the virus did not impact all developing countries as badly as initially feared,4 where health systems were weak, the assumption that they would be overwhelmed was enough to drive stringent containment measures (OECD, 2020[16]).
Disparities in national capacities to finance containment and other measures to suppress the pandemic have limited countries’ abilities to soften the blow of the pandemic’s socio-economic effects on livelihoods and on vulnerable groups. The inequality carries over to economic consequences induced by the global recession. Many developing economies are primary commodity exporters impacted especially by the global slowdown in trade (Gondwe, 2020[33]), which is projected to decline by 20% from its 2019 value of USD 25 trillion (Kituyi, 2020[34]). An oil price shock is hitting developing countries that are net exporters of oil (OECD, 2020[35]). Reductions in remittances5 as well as in tourism and domestic resource mobilisation, combined with the near collapse of international financial flows,6 also severely curtail the amount of financing available to developing countries to put economic and social support packages in place.7 Coupled with constraints on raising credit, the worsening economic situation increases developing countries’ dependence on external support (Goldin and Muggah, 2020[36]). Freeing up fiscal space became crucial as the crisis unfolded and was partially addressed through the Group of Twenty (G20) Debt Service Suspension Initiative (DSSI) (World Bank, 2020[37]).
Though governments stepped up social protection policies in response to the crisis, they were quickly oversubscribed and failed to reach the most vulnerable. Policy measures taken by developing countries to support populations, such as cash transfers or supports to business, largely reflect their economic structures and their limited fiscal capacity (See Chapters 1 and 3). The resulting inequality in spending capacity is stark. On average, COVID-19 social protection spending per capita has been USD 4 for low-income countries, USD 28 for lower middle-income countries, USD 57 for upper middle-income countries and USD 695 for high-income countries (Gentilini et al., 2020[38]).
Development co-operation had to balance emergency response and continuity of existing programmes
COVID-19 impacted development co-operation in different ways. It has shaken up working practices, partnerships and business models and put unprecedented strain on public finances and development co-operation budgets (See Chapter 4). Repatriation of international staff and travel restrictions in partner countries made it more difficult for development agencies to get the data and results information they needed to guide programming, manage risks and learn which responses were effective (OECD, 2020[39]). Some development co-operation actors displayed creativity in reallocating budgeted funds and using contingency budgets. To balance programme continuity for the sustainable development agenda and pandemic response, COVID-19 specific actions were integrated into ongoing programmes (See Chapter 4).
Development co-operation agencies showed impressive agility in responding to the health and humanitarian aspects of the pandemic through bilateral and multilateral channels and partnerships. Testing was ramped up using rapidly accredited local laboratories, drugs were approved, epidemiological models for various scenarios were developed, airlifts of supplies and protective equipment were organised. At the same time, humanitarian corridors were set up and humanitarian assistance programmes adapted or expanded to deliver cash, food, water, sanitation and other essential services and to protect populations, including from domestic and gender-based violence (See Chapter 4). By the second half of 2020, priorities shifted to resuming or expanding public health and education programmes, providing longer term income support, investing in information systems to monitor the wider effects of the virus, and protecting jobs and livelihoods.
Collectively, DAC members committed to strive to protect official development assistance (ODA) levels (OECD, 2020[15]). At the November 2020 High Level Meeting of the DAC, countries reaffirmed this commitment and reiterated the importance of ODA to address the immediate health and economic crises and support longer term sustainable development (OECD, 2020[40]). However, ODA levels are insufficient and several development and humanitarian initiatives are underfunded (see Figure 0.1).
Source: Authors
There are many lessons and new ways of working which could outlast the pandemic – if they are learnt and sustained. The international response to COVID-19 has so far been most effective where it built on key principles and good practices for effective development co-operation and particularly where development actors had sufficient flexibility, evidence and willingness to adapt actions to changing circumstances (See Chapter 4). There is no shortage of evidence or guidance on how international development should innovate and adapt priorities and, in so doing, avoid wasting the window for bold action that the crisis has thrown open.
Valuable insights can be drawn from the causes and impacts of the pandemic and responses to it. By analysing and learning from them, international development actors will be better equipped to design more effective strategies that support global resilience to shocks over the long term. Contributors to this report offer an array of recommendations: greening stimulus packages so that recovery activities do not aggravate climate change (See case study by Casado-Asensio, Kato and Sedemund); pursuing One Health programming which advocates cross-sectoral collaboration to achieve a broad range of public health, food security and trade outcomes (See Chapter 8); and integrating developing countries better into supply chains to reduce dependence and diversify economies (See Chapter 5).
