The Covid-19 pandemic ushered in the first recession in over 25 years for many, disrupted supply chains, and upended markets and trade. The war in Ukraine triggered increases in the cost of fuel, fertilizer, and food, and the historic increase in interest rates by the US Federal Reserve and European Central Bank have not only exported inflation to the developing world but have led to massive and unpredictable increases in debt service obligations.[1] Many low-income economies are struggling with over 40 percent food inflation and governments lack the fiscal space to provide additional subsidies.[2] Financial stability concerns in developed economies have further tightened global market conditions. For many countries still trying to recover from the shocks of the Covid-19 pandemic, this second wave of shocks has proved fatal. For low-income countries the most important need now is access to consistent, predictable low-cost resource flows.
In addition to these economic challenges, countries are also confronted with the worst climate events in over two decades. From the floods in Pakistan, Mozambique, and Madagascar to the droughts in Horn of Africa and the Sahel, livelihoods are being threatened and public services strained. Responding to these weather events costs countries 5-7 percent of their already shrinking GDPs.[3] In addition to climate countries must deal with biodiversity, pandemic preparedness, cross border migration, and rising conflict.
These economies are rowing against the tide to respond to overlapping challenges. In low- and middle-income countries, learning losses due to school closures from Covid have left up to 70 percent of 10-year-olds unable to read or understand a simple text, up from 53 percent pre-pandemic.[4] More than 370 million children globally missed out on school meals during school closures, losing what is for some children the only reliable source of food and daily nutrition and brain development.[5]
Maternal mortality rates are still 29 times higher in least developed countries than they are in Europe and North America, and hospital beds per 1000 are one hundredth the amount, as the COVID pandemic highlighted.[6] Low-income countries account for only 3 percent of global road networks worldwide, whereas high-income countries account for 43 percent, despite having only 16 percent of the population.[7]
Productivity growth has also slowed in many of these economies, sometimes even falling below population growth. In South Asia population growth was at 2 percent in 2021 while agriculture productivity was at 2.1 percent. In Africa population growth is at 2.8 percent and agricultural productivity at 1 percent.[8] Labor productivity displays similar trends. To turn the tide for these economies, transformational new investments will be needed to lift output, build infrastructure, and increase employment and productivity.
Development finance over the last 25 years has not delivered the scale and impact needed to improve lives and livelihoods at scale. Of the 81 countries that were part of the International Development Association (IDA) in 1996 only 17 have graduated.[9] Over these 25 years only 7 countries have seen their GDP per capita triple. Less than 35 percent have seen GDP per capita double, many of these being countries that started at a very low base such as Rwanda and Ethiopia. 10 countries have seen their GDP per capita drop over the last 25 years.
