On Monday, the World Bank announced that it was seeking $100 billion in donations to address global reversals in development caused by the COVID-19 pandemic. Lagging vaccination rates, supply chain bottlenecks, and economic inflation have throttled poorer countries’ growth in the past year, exacerbating gaps between advanced economies and low-income countries.
In making this announcement, President of the World Bank David Malpass warned that “progress in reducing extreme poverty has been set back by years, for some by a decade.” Calling on wealthy countries to increase donations, Malpass declared it “vital that we address [the poverty gap] head on.”
The World Bank’s request comes in direct response to a joint declaration by 23 African leaders this past July, which pleaded the Bank to grant $100 billion in funds to combat the pandemic’s effects on the continent. There is good reason to be concerned. Already, coronavirus has pushed 100 million people into poverty. In the past year, per capita income in low-income countries has grown only .5%. Countries with advanced economies have grown by 5%.
The World Bank is specifically seeking donations for their International Development Association (I.D.A). The I.D.A emphasizes economic and human development projects, offering loans to low-income countries which would normally be unable to borrow commercially or from the Bank’s other lending programs. Since its launch in 1960, the I.D.A. has achieved great success. Between 2000 and 2010, for example, the Association has funded projects which trained 3 million teachers, expanded access to water for 113 million people, and built or restored 118 million kilometers of paved roads. In part due to these projects, thirty-six of the I.D.A.’s borrowers have “graduated” out of its lending program.
The World Bank has a long history of successful international development. Its request for increased funding will reduce global poverty and limit the pandemic’s economic effects on low-income countries. That being said, there are some dangers with the I.D.A.’s model. In the past decade, sub-Saharan Africa’s debt has ballooned to nearly 60% of their G.D.P. The I.D.A. primarily provides loans to countries – albeit low-interest ones. While these countries desperately need funds, an onslaught of debt could do more economic harm than good. In Malpass’s statement announcing the Bank’s request for increased funding, he expressed concern over this very problem, warning that many African countries “are in external debt distress or at high risk of it.” As the world seeks to address global inequity caused by the pandemic, we must balance these concerns to ensure that the solution does not beget another problem.
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