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Aid fatigue fears hit poor countries

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There are fears that least developed countries (LCDs) such as Malawi will continue being heavily hit by the impacts of the Covid pandemic as cuts to aid budgets are expected to further set back their economic development.

A statement published by the World Economic Forum and picked by the World Trade Organisation says small businesses in LCDs are facing enormous challenges such that many have been left cash-strapped due to plummeting revenues during national and global Covid lockdowns.

It also says banks and other financiers have slashed lending at a time when small businesses need it most, apart from the fact that other forms of finance and credit are thin on the ground, making it nearly impossible for them to grow and build financial resilience.

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“The growth of small businesses in LDCs and the level of employment that has created for women, and youth in particular, has been a crucial part of sustainable development.

“However, Covid is already impacting how and where aid is spent. Several government donors have reprogrammed their aid budgets to fund immediate and urgent health priorities and humanitarian assistance in 2020,” the statement says.

It adds that despite international organisations calling on governments to maintain aid budgets in 2021, fears are spreading that governments are planning to slash billions from their aid budgets.

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“Amid this uncertain and concerning economic climate, it is crucial to ensure that aid is spent in a way that attracts private sector investment and ultimately makes funds go further,” the statement, published as part of the Davos Agenda, says.

LDC governments have also been reminded that they also have an important role to play, by doing what they can to create a strong investment climate in their countries.

This includes removing hurdles that are discouraging investors, such as unnecessary screening mechanisms, business registration processes, licencing processes and lack of protections for foreign investors.

“It is clear that, if aid budgets are cut, LDCs and the small businesses that are the backbone of local economies and livelihoods will undoubtedly suffer the most,” the statement says.

Recently, the Malawi Confederation of Chambers of Commerce and Industry predicted a tough year for businesses, saying the wave and extent of Covid second wave’s devastation could not be estimated with precision.

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