1.
Coronavirus is coming for the poor, low income countries, Ethiopia is no
exception. Countries with high poverty rates and weak governance and
institutions are especially vulnerable to negative short- and long-term socio-
economic impacts from Covid-19. Countries with weak governance may
find it particularly difficult to provide healthcare and other basic services,
and during crises these fragile systems can deteriorate or collapse. The
INFORM risk model and database of 191 countries identifies those at risk of
humanitarian crises and disasters, including pandemics. Some of the
indicators used to develop these risk profiles are related to countries’ coping
capacities – as measured in the strength of institutions (disaster risk
reduction and governance) and infrastructure (physical, e.g. access to
improved water and sanitation; communications, e.g. electricity and mobile
phone and internet access; and access to healthcare). Together, these
determine national-level coping capacities. Coping capacity is shown in
Figure 1 for the subset of developing countries with available data.
There is a strong correlation coefficient (0.73) between the $1.90 poverty
rate and lack of coping capacities in developing countries. The five countries
with the weakest coping capacities are all in sub-Saharan Africa (the Central
African Republic, Chad, the Democratic Republic of Congo, Somalia and
South Sudan). With limited access to healthcare and weak governance, the
pace of transmission of Covid-19 will easily exceed the ability of these high-
risk countries to cope, contributing to high death rates, impoverishment and
destitution.
Coronavirus is a threat multiplier. Its impacts, coupled with the impacts of
public health-related policy responses, may have multiple and interlocking
consequences. Covid-19 can also compound other existing shocks and
stressors, further impoverishing households near the poverty line. However,
Covid-19 and other sources of ill-health are far from the only shocks or
stressors in these contexts. Drought, floods or other hazards, price volatility,
theft (affecting especially women and older heads of households), the
impoverishment of women-headed households upon separation, divorce or
widowhood, and in some countries conflict between pastoralists and farmers
are just a few of the other common sources of impoverishment (Diwakar and
Shepherd, 2018). The likelihood of falling into poverty or living in chronic
poverty may also be higher in crises or conflict-affected contexts (Diwakar
et al., 2017). Addressing these issues alongside the response to Covid-19 is
critical to tackling the range of risk factors that affect poor people’s
wellbeing.
The country-level risk profiles outlined above are also partly reflected in in-
country socioeconomic disparities. This section highlights some sub-national
areas within countries that require particular attention if the aim is to reach
the poorest areas and populations in responses to international health crises.
People living in rural areas may have limited access to water, sanitation and
healthcare. They may have to travel long distances to reach medical
facilities, incurring high transport costs. They may lack health insurance,
their health literacy may be poor, and there may be social stigma around
seeking healthcare for some conditions. There may also be workforce
shortages. All can result in lower health outcomes (Noor et al., 2006;
Brinkerhoff et al., 2017). The share of people with basic handwashing
facilities or using basic drinking water or sanitation services is much lower
on average in rural than in urban areas, particularly in low-income countries
(see Figure 7). For rural populations in LICs, regular handwashing may
simply be impossible, increasing the risk of transmission
People and population groups in chronic poverty (see Box 1) suffer from
high levels of food insecurity and low access to services. This is one
example of the policy trade-offs between public health measures and the
economic and food security impacts on poor and near-poor households.
People in chronic poverty experience structural forms of discrimination,
social and political exclusion or adverse inclusion in institutions and
development processes. These may be heightened for people in chronic
poverty facing intersecting inequalities on the basis of economic
disadvantages and additional discrimination and exclusion based on identity
and location (Arauco et al., 2014). One study of persistently poor women
with disabilities in rural Bangladesh (Diwakar, 2017) found that they had a
reduced likelihood of receiving social transfers and lower education
outcomes compared to persistently poor men with disabilities. Investments
in
containing the pandemic need to be sensitive to the particular needs of
chronically poor women and men, and ensure that responses do not deepen
multidimensional poverty.
Additional risks to poor children and older people: two ends of the spectrum
Children • School closures disrupt learning for poor children unable to use
distance learning tools, or whose schools lack the capacity to offer them. •
Around 300 million children may miss school meals due to closures in
response to Covid-19 (AFP, 2020). This could increase food insecurity,
contributing in turn to increased rates of stunting (FAO et al., 2019). Older
people • Older people are at increased risk of developing severe illness if
they contract Covid-19, but also other sources of ill-health due to weaker
immune systems and heightened risk of impoverishment. • Lifecycle effects
on poverty in some countries (Diwakar and Shepherd, 2018) can mean that
there are more older people in poverty, with increased susceptibility to ill-
health including Covid-19.
