An IMF blog post, dated 27 August 2020, notes that the low income developing countries (LIDCs) are in a difficult position to combat the COVID-19 crisis. They have already been hard hit by external shocks and the lockdown measures are causing their economies to contract. With only limited resources they do not have the capacity to support their economies.

Although the LIDCs grew around 5% in 2019 that growth will come to a halt in 2020. The effects of the crisis are likely to harm development prospects; increase inequality; and reverse progress made during the past decade in reducing poverty.

Around half the LIDCs have high levels of public debt and during the crisis they have suffered external shocks including a fall in exports; lower prices for oil and other commodities exported; lower inflows of capital or remittances; and much lower receipts from tourism.

In the LIDCs a large segment of the population is living close to subsistence levels. Governments cannot easily trace those in need of help because of the large informal sectors, weak institutions and incomplete registries. Also the governments only have limited resources with which to support their populations.

Many LIDCs have had relatively short periods of containment of the virus, to flatten the curve of infections, while building capacity in the health sector. The proportion of additional spending flowing into healthcare has been higher than in developed countries but there have been fewer resources for fiscal support for their economies.

The IMF blog post considers that owing to these difficulties LIDCs must transition to targeted health measures such as social distancing and contact tracing, while focussing support on the most vulnerable. Protecting education is important to ensure there is no lost generation missing out on school.

The blog post points out examples of countries where technology is being used to combat the pandemic. Rwanda is using its digital finance infrastructure to discourage people from using cash. Another example is Togo which identified vulnerable people using the voter registration database and has directed assistance to them.

There is a danger that the crisis will leave a legacy for the LIDCs of worse health and education outcomes. The effect could be lower future revenues; lower assets and savings; failing businesses, especially small enterprises; disruption of production that cannot be recovered; and excessive debt that discourages further lending to the private sector. This would set the LIDCs back a decade in their fight against poverty and gender inequality and would be an obstacle to achieving the sustainable development goals.

The blog post concludes that the LIDCs need help from the international community (including the IMF) to recover. Priorities are to ensure health supplies; protect critical supply chains for food and medicine; avoid protectionism; obtain financing for critical spending; ensure international liquidity needs are met; restructure debt to restore sustainability; and stay on course to achieve the sustainable development goals.