Closing the digital connectivity gap has become even more crucial as a means of providing and accessing public services and assistance during the crisis. Digitalisation is a particular challenge in Africa, which has just 25% broadband penetration (See Chapter 1 and case study by Fafunwa). Addressing the enabling environment, for instance through electricity access and a supportive legal and regulatory environment, will be key (Cheney, 2020[41]). Fafunwa also cites digital skills, ID and a trust framework for interoperability as important elements to close the digital divide in Africa.
Resilience has gained prominence on the international agenda due to growing recognition of the interconnections among different types of risks, such as violence and conflict, climate change, disasters, and specific risk factors such as urbanisation and ageing populations (OECD, 2013[42]). While it is not a new concept for development co-operation, the multidimensional impacts of this crisis call for enhanced commitment to build resilience in immediate responses and long-term recovery efforts (UNDP, 2020[43]). Such a commitment would mean conducting joint risk-informed analysis, pursuing cross-sector programming with long time horizons, and dedicating more financing underpinned by flexible mechanisms (See Chapter 7).
More integrated policies working across sectors
Policies must enable governments and policy makers to tackle several problems at once: beat the virus and support recovery, ease the multiple stressors which cause crises, and improve resilience to other global threats (OECD, 2020[44]). Moreover, as a zoonotic virus that transfers from animals to humans, the virus that causes COVID-19 reveals the centrality of simultaneously keeping animal, human and environmental dimensions of health in balance (See Chapters 2 and 8). Multi-sector policies informed by analysis of exposure and resilience to shock across multidimensional indicators can be instructive for determining where to focus development co-operation generally and in response to a crisis (See Chapter 1).
Good practice in working cross-sectorally means adapting resource and reporting requirements and placing co-designed research and communities at the centre of programmes. A project in Lao People’s Democratic Republic, for example, demonstrates that community-led interventions that translate gender, knowledge, cultural practices and risk perception into robust disease surveillance and control programmes are instrumental to truly understanding disease drivers. Reviews of ONE Health programmes in Lao People’s Democratic Republic, Fiji, the Philippines, and Viet Nam show positive results from holistic interventions that go beyond disease control, achieving broader environmental and livelihoods benefits (See Chapter 8).
Development policies and programmes that are consistent with international climate and environmental objectives will support a recovery that builds forward better and greener (OECD, 2020[40]). Addressing environmental degradation and the climate emergency is a prerequisite for more resilient recovery and sustainable development (See case study by Casado-Asensio, Kato and Sedemund). The path to net-zero emissions and away from harmful carbon subsidies is one of the most significant growth and development opportunities of 2021 and beyond. Development partnerships should focus on making sure greener options are available to all countries, sharing information with countries about alternative, sustainable options and their development benefits, and overcome a bias towards investments and technologies that risk locking countries into unsustainable infrastructure over the medium term.
The crisis also highlights the need for more deliberate strategies and investment in the everyday economy – the activities of people and households at the broad base of the economic pyramid (See In My View by Songwe and case study by Roever and Tulaphan). The presence of large informal economies is a key determinant of a country’s capacity to support populations economically during the crisis.8 This reality makes it extremely difficult to channel support through taxation or other measures to the poorest people and to micro-, small and medium-sized enterprises (See Chapter 3). Effective investments in the informal economy will be central to inclusive recoveries (OECD, 2020[9]). Strong coalitions of informal workers, civil society and governments, for example, should be an integral part of inclusive recovery (See case study by Roever and Tulaphan).
The impacts of the pandemic are so far-reaching that strategies to meet the UN pledge to leave no one behind will need to be re-examined, with a more strategic focus on equity, reducing absolute and relative poverty and adjusting strategies to different contexts, drivers and solutions. In particular, ensuring a gender-equal recovery would generate high economic and development returns. Pre-pandemic estimates show that if women were to be able to exercise their full working potential, gains to the world economy could be as high as USD 28 trillion (Woetzel et al., 2015[45]). Recovery processes that put youth in the driving seat, as called for by EU Commissioner Jutta Urpilainen (See In My View by Urpilainen), would benefit from new approaches to leadership championed by young people and provide a more accurate picture of the realities young people are facing (See case study by Calarco).
Ways forward for international development policies
Agree an updated strategy to reach the SDGs that is coherent with climate targets. Spain and other OECD members are advocating for a special meeting of heads of state at the 2021 High Level Political Forum to reboot the SDGs (Spanish Ministry of Foreign Affairs, European Union and Cooperation, 2020[46]).
