SDGs vs COVID-19 in developing countries: The acid test

Doaa A.Moneim , Monday 28 Dec 2020

International and local officials and experts discuss how COVID-19 threatens the SDG agendas of developing countries, and how the SDGs could be a road to recovery for such economies


With COVID-19 severely affecting all the world’s economies and aspects of daily life, sustainable development has witnessed a shock because of the pandemic, especially in developing countries and emerging markets, which had already been witnessing a shortage in their financial resources and reliance on international financial institutions to secure loans to fund their sustainable development goals (SDGs) agenda.

The SDG agendas, which are also known as the global goals, were adopted by all United Nations (UN) member states in 2015 as a universal call to take action to end poverty, protect the planet, and ensure that all people enjoy peace and prosperity by 2030.

Developed and developing countries have committed to achieving the UN’s 17 SDGs entirely by 2030; however, COVID-19 comes as a hard test for developing countries over the coming decade, and also for what has been attained in this regard since the adoption of the UN’s agenda in 2015.

$1.7 trillion shortfall in financing SDGs in developing countries amid the pandemic

In November, the Organisation of Economic Cooperation and Development (OECD) issued a report showing that developing countries are experiencing a shortfall of $1.7 trillion in the financing they need in 2020 to keep them on track for the 2030 SDGs, at a time when both governments and investors are grappling with the health, economic and social repercussions of the COVID-19 crisis.

Moreover, developing countries are set to see a $700 billion drop in external private finance in 2020 and a gap of $1 trillion in public spending on COVID-19 recovery measures, compared to what is being spent in developed countries, according to the report.

The report attributed the drop in private finance to the decline in portfolio investments, foreign direct investment and the contraction of remittances sent home by migrant workers.

The report estimated that the projected $1.7 trillion shortfall for 2020 will add to an existing gap of $2.5 trillion in annual financing for developing countries concerning achieving the 17 SDGs by 2030, adding that 90 out of 122 developing countries are now in a state of economic recession after the pandemic heavily affected critical sectors like tourism, manufacturing and commodities.

The pandemic is also expected to put pressure on flows of the development aid provided by the advanced economies to developing economies, according to the report.

Such estimations show how the pandemic threatens developing countries’ efforts to achieve their SDG agendas amid the expected shortfall of the external development aids as well.


COVID-19 has stalled SDG plans across world

Meanwhile, Mahmoud Mohieldin, the Executive Director of the International Monetary Fund (IMF) and the UN Special Envoy on Financing the 2030 Development Agenda, said that the pandemic has contributed to increasing the global debt to $258 trillion (335 percent of the global GDP) and widened the SDG finance gap by 70 percent to reach $4.2 trillion.

Mohieldin told Ahram Online that this catastrophic situation has affected developing countries as well, as they increased foreign borrowing in response to the challenges imposed by COVID-19 on their already vulnerable economies, especially the lack of liquidity in their markets.

Mohieldin stressed that COVID-19 has affected plans to implement SDGs across the world, particularly in developing countries, saying that all countries now need to reprioritise their SDGs to meet the serious ongoing challenges.

Furthermore, the UN said in a report issued in September that global foreign direct investment (FDI) flows and supply chains have witnessed multiple shocks caused by COVID-19, with flows forecast to decrease by up to 45 percent in developing economies during 2020.

According to the report, private flows occupy the major portion of total financial flows into developing countries, FDI flows occupy about one-third of external finance flows towards developing countries 2019.

The report also said that SDG financing is scaling down and at a slower pace, which requires immediate and mid- to long-term policy responses to promote trade and investment, support small and medium-sized enterprises (SME) and social economy suppliers, and expand productive capacity for essential goods and services, particularly in the areas of food and health as well as other SDG sectors, especially in small and vulnerable economies.

The decline in remittances headed to developing countries as a result of the pandemic plays a role in this regard as well. According to the report, COVID-19 and the measures adopted to contain its spread are projected to result in a 20 percent decline of remittance transfers, which account for around one-fourth of external finance flows towards developing countries.

