At this moment, no one is certain when the COVID-19 disease will be put under control. Taking note of the type of economy the world have become used to over the past 20 years, Martin Henning, Professor of Economic Geography at the University of Gothenburg, explained the rapid and global phase that we are witnessing right now and linked to neither a classic recession nor a war. Instead, he referred it as an entirely new phenomenon dubbed “coronomics”.
Coronomics describes the impact the coronavirus is having on the global economy. According to Prof. Henning, it is having consequences such as: declining travel, decreasing demand for services and products, hampering business innovation, creating financial concerns, creating difficulties in global supply chains, creating pressure on public finances; both healthcare costs, business support and compensation to individuals, certain parts of the labour force are severely impacted, such as workers who are paid by the hour, as well as employees in the tourism and hospitality industries, and peculiar consumption patterns, such as unnecessary stock-piling.
The UN trade and development body, UNCTAD, in its latest report described COVID-19 pandemic – a matter of life and debt. It set out urgent measures needs to head off a looming debt disaster in developing countries reeling from the economic fallout from the coronavirus pandemic. It says the pandemic hits developing countries at a time when they have already been struggling with unsustainable debt burdens for many years, as well as with rising health needs.
In 2020 and 2021 alone, the report notes, developing countries’ repayments on their public external debt alone will soar to between 2.6 and 3.4 trillion USD. Calling for international solidarity which has so far delivered little tangible support the body also advised for the need to have an institution that oversees developing country debt relief programmes. Accordingly, the United Nations Conference on Trade and Development (UNCTAD) calls for 1 trillion USD in debt relief for these countries.
UNCTAD outlined three key steps to translate the calls into action. First, automatic temporary standstills to help provide macroeconomic “breathing space” for all crisis-stricken developing countries requesting forbearance to free up resources.
Second, debt relief and restructuring programmes to ensure the “breathing space” gained under the first step is used to reassess longer-term developing country debt sustainability, on a case-by-case basis.
Third, to take the first two steps forward, the UNCTAD report proposes the establishment of an International Developing Country Debt Authority (IDCDA) to oversee their implementation and lay the institutional and regulatory foundations for a more permanent international framework to guide sovereign debt restructurings in future.
And yet the public health crisis challenged the delivery of essential services to the most affected segments of the population. Hence,
the UN Children’s Agency puts gloomy picture to that the advances towards the achievement of Sustainable Development Goals (SDGs) will be jeopardized. While the International Food Policy Research Institute, 2020 estimates suggest that a 1 percent lower growth in the global economy would translate to between 14 and 22 million more people living in extreme poverty.
Moreover, the United Nations Economic Commission for Africa (ECA) has estimated that due to the COVID-19 crisis 48 percent fewer people could be lifted out of poverty in the continent. For Ethiopia, it could be estimated (based on the progress made by the country during the period 2017/18) that additional 600,000 people per year which will fall in absolute poverty measured according to national definition. Furthermore, children and families who are already vulnerable due to socio-economic exclusion or those who live in overcrowded settings are particularly at risk.
UNICEF says among all children, the rate of deprivation of this basic right is 89 percent, with children in rural areas being much more deprived than children in urban areas (94 percent and 53 percent, respectively). Obviously, hygiene remains a major gap in emergency and non-emergency settings.
Even under normal circumstances children are often disproportionately affected by measures taken to control emergencies. Special attention needs to be paid to prevent and minimize negative consequences for children as much as possible. If exceptional measures are not taken, UNICEF fears the worsening of monetary and multidimensional child poverty will be observed with a potential regression of the development objectives’ gains Ethiopia has so far achieved.
Rural populations and the poorest households are the most disadvantaged in terms of a growing reality of even further constrained access to food due to shortages, high food prices and curtailed incomes. Taking note of an ECA report that predicts anywhere between 300,000 and 3.3 million African people could lose their lives as a direct result of COVID-19, depending on the intervention measures taken to stop the spread, authorities need to be cautious than ever about the rural settings.
Extraordinary time
An Ethiopian Economic Association (EEA) latest preliminary projection indicates that in Ethiopia COVID-19 will likely cause economic damages of some 200 billion Birr or a downturn of 10 percent in the GDP. Yet this expert report hopes the agricultural sector to remain the least affected. However, this writer thinks, if in anyway this pandemic hits the rural majority under a prolonged duration the pandemic could be severe forcing the agricultural sector to a significant loss.
This particularly could affect an estimated 4 million smallholder coffee growers that a downward trend in demand pressure has already reduced prices in the major import markets, such as the United States and the European Union, with the International Coffee Organization composite price
indicator for coffee for March 2020 falling 7 percent from December 2019, according to a quotation on the latest ECA report – “COVID-19 in Africa: Protecting Lives and Economies”.
In food crisis contexts, the Food and Agriculture Organization of the United Nations (FAO), says needs are already extremely high and basic service delivery is poor. Production of staple foods has to be stronger than ever and its access to that supply must be ensured in tandem with Labour shortages that could further disrupt the food supply chain, while informal labourers will be hard hit by job and income losses.
Ethiopia must ensure that lockdowns and curfews cause minimal disruption to labour for farming and food processing, and to domestic distribution and retail channels, in particular the distribution of inputs during the planting season. Although still lagging behind continued access to agricultural services that can be provided digitally is also essential. Health and screening checks at ports and borders must be designed to minimize disruptions to trade in staple foods.
Speaking on an agriculture sector specific response plan Dr. Eyob Tekalign, Finance State Minister said “government is working to safeguard the agricultural sector from the immediate impact of the pandemic.” According to him, nationwide resource mobilization is underway to increase production more than targeted yearly plan. Hence, there is more productivity expected than what was planned like for instance, 20 to 30 metric tons additional production by creating extra arrangements such as quick irrigation.
Making sure there is enough food for not only the vulnerable groups but the wider population is something Dr. Eyob tells that the situation is not a cycle issue but compels government to work simultaneously. “If we don’t respond this way while fighting the health pandemic we might be losing lives due to hunger,” he stressed.
Government’s effort to safeguard the agricultural sector from the immediate impact of the pandemic has however face another invasive foe called desert locust. “We are waging full-fledged war against this locust invasion with international partners… it would have some impact but we are on top of it,” Dr. Eyob said.
Eventually, the other question would be, “Is government ready to bailout big corporations like the Ethiopian Airlines?” As to the minister given the commendable strategy being followed at the management of the Ethiopian “the discussion for bailout is too early.” Indeed these are extraordinary times for economies like Ethiopia.
The Ethiopian Herald April 28/2020
BY KIRAM TADESSE