Recognise that sustainable solutions cannot be delivered by one sector alone, and adjust toolkits for more collaborative and transdisciplinary ways of working across multiple sectors.
Support the everyday economy and use the right holistic strategies and community-based engagement to include voices and agency of women, youth, refugees and other marginalised communities.
Supporting country systems to build resilience
The cascading effects of the crisis underline how connected systems are and made those systems’ weaknesses more obvious (OECD, 2020[44]). A clear lesson from COVID-19, and previous crises, is that government capacity is a key factor in shaping effective crisis responses (Fukuyama, 2020[47]). Therefore, reforms leading to strong and well-functioning country systems are critical to build resilience to future crises, both within countries and to avoid negative externalities more globally (See Chapter 1, case studies by Anderson and DeTollenaere, and Strupat and Marschall). For all its negative effects, the crisis also offers opportunities to build on emergency and short-term measures to expand social protection to the most vulnerable and strengthen health security against future pandemics. It also highlights the need for well-resourced data systems.
Strengthen health and social protection systems for the long term
The pandemic has shown that building strong health systems and making progress towards the goal of universal health coverage are urgent priorities (UN, 2020[48]) – not only to have surge capacity to deal with unexpected shocks like COVID-19, but to strengthen health security for the future (OECD, 2020[49]). A rising number of low-income countries face the double challenge of lasting infectious diseases and the growth of non-communicable diseases (OECD, 2020[49]).
The political and strategic importance of expanding the reach of social protection has also increased, as demonstrated by a meeting of experts in September 2020 on the establishment of a Global Fund on Social Protection for All (Gurría, 2020[50]). Social assistance interventions such as cash programmes can fuel inclusive growth by lifting credit constraints and encouraging investments, providing greater security and certainty, and improving household resource allocation and dynamics (OECD, 2019[51]). While social protection (SDG Target 1.3) is proving to be a crucial instrument for cushioning the impacts of the crisis on livelihoods and economies, lower resources and poor coverage constrain reach in developing countries (See Chapter 1 and case study by Strupat and Marschall).
However, it remains to be seen how governments would raise the resources to pay for universal healthcare and social protection, which rely on predictable, long-term investments, and domestic spending in particular (OECD, 2020[52]). It may be more feasible to start with staged and incremental strategies that expand access to pro-poor social assistance, to create social protection floors,9 which are thought to be affordable, and extend health service coverage incrementally as revenues grow and health systems get stronger and more efficient (Barber et al., 2020[53]).
As significant contributors to social sectors in least developed countries and other countries most in need, development co-operation actors should review their priorities and investments in country social systems. Commitments to support the expansion of social protection in low-income countries have increased from 0.7% of total bilateral ODA in the late 1990s to a peak of 1.8% in 2010 before falling and remaining relatively stable around 1% up to 2018 (OECD, 2020[52]). However, the International Labour Organization calculates that developing countries would need to invest an additional USD 1.2 trillion to close the annual financing gap in social protection in 2020 and that this financing gap has grown by approximately 30% since the onset of COVID-19 (ILO, 2020[54]). On average, OECD-DAC countries committed 2% of bilateral ODA for health systems in the period from 1996 to 2018 (OECD, 2020[52]), which is complemented by multilateral contributions to social sectors totalling approximately USD 28 billion in 2018 (OECD, 2020[55]). While ODA had shifted away from funding health systems towards battling infectious diseases, the pandemic has revealed the need for a rebalancing to help make up the estimated annual shortfall of USD 200 billion to achieve SDG targets for primary health globally (OECD, 2020[52]).
The COVID-19 crisis spurred many countries to expand, innovate and supplement their social protection systems as an emergency response. By September 2020, an estimated, 212 countries and territories either planned to or had already put in place 1 179 social protection measures, according to research by Gentilini et al. for the World Bank (Gentilini et al., 2020[38]). Cash transfers were the most popular measure. Scaled-up or new programmes in response to the pandemic targeted informal workers especially who are usually not covered by social protection schemes. Creative approaches to reaching those most in need have emerged during the crisis with digitalisation of government support and services being critical in a country’s ability to deploy assistance and in the ability of its citizens to access such support.
