Washington: IDA has been the leading multilateral provider of concessional resources to small economies, which have been hit hard by the COVID-19 pandemic. Robust IDA support for recovery is needed now more than ever, agreed a group of country representatives convened recently for the Small States Forum. The Bank is in discussions with the international community on committing to a strong IDA20 replenishment to ensure appropriate levels of support to countries for immediate crisis response as well as getting back on track to their long-term development trajectories.
IDA has been at the forefront of support to small states, recognizing their unique vulnerabilities, and has provided: (i) exceptional access to concessional resources, (ii) increasing financing volumes, and (iii) granting the most concessional terms available. The need for additional financial resources has increased considerably as many governments have had to tackle urgent COVID-19 impacts without losing sight of longer-term development objectives.
COVID-19 has had severe economic impacts on small states — these are 50 countries that comprise the Small States Forum and face unique development challenges due to their small population and economic base. These countries are particularly vulnerable to external shocks, natural disasters, and climate change. In 2020, real GDP for the small states is estimated to have contracted by 6.1 percent, compared to a 1.8 percent contraction for all emerging markets and developing economies.
The most affected countries are island economies relying on tourism. International arrivals in tourism-reliant small states collapsed between 35 to 84 percent, resulting in a 17 percent contraction of output on average. These states are also expected to recover slower than other economies. Most are expected to return to their pre-crisis levels only in 2022, provided that access to vaccines enables them to reopen and potential tourists to resume traveling.
To date, the Bank’s emergency COVID-19 response has reached more than 100 countries. Since the start of the outbreak, overall financial support to roughly 30 small states has exceeded $1 billion of which around $600 million has been geared toward the COVID-19 response.
“The COVID-19 pandemic shows how important concessional financing is for small states and other countries vulnerable to shocks. The World Bank has been leading the way. We appreciate the increased financing made available so far and ask IDA donors to support a strong and advanced IDA20 replenishment. A critical challenge now is to help us to secure expeditious access to vaccines, so that we can reopen and rebuild our devastated economies,” said H.E. Aiyaz Sayed-Khaiyum, Attorney-General and Minister for Economy and Minister responsible for Climate Change, Government of Fiji; and Chair, Small States Forum.
“COVID-19 is having a disproportionate impact on small states, with thousands of jobs lost and significant damage to the tourism and transportation industries among others. The World Bank Group is committed to strong recovery for these economies, complementing large-scale crisis response support with enhanced efforts to boost resilience and preparedness. IDA is making a vital contribution to small states, and a robust IDA20 replenishment will help us to sustain this good momentum,” said Axel van Trotsenburg, World Bank Managing Director of Operations.
Convening every year on the sidelines of the World Bank Group/IMF Spring and Annual Meetings, the Small States Forum provides a platform for dialogue and knowledge sharing on how the World Bank Group and the broader development community can best support small states. This group of countries makes up more than one fifth of World Bank members, and despite their diversity, these countries share unique vulnerabilities associated with the small size of their economies and high exposure to natural disasters and other external shocks, including the current COVID-19 pandemic.
The Forum, which met most recently on April 10, provided an opportunity to exchange knowledge and to discuss policy options for safely reopening small economies, with a special focus on the challenges that members face to access vaccines and secure concessional financing.