The World Bank has issued a stark warning about the severe repercussions of the pandemic on the world’s most impoverished nations, highlighting a disturbing halt in progress towards poverty reduction and an expanding income disparity between these countries and the wealthier nations of the West. This alarming analysis was part of a report released in conjunction with the organization’s biannual meeting. The findings revealed that over the last five years, income per capita growth in 50% of the world’s 75 poorest countries has lagged behind that in developed nations.
In response to what the World Bank describes as a “great reversal,” there is a strong call to action for both governments and the private sector. Since the onset of the pandemic in 2019, there has been a noticeable increase in food insecurity and a rise in debt problems among these vulnerable nations. The data is particularly grim, indicating that one in three countries eligible for support through the World Bank’s International Development Association (IDA) now has an average income lower than before the pandemic—a regression not seen since the late 1990s.
During the forthcoming donor conference, which occurs every three years to secure funding for IDA, World Bank President Ajay Banga will emphasize these troubling findings to encourage substantial financial commitments. Banga has already suggested that this next funding cycle should be the largest ever, given the dire needs of these nations.
The pandemic has indiscriminately impacted countries globally, but its effect on poverty rates in the most affected nations has been disproportionately severe. The extreme poverty rate in these countries is more than eight times higher than the global average, with one in four individuals living on less than $2.15 a day. Additionally, these countries bear the brunt of global hunger and malnutrition, accounting for 90% of all such cases worldwide. The financial outlook is bleak as well, with half of these countries grappling with debt crises or at high risk of entering one. Despite this, support from foreign lenders, both private and governmental, has been waning.
Geographically, more than half of all IDA countries are located in sub-Saharan Africa, with others spread across east Asia, Latin America, the Caribbean, and South Asia—excluding India. Many of these nations are grappling with incomes of less than $1,315 per year and are categorized as fragile and conflict-affected.
On a brighter note, the report highlights some potential advantages for IDA countries. While most of the world faces aging populations, these countries are expected to benefit from a demographic dividend due to their younger workforces projected through 2070. Furthermore, these nations are endowed with rich natural resources, hold significant potential for solar energy production, and possess extensive mineral deposits critical for the global transition to clean energy.
Indermit Gill, the World Bank’s chief economist, emphasized the global strategic importance of supporting IDA countries. He pointed out that several of today’s economic giants, including China, India, and South Korea, were once IDA borrowers themselves and have since made remarkable progress in reducing extreme poverty and improving living standards. Gill asserts that with adequate international support, the current group of IDA countries has the potential to achieve similar transformative economic and social improvements.