However, the emergency social assistance policies that many countries put in place were time bound and had large coverage gaps. Weak coverage of those who are most vulnerable and invisible in data systems is a well-documented failing of social protection programmes (OECD, 2018[56]). While some countries found innovative ways to combine data sources to identify the most vulnerable, targeted efforts will still be needed to identify and reach those most in need of support. Improvement of registers is one such solution.
Building local data capacity and systems for evidence-based decision making
The crisis reinforced the need for all actors to invest in evidence, rapid learning and timely results information that can guide decision making, support internal and cross-country learning, and strengthen accountability and communication. Assessing who is vulnerable to primary and secondary shocks is vital, as policy actions can impact groups in different and unintended ways. For example, rural populations in Kenya were less exposed than people in urban areas to the virus. Yet the crisis affected rural livelihoods and food security by reducing domestic demand for produce, disrupting supply chains to national and exports markets, and restricting travel for seasonal workers needed for harvests (See case study by Ochieng).
Data collection and evidence generation did evolve rapidly to meet the urgency of the pandemic. For example, the World Bank rolled out high-frequency surveys to monitor COVID-19 impacts and provide information on a monthly basis to policy makers on topics such as agriculture and food security, education, work and employment, and gender (World Bank, 2020[57]). Siwale and Wilkinson (Chapter 3) show that co-generation of evidence combined with an active learning approach in relation to virus containment measures in Pakistan led to more effective, context-specific approaches.
Nevertheless, national data and evidence systems and capacity remain weak and under-resourced (OECD, 2018[56]). Clear gaps in data and real-time monitoring systems have emerged in tracking the direct health impact of the virus (health records, infectious disease surveillance and death registration systems) and secondary socio-economic impacts. Limited capacity to capture and track vital statistics for the most vulnerable people, who may not have civil registration, creates blind spots for policy makers and development strategies. Investments in statistical infrastructure such as civil registration and vital statistics would reap rewards, not only during health crises, but in managing health and demographic change more generally (Lange, 2020[58]). Well-resourced data systems are also crucial to provide the statistics and indicators required to assess how systems are exposed to shocks and likely to be resilient.
Ways forward to support country systems through development co-operation
Advance international leadership and solutions to make progress towards universal social protection and health coverage, taking an evidence-based, pro-poor approach.
Development and humanitarian actors should:
Invest in financial and technical resources to prepare local response systems and build the capacities of local and national actors.
Commit collectively to use and optimise existing country systems, rather than replace or duplicate them.
Support country systems with predictable, long-term finance and capacity building.
Support and capitalise on local action, knowledge and innovation.
Avoiding a development finance crisis
International finance and support for the crisis, while welcomed by developing countries, have not been sufficient to close gaps. As early as March 2020, African governments called for USD 100 billion a year for the next three years in international support (Ofori-Atta, 2020[59]). Had developing countries been able to raise spending proportionally to the economic downturn as was the case for advanced economies’ rescue packages, they would have mobilised between USD 800 billion and USD 1 trillion (OECD, 2020[7]). By November 2020, the UN Global Humanitarian Response Plan had received approximately USD 3.4 billion; its total requirement is USD 9.5 billion (Chapter 7). A global financing crisis may be on the horizon in 2021 and beyond due to a convergence of factors, which include growing debt distress in developing countries, and lagging reforms to the international finance system which could help ease fiscal pressures. Private investment like foreign direct investment may also be slow to recover (OECD, 2020[7]). Moreover, with many suspended programmes resuming towards the end of 2020, it is not clear how future budgets will accommodate both pandemic responses and longer term investments.
G20 and OECD leaders have made clear political statements about the need to step up international co-operation for a global recovery. The question is how to fill the funding gaps and mitigate a financial crisis. Advanced economies have been criticised for double standards. They have maximised flexibility, capacity and regional co-operation to bypass fiscal rulebooks to mobilise unprecedented support packages at home but less so for the international response.10 Multilateral institutions, which have provided the majority of crisis financing, have been criticised for failing to maximise every option to make more financing available for client countries and disbursing funds too slowly to meet even their own targets (Duggan et al., 2020[60]). According to Ghanaian Finance Minister Ken Ofori-Atta, the international financial architecture as it is right now is not fit to respond to crises like this (See Chapter 5).
Debt service suspension became an instrument to free up fiscal space for developing countries in response to the crisis. However, while the Debt Service Suspension Initiative (DSSI) negotiated by the G20 was a step towards solidarity, the savings from it are projected to be lower than expected, and not all stakeholders fully engaged (Malpass, 2020[61]; Ramaphosa, 2020[62]). Additionally, only 46 of the 73 countries eligible for the DSSI are taking up the initiative (G20, 2020[63]) due, among other factors, to the risk of downgrading (Shastry and Mark, 2020[64]) (See Songwe in Chapter 5). The DSSI is limited in its coverage and it does not cover most middle-income countries. These factors all point to the need for different instruments to meet divergent needs and avoid a debt crisis or defaults.