Following the COVID-19 pandemic, the government is implementing
various measures which will disrupt economic activities. People are advised
to stay at home; public institutions are also granting forced leaves for their
workers operating at minimum capacity, business firms are laying off their
workers; downscale their operations; some firms are under complete closure;
self-employed workers (including day laborers) are also reducing their effort
with many forced layoff days; etc. Although the impact of the pandemic on
economic activities may differ, almost all sectors and sub-sectors are
expected to be negatively impacted by the COVID-19 layoff effects, on the
one hand, and workers who lose their jobs spend less, on the other.
Beyond the short-term impact on food supply, there is also a risk that
agricultural production will be impacted, generating deeper shortfalls on
food availability, higher prices and overall severe hardships of food security
at household and national levels. For instance, if the planting season is
missed or delayed due to movement restrictions to contain the spread of the
virus, current and subsequent year’s production will likely suffer, causing
persistent supply shortage and unmet food demand which will have to be
met through food imports, if the global food commodity is assumed to be
retained as normal. There are multiple ways through which reduced supply
affects the economy. First, less will be available to the domestic market
which will lead to rising prices in the domestic market due to supply
shortage. Second, there will be less export supply which will in turn affect
the foreign exchange reserve of the country. Limited foreign exchange
earning means that the country will be unable to purchase the required
materials (such as inputs, investment goods, and other basic commodities)
from the rest of the world, i.e. imports will decline. A decline imports will
exacerbate supply shortages in the domestic market, leading to instability in
the country. Demand shock: The supply-side shock can quickly turn into a
demandside shock. Because of slow business operation, firms reduce their
demand for inputs and may also experience difficulties meeting their
obligations as cash flows dry up. Fear of contagion (e.g. stay-at-home)
Economic and Welfare Effects of COVID-19 and Responses in Ethiopia:...
Policy Working Paper 02/2020
11
and heightened uncertainty will make firms spend less which consequently
reduce investments. Due to slowdown in economic activities, firms are
forced to reduce workers, as firms will face difficulties in paying wages and
salaries to workers. Although the pandemic will affect all sectors, some
sectors such as tourism, airline, hospitality and other services will be hit hard
due to travel ban and hence lower tourists. There is external demand shock
as countries impose travel ban which will adversely affect the demand for
these activities. The number of tourists will decline which will affect the
local tourism sector, leading to a fall in revenues and profits of the tourism
sector and other hospitability activities. Due to travel ban restrictions and
limited international mobility, the Ethiopian airline will experience. Loss of
income, fear of contagion (e.g. stay-at-home), and heightened uncertainty
will make people spend less which consequently reduce overall demand. In
addition, consumers change their spending patterns, reducing expenditures
on travel, entertainment, tourism and other discretionary items. On the other
hand, consumers increase their expenditures on medical and pharmaceutical
goods, health services, and necessities. Financial shock: Because of
slowdown in economic activity and business closure, enterprise will
experience a liquidity crunch and unable to repay bank loans. In particular,
small and medium enterprises will not be able to survive too long before
defaulting or having to reschedule bank loans. If a large share of businesses
is unable to pay their bank loans, then the financial sector will be under
pressure. If not supported by appropriate scheme, the financial sector will
collapse. The three shocks reinforce each other and exacerbate business
closures and job losses, resulting in wider social problems. Given that a
significant part of the shock is coming from the supply side, country
experience indicates that demand management policies, such as fiscal and
monetary policies may play a small role in stabilizing the economy
(Mickbbin, 2020).
The pandemic could lead to recession when there is a prolonged slowdown
in economic activity, widespread drop in spending arising from the adverse
demand shock. Contraction of business sales and revenues and negative
growth of household income and expenditure arising from measures taken to
control the pandemic are associated with multiple economic consequences,
including massive job losses, and adverse welfare effects of populations and
societies (Figure 1). If the pandemic generates multiple disruptions, then
what is the effects of the pandemic on economic growth and welfare of the
population?
Malnutrition and disease means COVID-19 could be more deadly in Africa
than elsewhere in the world.
Health systems in Africa have limited capacity to absorb the pandemic.
The strategic approach should focus on containment and aggressive
preventive measures.
As of 29 March 2020, there have been more than 680,000 confirmed cases
of COVID-19 disease in 203 countries around the world.
