The authors of the UNU-WIDER study – Andy Sumner and Eduardo Ortiz-Juarez of King’s College London and Chris Hoy from Australian National University – find that a setback of this size would reverse a decade of global progress on poverty reduction.

COVID-19 fallout could push half a billion people into poverty in developing countries

This study shows that the achievement of the 2030 Agenda, and in particular, the SDGs on no poverty and zero hunger, is under considerable threat. The need of the hour is to bring together development agencies, national governments, civil society and the private sector in a global effort to protect the livelihoods and lives of the poorest of the poor in the Global South. – Kunal Sen, Director of UNU-WIDER.

The results of the study have galvanized concern for vulnerable communities around the world. They are being cited by Oxfam International, today, in its call to world leaders to implement “an Economic Rescue Plan for All, to keep poor countries and poor communities afloat,” ahead of key meetings of the World Bank and International Monetary Fund (IMF) and G20 Finance Ministers’ next week.

Oxfam is calling on world leaders to agree on an Emergency Rescue Package of 2.5 trillion USD paid for through the immediate cancellation or postponement of 1 trillion in debt repayments, a 1 trillion increase in IMF Special Drawing Rights (international financial reserves), and an additional 500 billion in aid.

The WIDER Working Paper estimates an outcome of a 400-600 million persons increase in global poverty given a scenario in which per capita consumption contracts by 20%. The study also estimates poverty increases for mitigated contractions of 10% and 5% and shows the impacts on poverty by region, as well as globally.

Andy Sumner, Professor of International Development at King’s College London and a Senior Non-Resident Research Fellow at UNU-WIDER, said of the research:

“We were surprised at the sheer scale of the potential poverty tsunami that could follow COVID-19 in developing countries. Our findings point towards the importance of a dramatic expansion of social safety nets in developing countries as soon as possible and – more broadly – much greater attention to the impact of COVID in developing countries and what the international community can do to help”.

The key points of the ‘Economic Rescue Plan For All’ would be:

• To provide cash grants for all who need them. All workers suffering a loss of income must have access to some form of income replacement, be it a wage subsidy, unemployment benefit, sick pay or other benefits.
• Bail out businesses responsibly. The stimulus packages announced in response to the pandemic must not make the same mistakes as were made in the 2008 financial crisis. Instead, bailout money must go into the hands of the most vulnerable people – workers and small businesses who are the least prepared to cope.
• Suspend and cancel debts. Cancelling debt payments is the fastest way to keep money in countries and to free up resources to tackle the urgent health, social and economic crises resulting from the global pandemic.
• Issue Special Drawing Rights. The G20 should immediately propose an emergency issuance of $1 trillion in SDRs.
• Increase aid now. Donors should provide immediate emergency support to limit the outbreak and save lives, both through multilateral bodies like the World Health Organization that are responsible for managing the global response and directly to developing countries.
• Adopt emergency solidarity taxes. Governments must make use of extraordinary measures to tax those who can afford to be taxed, in order to fund the global health package and the global economic relief measures.

Press release UNU-WIDER

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