In addition, the report predicts that official development assistance (ODA) given by international financial institutions and governments to developing countries will contract by up to 8 percent in 2020 due to the ongoing COVID-19 crisis.

Egypt’s Minister of International Cooperation Rania Al-Mashat stressed that COVID-19 has impeded the development plans of all countries, especially developing and low-income countries, including the SDG efforts, as was mirrored in international institutions’ expectations that these countries would see negative growth in 2020 and 2021.

Al-Mashat spoke to Ahram Online about the efforts Egypt has made to avoid such a disastrous situation, saying that these efforts have helped the country become the only one among developing countries, emerging economies and in the MENA region to witness a positive growth in 2020 and 2021.

The minister said that Egypt has managed to secure $9.8 billion in development funds from a variety of international financial institutions, as the pandemic has proven the importance of multilateral cooperation in times of crisis.

She added that these finances were secured to help the country meet its SDG agenda through 2030.

The energy sector was the highest receiver of ODA finances with a total of $5.95 billion, making up for the 23.2 percent of the ODA finances, according to Al-Mashat.

She also added that the ministry inked agreements totalling $677 million to meet the SDG agenda in the sector.

Regarding finances secured for the health sector and fighting COVID-19, Al-Mashat said that $477 million were secured in development financing for seven projects with number of international development partners, adding that Egypt also has 36 projects totalling $1.443 billion, which represents 5.62 percent of the total ODA.

Moreover, $100 million were secured for agriculture, irrigation and national supply, while ending hunger makes up 1.89 percent of the ODA finances used in 17 projects costing $486 million, according to Al-Mashat.

For education, the ministry secured financing agreements totalling $252 million from USAID, besides 36 projects on quality education amounting to $2.361 billion currently being implemented, representing 9.2 percent of the total ODA finances, Al-Mashat said.

The infrastructure sector also received $5.737 billion, making up 22.3 percent of ODA financing, which makes it one of the three highest financed SDGs in Egypt, according to the minister.

She also added that there are 30 projects in sustainable cities and communities worth $1.497 billion and 34 projects for affordable and clean energy worth $5.950 billion.  

She added that the government has launched Egypt’s SDGs Monitor (a digital platform), in cooperation with UNICEF and Egypt’s Central Agency for Public Mobilisation and Statistics (CAPMAS), to track Egypt’s SDG implementation, which has reached 50 percent.

On how the current state budget for FY2020/2021 is supporting Egypt’s trajectory regarding achieving the SDGs amid the ongoing crisis, Al-Mashat expounded that the budget targets providing $80 million for achieving SDG 1, which relates to attaining inclusive economic development, $346 million for SDG2, which relates to achieving social justice, $58 million for sustainability of the environment and natural resources, and $48 million for women’s empowerment.

Al-Mashat emphasised that achieving SDGs guarantees the countries’ economic growth and its social, environmental and economic sustainability, adding that this mission could not be accomplished without the international multilateral cooperation and partnership, in addition to the cooperation between the public and private sector as well as civil and academic society.

“Such cooperation should lead to drafting a new universal social contract, designing inclusive economic policies, catalysing economic integration, reshaping education systems, harnessing the fourth industrial revolution, enhancing environmental sustainability, reducing global health risks and committing to flexible and rationalised governance. All of these targets are the substance of the SDGs,” Al-Mashat said.


Egypt responded to the crisis by increasing public investments by 70%

Meanwhile, Gamil Helmy, assistant to the Egyptian minister of planning and economic development, said that Egypt responded immediately and wisely to the challenges imposed by the COVID-19 crisis since its onset in the country in March.

Helmy told Ahram Online that Egypt’s economic reform programme, which was implemented from November 2016 to July 2019 with an IMF loan of $12 billion, helped the country absorb the shock, which has contributed to Egypt keeping its expected positive growth in 2020 and 2021.

Helmy said that Egypt started implementing its SDG agenda in February 2016, which was before it commenced with implementing its economic reform programme, which reflects the priority given to this issue.

Helmy also demonstrated that the government of Egypt has responded to the crisis by scaling up its efforts to implement the SDG agenda and rationalise its goals by increasing the allocations of public investments in top-priority sectors.

