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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The writer is chief executive of the Bill & Melinda Gates Foundation
As COP28 continues in Dubai, one thing is clear: climate change is affecting everyone on Earth. But low-income countries are facing its most severe consequences. The flooding in recent weeks in the Horn of Africa has displaced more than a million, just as the region was emerging from its most severe drought in 40 years.
Unfortunately, climate change is only one of the compounding crises affecting the world’s poorest countries. Deadly infectious diseases and poverty are both on the rise after years of decline. Low-income countries are showing the most economic scarring from the pandemic, with gross domestic product down 7 per cent from pre-pandemic projections.
More than half the poorest countries are either at high risk of debt distress or are already in it. The UN reports that nearly half of the world’s people live in a nation that spends more on servicing foreign debt than it does on healthcare. The global financial system is failing low-income countries. In Dubai, leaders talked about solutions. But one of the most vital resources has been absent from the conversation: the International Development Association.
IDA, an arm of the World Bank that provides low-cost loans and grants, has been one of the most effective development institutions since its creation more than 60 years ago. It’s one of the largest sources of financing for the 75 poorest countries — for many, it’s the only reliable source of external funds for development.
But it relies on donor states and is straining to meet countries’ needs. This week, the World Bank, donors and low-income states are meeting in Zanzibar to talk about IDA’s finances. In the coming year, donors must increase their contributions substantially beyond the $23.5bn they pledged in 2021. If they don’t, IDA will be forced to cut the financing it can provide — jeopardising the health and wellbeing of hundreds of millions of people and threatening global prosperity and security.
At this year’s World Bank and IMF annual meetings in Morocco, I met finance ministers from countries such as Pakistan and Nigeria who are increasingly frustrated by rhetoric about collaboration that doesn’t deliver real results for their people. They see many opportunities to transform their economies but can’t get affordable financing.
That’s exactly why IDA exists. In the 1990s, it played a pivotal role in helping states address their debt crises, paving the way for spectacular poverty reduction. Between 2000 and the start of the pandemic, extreme poverty in low-income countries fell by 25 per cent.
In recent years, IDA has boosted food production in countries ranging from Burkina Faso to Tajikistan. It has strengthened disease surveillance and emergency epidemic preparedness across west and central Africa. And it has helped millions of Tanzanian students get a quality education. These are the fundamental building blocks of flourishing societies.
IDA’s ultimate goal is to put itself out of business by spurring economic growth and reducing poverty to the extent that countries no longer need access to its funds. This has happened to 36 states and many — including China, India and Turkey — have since become IDA donors themselves.
During the past few months, consensus has grown about the need to update the global financial system to address the needs of low-income countries. A strong IDA replenishment will help prove to leaders of poor countries that global co-operation is a substantive promise, not a convenient slogan. More importantly, it means unlocking opportunities for people to reach their full potential. More children in schools. More women in the workforce. More people with access to basic human needs: clean water, food and medicine.
Leaders have a chance to safeguard our global economy and help get the world back on track towards essential health and development targets. But the clock starts now — and half a billion people can’t afford to wait.
Source: Economy - ft.com