At the G20 Summit in November 2020 leaders agreed on the Common Framework for Debt Treatments beyond DSSI (G20, 2020[65]), which will allow eligible countries whose debt is determined as unsustainable to restructure it in a similar manner to classical Paris-club resolutions, including by imposing similar terms to private sector creditors. Despite this progress, the International Monetary Fund (IMF) has called for urgent reform of the international debt architecture to strengthen contractual provisions and increase debt transparency (IMF, 2020[66]). Other long-standing issues to be addressed include better anti-money laundering mechanisms, agreeing on global tax rules and the capacity to extend new credits, for example through the reallocation or increase of Special Drawing Rights at the IMF (See In My View by Coulibaly; (ONE, 2020[67]; Davies, 2020[68]; Gallagher, Ocampo and Volz, 2020[69]; OECD, 2020[9]).
Increasing and safeguarding concessional finance and ODA for countries and people most in need
ODA plays an essential and unique role in supporting developing countries to face and cope with challenges, focusing on peoples’ welfare, going where other (private) finance does not, and has been a relatively stable and predictable resource in times of crisis (OECD, 2020[52]). Countries responded to the COVID-19 crisis through bilateral and multilateral channels. As the largest financing partners to the multilateral system, DAC members should help ensure that the multilateral development system receives funding in sufficient quantity and quality to fully contribute to the 2030 Agenda and the COVID-19 recovery (OECD, 2020[55]).
However, getting a clear picture of development finance for COVID-19 has been difficult: data are incomplete, there are risks of double counting in tracking mechanisms, and the lack of transparency around crisis funding, from both bilateral and multilateral sources, raises accountability questions. The OECD, which is mandated to collect official development finance statistics, conducted two ad hoc surveys on COVID-19 funding, but does not conduct real-time tracking of finance commitments and allocations. While financing trackers like the International Aid Transparency Initiative and an interactive portal set up by Devex (See Chapter 9) provide some real-time data on funding, these are not comprehensive.
From the estimates available, DAC members seem to be meeting commitments to safeguard ODA levels in 2020 while also mobilising resources for COVID-19 expenditures and responses. Initial estimates suggest that DAC members mobilised USD 12 billion for COVID-19 support to developing countries. Of this USD 12 billion, USD 7 billion was reported as extra-budgetary funds, i.e. new funding that was not previously available. The remainder was raised from contingency budgets or by redirecting resources from development programmes, some of which were delayed or stalled due to the crisis. Multilateral development banks and financial institutions were in a position to allocate at greater scale. The World Bank has mobilised USD 43 billion, and other multilateral organisations (not including the IMF) USD 37 billion (See Chapter 9). Providers seem to be focusing on countries most affected or at risk, low-income countries and fragile regions, and their priority countries, guarding against the risk of funding going to actors and institutions with the greatest capacity to apply for it.
Even if the official detailed statistics on COVID-19 spending will enable ex post analysis and accountability, they are too late to inform strategic collective responses. More comprehensive, real-time tracking of forward spending plans,11 pledges, disbursements and allocations would increase funding transparency and help identify where ODA could best fill gaps in a crisis and in normal times.
Ways forward to safeguard financing for development
G20 and other actors should continue working together to come up with solutions to the debt crisis and restructuring and to increase the capacity of international financial institutions to extend new credits.
Development co-operation actors must maximise synergies in the allocation of bilateral and multilateral finance to focus on countries and people most in need in the ongoing response to and recovery from this crisis.
All stakeholders should work to increase transparency of crisis funding in real time to match overall funds with global needs, inform programming decisions and track collective allocations across sectors and countries.
Collective action to provide global public goods
There are short lists of threats that could spill over into global crises without much warning (World Economic Forum, 2020[70]; Global Challenges Foundation, 2020[71]). Some threats are existential, like climate change and nuclear war. Others have the potential to do great damage, as shown by COVID-19. It is also clear in light of COVID-19 that in a hyper-connected, globalised world, systems of organising are complex, interwoven and thus vulnerable to cascading impacts and unpredictable crises (OECD, 2020[44]). Pursuing systemic preparedness and resilience internationally would seem prudent insurance policies, both to lower the risk of crises occurring in the first place and to mitigate their impacts and enable effective response if they do. The lack of preparedness for high-impact but infrequent events is due in part to underinvestment in global public goods (GPGs), according to Ahmed and Brown and Kaul (Chapters 5 and 6). Funding for pandemic preparation, adaptation or mitigation of climate change, biodiversity, and other GPGs has too often been edged out by what are deemed more immediate concerns.