Accordingly, the government has increased public investments, which are financed by the state’s public budget, by 70 percent in FY2020/2021, the highest increase compared to other areas of spending in the budget.

These increases also backed the EGP 4 trillion that was already spent as public investment allocations over the past seven years, in FY2014/2015 in particular, according to Helmy.

“While all countries around the world have resorted to rationalising their spending and adopting austerity policies to deal with the heavy pressure placed by COVID-19 on their economies, Egypt has managed to avoid adopting similar policies and opted to increase public investments for the sake of pushing its economy forward, protecting its economy from the slowdown in private investments amid the crisis and maintaining the gains of its economic reform programme,” Helmy illustrated.

He also added that the government set seven development sectors as a top priority for where efforts should be intensified, including domestic manufacturing, transport and roads, tourism, health, medical supplies, information and communication technology (ICT), renewable energy, green economy and agriculture.


Record debt levels exacerbated by COVID-19

Developing countries had already been suffering increased debt burdens before the onset of COVID-19, but the pandemic has put even more of a dent in efforts to achieve these economies’ SDGs.

According to the International Debt Statistics (IDS) report 2021, issued by the World Bank in October, the total external debt of these countries jumped by 9.5 percent to a record $744 billion in 2019, compared to 2018, highlighting the growing risk of sovereign-debt crises triggered by the COVID-19 pandemic.

The pace of debt accumulation for these countries was nearly twice the rate of other low- and middle-income countries in 2019, according to the report.

Prior to the pandemic, the World Bank estimated the external debt for such countries at 5.3 percent to $7.8 trillion in 2018 (a growth of 5.3 percent compared to 2017), while net debt flows (gross disbursements minus principal payments) from external creditors tumbled 28 percent to reach $529 billion, the World Bank’s International Debt Statistics 2020 shows.

The report also classified Egypt as the largest borrower in the Middle East and North Africa (MENA) region with an accumulated debt rate of 15 percent.

At the same time, developing countries that are eligible to obtain loans from the World Bank, through its financing arms, were facing suffering a serious debt state by 50 percent in 2019, according to the World Bank.

Moreover, the Institute of International Finance (IIF), whose members include over 400 banks and financial institutions across the globe, disclosed in November that global debt sharply increased by $15 trillion in 2020 to record $272 trillion through September, revealing that governments – mostly from developed markets – occupied nearly half of this increase.

In a report, which described the global debt crisis as a “tsunami”, the IIF said that developed markets’ total debt leaped to 432 percent of GDP in the third quarter of 2020, up from a ratio of 380 percent at the end of 2019, while emerging market debt-to-GDP ratio hit approximately 250 percent in the third quarter of 2020.

The elevated global debt will definitely have an effect on developing countries’ and emerging markets’ SDG plans amid the expected slowdown in their economic growth amid the crisis in 2020 and 2021.

Such a serious situation pushed the international community to take action through the G-20 in its meetings in April and November, where the Debt Service Suspension Initiative (DSSI) was launched.

Under the initiative, G-20 members suspended the debt burdens on the poorest countries, worth $600 billion, for six months. The initiative was extended to June 2021, with the beneficiaries reaching 46 countries with a total suspended debt of $14 billion.


Jihad Azour, Director of the Middle East and Central Asia Department at the IMF, said that the global external debt was exacerbated due to the pandemic that forced the countries to expend in borrowing to meet the shortfall of cash liquidity in the markets and to deal with the negative growth the countries are set to witness during 2020 and 2021.

Azour told Ahram Online that economic activity and its performance in the region are not expected to bounce back to their normal levels before a decade from now because of the pandemic and its associated harsh impacts on the region’s economies.



He also said that the COVID-19 crisis combined with the global oil price crisis are expected to cause a total deficit of $224 billion for oil exporters, which will affect other countries over the coming year.

For Egypt, Azour said that if the country manages to reach pre-pandemic growth level (5 to 6 percent), it should be able to control its budget levels.

“It also needs to reduce the budget deficit, which would lead to decreasing the financial requirements on the public budget,” Azour said.


