Helping governments make tough calls in Covid age

The impact of the Covid-19 crisis is dramatic in terms of immediate loss of human life and many families suffer profoundly. While the epidemic rages across the world, all efforts should now be focused on preventing the worst scenarios from coming true.

Low- and middle-income countries will be affected harder and face real risks that progress in human development will be eroded. But a structural break such as Covid-19 also opens the possibility to make better use of limited resources and keep making progress towards universal health, education and social-protection services, and more efficient delivery systems. Now is also the time to start preparing to be ready to make good resource allocation decisions when the time is ripe.

Fiscal constraint jeopardises human development progress ...

African countries are likely going to be particularly hard hit as they face difficult epidemiological conditions on the ground, and have fragile and incomplete health systems. It is hard to provide large segments of the population in the informal sector with supportive measures, and social-distancing and quarantining rules are more difficult to enforce. This may result in a more severe and prolonged epidemic than we have seen in the northern-hemisphere. Since 2008, there has been a general increase in debt levels.

Increased international aid, which in many sectors flatlined before the Covid-19 pandemic, might not be forthcoming because developed countries are also grappling with the economic and fiscal impacts of the pandemic. Before long African governments will face tough decisions on where to invest scarce resources as they consider the trade-offs between economic and social sectors, and weigh up the realignment of budget allocations between health, education and social-protection sectors.

... but proactive management of these resource decisions can safeguard gains in human development

Once countries start returning to a new normal, the lack of fiscal space will be such that advances are put at risk because of under- or disrupted funding. This will be the case in critical areas of health, particularly for diseases such as HIV, TB and malaria, as well as education and social protection, or progress made in the social outcomes for population groups such as children, youth and poor and vulnerable households.

That is why we need to identify proportionate and effective fiscal and budgetary policy responses. We can prepare for this by connecting a financial programming framework, which projects forward the economy and the macrofiscal environment, with granular health, education and social-protection budget and expenditure projections. Doing so, we can identify expenditure scenarios that safeguard human development, using the fiscal crisis as an opportunity for better resource use.

Figure: Relational framework from Covid-19 to policy outcomes

The key point is that now is the right moment to prepare for difficult resource allocation decisions and refocus efforts on universal access to basic services in health, education and social protection. Planning for the post-Covid new normal should start now.

Tomas Lievens is the partner in our Human Development practice