To date, there has been political support for incremental adjustments in global governance architecture and mechanisms to be more fit for purpose, but this crisis has revealed the need for better global preparedness and risk management.12 Now, world leaders are being called on to reform, even redesign, the multilateral system to ensure adequate provision of GPGs (See Chapters 5 and 6) and close the gap between increasingly complex systems and methods of managing their risks (Goldin, 2020[72]). While COVID-19 has pushed health security13 – a global public good – to the top of the international agenda, it also highlights the urgency of investing in others to avoid a similar or worse crisis due to their under provision. New mechanisms of global governance could better incentivise state and non-state actors to support and protect global public goods (See Chapter 6). However, several contributors to this report flag long-standing issues and geopolitical sensitivities related to responsibilities, budgets and ways of measuring finance for global public goods (Box 3).
International debates about the governance and provision of global public goods converge under three main themes.
Inclusive governance: Governance questions relate, in particular, to the inclusion and role of emerging and developing economies, notably as policy setters rather than conventional policy takers. The extent to which multilateral institutions are empowered by shareholders to tackle global issues is another challenge (Goldin, 2020[72]).
Redesigning institutional architecture: International structures are lagging the changing realities of global policy challenges, which is a constraint to effective multilateralism (See Chapter 6 and Goldin (2020[72])). Kaul and others propose designing a new platform of platforms, or holistic co-ordination mechanisms backed with appropriate global financing to incentivise global public goods-focused investments (See Chapter 6 (Kenny, 2020[73]).
Using common measurement and accountability mechanisms: Total official support for sustainable development (TOSSD) can help fill critical data gaps on investments in international public goods, thus supporting a more informed discussion on the allocation of global resources for sustainable development and a more coherent and integrated implementation of the Sustainable Development Goals. International research, global disease surveillance, development of treatments and vaccines, and their production and deployment represent a significant part of the global response to COVID-19. These initiatives and expenditures would be tracked in TOSSD.
Note: In TOSSD, international public goods include global public goods whose benefits are nearly universal (e.g. stable climate); regional public goods whose benefits extend to countries in the same region (e.g. transboundary water management); and other international public goods whose benefits are neither global nor regional (e.g. bilateral trade agreements).
Source: OECD (2020[74]), Total Official Support for Sustainable Development (TOSSD), webpage, www.oecd.org/dac/tossd.
Efforts to ensure equitable access to COVID-19 vaccines could be the vanguard of more holistic approaches to global challenges
International co-operation to strengthen global health security in response to COVID-19 could be a blueprint for revamping governance and financing mechanisms for other global challenges that depend on global solutions. The Access to COVID-19 Tools (ACT) Accelerator brings together governments, global health organisations, manufacturers, scientists, the private sector, civil society and philanthropy to accelerate development, production and equitable access to COVID-19 tests, treatments and vaccines (WHO, 2020[75]). The COVAX pillar focused on vaccines is the biggest multilateral effort since the Paris Agreement, representing about 90% of the world’s population. The COVAX facility uses the collective buying power of high-income countries to bring vaccines to the market quicker and at a lower price than would otherwise be the case (See Chapter 4). It then works through its second arm, the COVAX Advance Market Commitment (AMC), to support developing countries that cannot afford to self-finance their access to vaccines. Of the 189 economies involved in COVAX (92 are middle- and lower income countries engaged in the AMC, which is funded mainly by ODA (See In My View by Berkley).
At their November 2020 meeting, G20 leaders committed to ensure that COVID-19 diagnostics, therapeutics and vaccines were affordable and equally accessible for all people, and to address the remaining global financing needs of the ACT-Accelerator, recognising widespread immunisation against COVID-19 as a global public good (G20, 2020[63]). While the initial USD 2 billion required to start the COVAX AMC has been received, another USD 5 billion is needed to reach 2021 vaccination targets (See In My View by Berkley). As the virus is the primary driver of the global economic and social crisis, such an investment is likely to represent good value for money.