SDGs: The hope for developing countries to recover

While COVID-19 has imposed serious challenges to achieving the SDGs in developing countries, the SDGs themselves are considered a lifeline for these countries to recover from the pandemic and attain sustainable economic growth.

In this regard, the UN’s Mahmoud Mohieldin said that the 17 SDGs provide a pathway for all countries, especially those that are hardest hit by the pandemic, to recover and “rebuild better after the COVID-19 crisis and address challenges in poverty, health, inequality, and many other areas for the sake of every individual across the world by 2030.”

In his research, which was conducted in cooperation with Michael Kelleher, the former advisor at the World Bank and former special assistant to US President Barack Obama, Mohieldin noted that many of the SDGs address the current crisis as well as longer-term recovery requirements, including SDG 3, which focuses on good health and wellbeing.

The research said that the World Health Organization and other partners are currently supporting government COVID-19 responses, including testing, isolating, and caring for confirmed cases, while also tracing and quarantining people who have come in close contact with the infected.

Over the long term, each country needs a health system that can deliver quality, essential healthcare and preventative services to everyone, in addition, they need the capacity to perform future disease surveillance and diagnosis to rapidly identify, treat, and contain outbreaks, so that the human and economic costs are lessened.

Regarding SDG 6, which deals with water and sanitation, the research said that to slow down the transmission of COVID-19 people need to wash or sanitise their hands, and that 3 billion people around the world do not have access to even basic handwashing facilities at home because of lack of access to clean water, which increases their vulnerability to disease and poor health.

Over the longer term, according to the research, focusing on achieving the SDGs will provide universal access to safe and affordable drinking water and adequate sanitation, which will slow down the spread of infection and improve the health of all people.

On SDG 2, which addresses ending hunger, the research said that in many parts of the developing world, school closures mean the loss of children’s meals, in addition, global supply chains and trade have been disrupted for food and agriculture inputs that support food production, exacerbated by the substantial number of workers who lost their jobs due to COVID-19.

In this regard, the research stressed that now is the time to work towards long-term food security by making investments in technology that can improve agriculture productivity and the incomes of small-scale farmers.

Furthermore, SDG 8, which deals with achieving decent work and economic growth, can also help in recovering from the pandemic in the short and medium terms.

According to the research, the International Labour Organization (ILO) expects the COVID-19 crisis to wipe out 6.7 percent of working hours globally (equivalent to 195 million full-time workers), thus, working on achieving such a goal will enable countries to make investments that aim to sustain per capita economic growth, productivity, and entrepreneurship, to support formalisation and the growth of micro, small and medium-sized enterprises, including through access to financial services.

“This crisis has shown us the enormous economic and human costs of ignoring our own best advice to stave off the next crisis. This time, let’s do the right thing and deliver,” the research said.


Green economy: The inevitable path to recovery

According to a recent report issued by the World Economic Forum, adopting a green economy by applying nature-positive solutions is expected to create 395 million jobs by 2030. In addition, it provides a $10.1 trillion business opportunity that can be tapped by businesspersons.

The report pointed out that these advantages can help countries deal with the unprecedented job losses and economic uncertainty the pandemic has caused.

During the autumn meetings of the IMF and the World Bank, held in October, Kristalina Georgieva, the managing director of the IMF, revealed that green investments could curtail the severe consequences resulting from climate change, which is estimated at $1.3 trillion in 2019.

For Egypt, the government has scaled up its actions concerning green investments, targeting 100 percent green public investments over the coming three years.


Egypt issues first of their kind in MENA $750 green bonds

Egypt issued in October its $750 million sovereign green bonds, the first of their kind in MENA, in five-year terms in response to the challenges that the COVID-19 crisis has caused.

Ahmed Kojok, vice minister of finance for financial policies, expounded that this kind of bond has attracted a new base of investors from Europe, the US, East Asia and Middle East who are keen on investing in Egyptian debt finance instruments.

He also added that the proceeds from these bonds will be used in financing eco-friendly, clean transport and renewable energy projects as well as implementing projects that aim at curbing pollution, adapting to climate change, upgrading energy efficiency and achieving water and sanitation sustainability.

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