New research commissioned by WaterAid and End Water Poverty, released at the end of July, shows that the economic effects of COVID-19 means that low- and middle-income countries will have almost $400 Billion USD less than projected for public spending on development in 2020-2021.
This funding gap is in addition to the existing estimated gap of about $2.5 Trillion needed to achieve the Sustainable Development Goals (SDGs). The additional amount could have a major impact on progress to-date with respect to poverty reduction with a double effect of allowing the coronavirus to spread.
“Without basic services such as clean water or basic health care, millions more will be pushed back into poverty, poor health, and diminished job prospects and life chances,” warned John Garrett, senior policy analyst of development finance at WaterAid.
The report analyzed data from the IMF’s Government Spending Watch initiative to gauge COVID-19’s impact on public finance. Findings suggest that in developing countries about 10 percent of domestic spending on SDG-related sectors would evaporate over two years (2020 and 2021) compared to the 2019 baseline. The report also warns that there could be an even greater decline in spending.
The impact of COVID-19 on all economies suggests that lower-income countries will likely receive $27 billion less in international public finance from 2020-2021 if donors maintain their current levels relative to gross domestic product.
“This report is identifying the need for a change in direction and mobilization of funding on a much greater scale than we’ve seen to date,” Garrett said in a press release.
Raising the recommended level of giving from higher-income countries from 0.7% of gross national income to 1% is estimated to make make up for the lost domestic financing by providing an additional $350 billion annually, according to the report.
“Richer governments have the opportunity to ensure poorer countries can invest in essential services, such as water and sanitation and clean energy from renewable sources, without incurring crippling debts that ransom off their future,” according to Garrett.
WaterAid is calling for renewed prioritization, solidarity, and investment from higher-income countries around SDG 6 (clean water and sanitation ) in the form of aid and grant-based funding.