COVAX may also have strategic importance beyond the delivery of vaccines. Working to satisfy the needs of relevant stakeholders and devising a fair allocation mechanism to secure equitable access for all, COVAX is a new form of partnership for innovation, procurement and global solidarity, at the vanguard of more holistic approaches to global challenges.
Ways forward for global public goods
The international community needs more robust mechanisms for co-ordinating policies and financing for global public goods, clarifying the role and contribution of public finance in general. TOSSD will provide crucial information to track resources for global public goods.
Learn lessons from the ACT-Accelerator and COVAX initiatives to design strategic and holistic mechanisms for other global public goods such as climate change mitigation and crisis response mechanisms.
More deliberate crisis preparedness and co-ordination for development co-operation
The escalating needs, differential impacts and limited resources available for development actors to respond to the COVID-19 pandemic made it essential to have effective co-ordination underpinned by comparable, comprehensive evidence and open data.
For development actors, including DAC members, the COVID-19 pandemic has brought into sharp relief several co-ordination challenges. While the international community struggled to broker co-ordinated responses and action at a time when they were needed most (See Chapter 5), ad hoc initiatives were established to meet specific immediate needs.
Team Europe has demonstrated the potential of the EU to pool efforts and resources and advocate collectively for a shared agenda and enhanced co-ordination within the European Commission. Going forward, it remains to be seen if Team Europe will be institutionalised and how it might co-ordinate all EU development finance, including members’ bilateral ODA, and other policy positions for global crises (See Chapter 4). Another co-ordination example is the informal Development Ministers Contact Group on COVID-19, convened by Canada and the United Kingdom with membership comprising Australia, the EU, France, Germany, Italy, Japan, the Netherlands, New Zealand, Norway, Sweden and the United States.
The DAC, a critical consensus builder in defining and protecting the role of ODA and holding members to account for their commitments, has also acted with agility in the crisis, developing methods to clarify eligibility rules for vaccine-related expenditure for COVID-19 and launching discussions of these and other initiatives for the benefit of developing countries.
Nevertheless, the need for better co-ordination and more sharing of real-time information among development actors was flagged at global and regional levels, in partner countries, and across individual OECD government systems. There were missed opportunities for the synergies and coherence of more collective efforts. As Chapter 4 shows, initially, bilateral resources were allocated without a clear overview of priority needs, channels for support, or other actors’ responses. Development co-operation actors applied lessons from health and other humanitarian crises such as Ebola, HIV/AIDs and the Asian tsunami. DAC members also shared sector-specific information and plans through ad hoc seminars and peer learning in meetings of networks on gender, governance and the environment, among others. But those lessons, particularly from evaluations,14 could have contributed in advance to preparedness strategies, even if lessons did re-emerge over the course of 2020.
There is an opportunity to improve preparedness by learning from shortcomings and developing more deliberate processes for responding to crises.15 With clearer and systematic procedures and the right information and advice in real time, the DAC could serve as a platform to convene and advise members during crises with global impacts - clarifying and upholding DAC standards and effectiveness principles while also facilitating greater collaboration across bilateral portfolios and mutual learning in a context of fast-paced decision making and uncertainty.
Ways forward for crisis preparedness and co-ordination
Maximise the combined development, diplomatic and political power of OECD governments to best complement multilateral efforts to mobilise resources, co-ordinate efforts and encourage reforms at country and global levels.
The development co-operation system, championed by the OECD DAC, should develop its strategy and contingencies for responding collectively to global challenges, shocks and crises.
A development co-operation crisis strategy should enable members of the DAC to quickly share data, evidence, plans and intelligence to inform responses and fast-paced decision making to meet the needs of the world’s poorest people and countries most in need.
“The pandemic has laid bare the stark inequalities that still, in 2020, dictate who lives and who dies, who thrives and who suffers, and which countries and communities rebound from multiple shocks or collapse under their weight” (See In My View by Smith). COVID-19 confirms lessons that international development actors know, and relearn, with each new crisis. The crisis also throws an unforgiving spotlight on disparities in national capacity that have decisive consequences for resilience. This is why all actors, from the local to the global level, should build on the pandemic’s lessons for greater preparedness and resilience.
An effective international response to the COVID-19 crisis is one that builds greater sustainability, resilience and preparedness for an uncertain future. A (re)commitment to global solidarity is the starting point. As shown in this chapter, and in this Development Co-operation Report as a whole, the pandemic has indelibly shaped the development co-operation agenda for 2021 and beyond. Delivering on an agenda that results in more integrated cross-sectoral programmes, builds country systems, increases development financing, steps up action on global public goods and improves co-ordination would put the development co-operation community on track to support a strong, resilient, green and inclusive recovery.