On 11 March, the World Health Organization characterized COVID-19 a
pandemic. Africa was initially spared, however this is changing rapidly. In
the last two weeks, the number of affected African countries increased from
9 to 41. As people continue to travel, it is only a matter of time before
COVID-19 spreads to the rest of the 54 countries on the continent. As I write
this from Monrovia, Liberia – a country whose health system has suffered
enormous challenges due to civil wars and the Ebola epidemic in 2014 – I
am compelled to highlight that one size does not fit all, and special
considerations need to be taken into account as we develop the COVID-19
response for Africa.
Countries with confirmed cases.
The continent’s population and health systems make it different from other
regions that have experienced COVID-19 to date. Three factors are
important at the population level.
First, the continent’s demographic structure is different from other regions in
the world. The median age of the 1.3 billion population in Africa is 19.7
years. By contrast, the median age in China is: 38.4 years, and the median
age in the European Union is: 43.1 years.
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Experiences in Asia and Europe showed that people over 60, and those with
significant health problems are most vulnerable to severe cases of COVID-
19. Although Africa’s youth may be considered a significant protective
factor in the pandemic, how the virus will evolve and manifest itself on the
continent remains unknown.
The second factor within the population is the high prevalence of
malnutrition, anemia, malaria, HIV/AIDs, and tuberculosis. Liberia, for
example, has one of the highest rates of stunting in the world: one in three
children under five years old are stunted. In recent weeks, we have
witnessed an increase in the incidence of malnutrition. Moreover, the rainy
season has come early this year, which means that malaria cases will rise
rapidly and peak malaria cases in 2020 may coincide with the ongoing
COVID-19 pandemic.
We should therefore anticipate that in Africa a higher incidence of severe
forms of COVID-19 will occur in younger patients because of the
demographics and associated endemic conditions that affect the immune
system. Malnutrition, anemia, malaria, HIV/AIDs, and tuberculosis are
likely to increase the severity of COVID-19. Africa may not see the same
narrative of “most people who get it will be fine” play out.
Third, social cohesion and social gatherings are of great importance in
Africa. For example, weekly attendance of a religious service is highest in
Africa with rates as high as 82% in Uganda and Ethiopia. As a result,
measures to impose social and physical distancing may prove to be more
challenging, as demonstrated by the protests that broke out on 20 March
2020 in Senegal after public gatherings, including gatherings at mosques
were banned as cases of COVID-19 rose. Earlier this week, Tanzania came
under scrutiny when it was announced that the country will not close places
of worship.
There are two major health system factors that will make the COVID-19
response in Africa more challenging. First, the continent is experiencing the
double burden of diseases: in addition to dealing with these endemic
infectious diseases, health systems in Africa are facing non-communicable
diseases, including injury, and cancer. As a result, the health systems are
stretched thin to begin with, and there is very little room to absorb the
COVID-19 pandemic.
Second, the capacity to provide critical care is the lowest in the world.
Severe forms of COVID-19 lead to respiratory failure requiring ventilation
support. The ability to treat severe forms of COVID-19 will depend on the
availability of ventilators, electricity, and oxygen. A recent analysis
of countries with the highest numbers of intensive care beds per capita does
not include any country from Africa. In Liberia for example, there are no
intensive care units (ICU) with ventilators. Uganda has 0.1 ICU bed/100,000
population. In contrast, the United States has 34.7 beds/100,000 population.
Lessons learnt in Italy and China are extremely valuable. However, they
cannot be extrapolated directly to Africa because of these differences in
demographics and health system constraints.
Because health systems in Africa are strained to begin with and have very
limited capacity to absorb the pandemic, the overall strategic approach
should focus on containment and aggressive preventive measures.
Early and aggressive physical distancing and frequent handwashing will
prevail as the most effective and affordable interventions for the continent,
with parallel testing, contact tracing, and isolation of cases. For aggressive
preventive measures to work, we will need the full support of populations.
Full support of populations can only be achieved with community
engagement and strong health leadership.
Furthermore, given the youth of the continent, youth leadership and
engagement will be critical for prevention and containment activities. And
lastly, given the priority given to religious services, religious leaders will
need to participate actively in the COVID-19 response. At the health system
level, operating rooms and teams could be reorganized and repurposed to
build critical care capacity in district hospitals.
The African context is unique. There are population structure differences,
high prevalence of endemic diseases and the double burden of disease, with
health systems that are stretched thin with minimal critical care capacity.
A robust COVID-19 response for the continent will need to take these
factors into account and include community engagement, health leadership,
and involvement of youth and religious leaders to drive containment. At the
health system level, temporary repurposing and reorganizing of the surgical
system will be key to increasing critical care capacity during the response,
focusing on what we have as we move forward.