Augusto Lopez-Claros held leadership responsibilities with the World Bank Group (WBG) as director of Global Indicators Group, Development Economics. Focused on sustainable pathways to stability and growth, Augusto Lopez-Claros has a keen interest in the role played by the international financial institutions in assisting their member countries to mitigate the impact of COVID-19. One special source of concern at this point is the speed of contagion and how it might affect other countries, particularly those in the developing world with far more precarious health systems and often limited scope for large-scale fiscal interventions. In this respect, the Spanish flu of 1918–19 provides particularly relevant insights. It is estimated that somewhere between 50 to 100 million people died over the three phases of the flu. This level of mortality is equivalent to somewhere between 2.7 and 5.4 percent of the world’s population in 1917, the year before the flu.
The global impact of the Spanish flu, however, was highly uneven. In the United States it led to 675,000 deaths, or about 0.65 percent of the US population. In India it is estimated that some 17 million people perished, equivalent to some 5½ percent of the country’s population. Developing countries are more vulnerable in a pandemic, because it is more difficult to implement “social distancing” measures in congested urban settings, where tens of millions of people have no access to running water, sewage and other facilities available in the higher income countries. Moreover, the overwhelming majority of the over 800 million malnourished people in the world are located in developing countries and have much weaker immune systems. The economies in these countries will also be affected by capital flight, as foreign investors repatriate tens of billions of dollars from emerging markets, as workers’ remittances drop precipitously, government revenues shrink, borrowing costs shoot up, and the erosion of export earnings limit their ability to import essential medical supplies and equipment, as well as food. Indeed, in the case of emigrant remittances, the latest data from the World Bank points to a 20 percent drop in 2000, to about US$445 billion this year, a drop likely to set back some of the gains made in recent years in poverty alleviation and aggravating the job losses which the lockdowns imposed by most countries have brought about.
In this respect an important question is whether the multilateral development banks have adequate resources to support the emergency needs of the 100 plus countries that have signaled sometimes large financing gaps. A major issue is how to assist those who are displaced or refugees, and particularly vulnerable to COVID-19. This includes millions living in war torn Syria, Iraq, Yemen, and Libya. WBG is working to assist refugees and host communities through the International Development Association (IDA), which has committed to an US$82 billion financing package over the next three years. While this is insufficient to address the current crisis, it can act as an “anchor” in enabling developed world governments to catalyze their pandemic response.