In sum, a new and greater ambition to build resilience to global shocks calls for specific actions by development co-operation actors that:
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Notes
← 1. For example, the Global Preparedness Monitoring Board, an independent monitoring and advocacy body calling for political action on preparedness and mitigation of global health emergencies, warned in 2019 that “there is a very real threat of a rapidly moving, highly lethal pandemic of a respiratory pathogen killing 50 to 80 million people and wiping out nearly 5% of the world’s economy” (2019[83]). Prior warnings had come from notable figures such as Bill Gates, whose TED talk in 2015 on how to apply lessons from the Ebola outbreak in West Africa to pandemic preparedness in the rest of the world has been viewed more than 38 million times (See Gates (2015[90]). Warnings to the wider public about the likelihood of pandemics also came from science writers, including the New York Times bestselling book by Quammen (2012[84]), Spillover: Animal Infections and the Next Human Pandemic. Also, in 2012, The Lancet published a series of articles on “prediction and prevention of the next pandemic zoonosis”. See Morse et al. (2012[78]).
← 2. Ahmed and Brown, and Kaul (Chapters 5 and 6) assert that the international system’s failings and need for reform are not new to the international agenda; they have just been postponed for too long.
← 3. See for example, the OECD Recommendation on Policy Coherence for Sustainable Development at www.oecd.org/gov/pcsd/oecd-recommendation-on-policy-coherence-for-sustainable-development.htm.
← 4. See for example, Walker et al. (2020[81]); Sandefur et al. (2020[80]); and Maoujoud and Ahid (2020[76]).
← 5. See for example http://www.oecd.org/coronavirus/policy-responses/developing-countries-and-development-co-operation-what-is-at-stake-50e97915.
← 6. See for example http://www.oecd.org/coronavirus/policy-responses/the-impact-of-the-coronavirus-covid-19-crisis-on-development-finance-9de00b3b/.
← 7. See for example https://dx.doi.org/10.1787/e3c30a9a-en.
← 8. As noted by the International Labour Organization, informal jobs are often unregistered and generally lack basic social or legal protection and employment benefits. See ILO (2020[85]). The informal economy globally accounts for, 61% of global employment (See case study by Roever and Tulaphan), and for many developing countries, the informal sector accounts for the majority of jobs. See ILO (2018[86]).
← 9. In 2017, research conducted for the International Labour Office compared the GDP levels of various countries when they introduced social protection floors to the GDP levels of low-income countries in 2017, concluding that low-income countries could afford to put social protection floors in place. See Ortiz et al. (2017[79]).
← 10. The euro area countries, for example, are expected to exceed the usual allowed budget deficit ceiling of 3% of GDP and reach 8.5% in 2020 (Haroutunian, Hauptmeier and Leiner-Killinger, 2020[82]).
← 11. OECD international development statistics unit has been collecting donors’ forward spending plans since 2011 to improve predictability in line with the effectiveness agenda. More information is available at: https://www.oecd-ilibrary.org/development/data/oecd-international-development-statistics/donors-forward-spending-plans_g2g558bd-en.
← 12. Such as adjustments to monitor goals and targets in international treaties and the creation of specific trust funds, such as GAVI, the Vaccine Alliance.
← 13. In 2019, a Joint External Evaluation of pandemic preparedness financing, prepared for the Global Preparedness Monitoring Board, concluded that investment in pandemic preparedness should be recognised as a global public good and called on the UN, its specialised agencies like the World Health Organization and international financing institutions to develop a preparedness mechanism (World Bank Group, 2019[87]).
← 14. The COVID-19 Global Evaluation Coalition – a partnership of over 42 bilateral and multilateral organisations with the OECD serving as secretariat – supports collective learning with both rapid evidence summaries and evaluations, see http://www.covid19-evaluation-coalition.org/. To meet its key objective to provide credible evidence to inform international development co-operation, the coalition supports and communicates individual members’ evaluations and joint analysis of the effectiveness and results of COVID-19-related response and recovery efforts.
← 15. International and regional crisis mechanisms that could inform reflections include the UN Central Emergency Response Fund, which pools resources and matches them to needs (CERF, 2020[91]), or the EU’s Integrated Political Crisis Response mechanism, which has protocols activated at different levels (monitoring, information sharing and full activation), and provides a platform to share information, work together easily and co-ordinate crisis response (European Council, 2020[89]).