The pandemic presents global challenges. How will countries with existing challenges and limited healthcare and revenue capacity respond to the crisis?
Within a couple of days of the first case of COVID-19 being reported in Mozambique, the government put into place a stringent set of rules to control mobility. All sports and cultural activities were suspended, several workers were asked to work remotely, and gatherings of more than ten people were banned.
Key challenges and questions lie ahead: Will mobility restrictions be enforced? How will one of the most fragile health systems in the world cope with a rise in infections? How will the economy survive the lockdown?
The Great Lockdown: Global economic impacts
While the full consequences of COVID-19 around the world are far from known, the global outlook is grim. Numerous lives will be lost as a direct result of the pandemic and many more are at risk due to its social and economic impacts.
According to the International Monetary Fund (IMF), due to ‘The Great Lockdown’ - name given by the IMF to the economic downturn resulting from the pandemic - the global economy is expected to shrink by roughly three percent during 2020. This means the world will experience its worst recession since the Great Depression.
While the recession will affect both advanced and emerging economies, it is likely to hit the developing world particularly hard. Weaker health systems, higher rates of informality, lack of adequate social protection systems, and limited space to provide a fiscal response are likely to make these effects far-reaching and long-lasting.
The Mozambican context
- Humanitarian crisis: Existing challenges
For Mozambique, the timing of the crisis is troubling. In 2019, it was affected by cyclones Idai and Kenneth, which left nearly 2.2 million Mozambicans in need of humanitarian assistance. Many homes, schools, and crops were ravaged by the cyclones, rendering hundreds of thousands of Mozambicans displaced and at risk of losing their livelihoods.
Moreover, an ongoing insurgency in the north of Mozambique and terrorist attacks have displaced thousands more and threaten to slow down the development of a US$ 60 billion natural gas project that could help Mozambique to achieve its development goals. COVID-19 is likely to exacerbate these challenges.
- Public healthcare: Limited capacity
Access to healthcare in Mozambique remains limited. According to USAID (2019), more than half of the people in the country need to walk more than an hour to reach their closest health facility and there are only three doctors per 100,000 people.
Furthermore, a lack of sufficient hospital infrastructure and equipment, as well as a limited number of healthcare specialists - who are mostly located in urban areas - means that the majority of the population do not have access to adequate healthcare.
HIV, malaria, and malnutrition are amongst the most prevalent diseases in the country, and a large share of Mozambicans living with these ailments, which require consistent care, depend on a system that is already at capacity. If infection rates soar too quickly, despite the more favourable age pyramid and greater distancing in rural areas, the health system might face the risk of collapse.
There are only 24 ventilators (as of 15 April 2020) in the entire country, indicating that if the number of infected people continues to grow, there will not be enough ventilators to help patients survive if they require assisted breathing. Additionally, a limited number of beds and intensive care units (ICUs) mean that many of the patients will not receive the care they will need to fight the virus.
- Revenue and restrictions: Endangered livelihoods
In addition to its effects on public health, COVID-19 threatens the livelihoods of millions of people. According to the IMF (2020), real gross domestic product (GDP) in Mozambique is only expected to increase by 2.2 percent this year. This figure is much lower than the initially projected growth of 5.5 percent.
This lower growth limits the margin of manoeuvre for the government to respond adequately to the pandemic due to an anticipated reduction of 15 percent in government revenue. To offset this reduction, The World Bank and IMF will allocate US$ 313.4 million to the state budget, which represents nearly six percent of the planned expenditures for 2020.
Furthermore, sectors that are crucial to protect the most vulnerable, such as health and social protection, will see a real reduction in their 2020 budget by 14 and six percent, respectively. In a country where 46 percent of the population lives in poverty, and where nine out of ten people work in the informal economy, the social and economic implications of a generalised lockdown are daunting.
Data shows that retail and recreation sites, and places like grocery stores and markets, have experienced a reduction in mobility of 30 and 21 percent respectively, following the implementation of social distancing measures. Public transit and mobility for places of work have also decreased by 29 and 14 percent.
Mobility trends: Retail and recreation
The slowdown in economic activity has already severely impacted the private sector, with over 217 companies opting to suspend the work contracts of around 6,400 workers. The tourism and transport sectors have also been heavily impacted by the suspension of visas to the country and by the different measures of social distancing.
The closing of borders has led to a rapid increase in prices of essential products. This can have severe implications for food security and the livelihoods of the most vulnerable, who up to now have received little in the form of social protection.
Mozambique’s response to COVID-19: Internal and external measures
Mozambique, like many other countries in Africa, reacted swiftly to the pandemic. In contrast to most western countries, Mozambique closed its borders and suspended public gatherings as the first cases of the virus were detected. This prompt response, together with limited testing, could help explain the low number of confirmed cases seen so far (80 cases as of 3 May 2020).
Early measures of social distancing may also keep these figures low. The Ministry of Health has restricted access to routine care (including for chronic diseases), in an attempt to reduce congestion in health clinics. Meanwhile, the Bank of Mozambique has reduced the cost for consumers of electronic and between bank transactions, reduced some of its reference rates, and made available a line of credit of US$ 500 million for commercial banks.
The government is seeking collaborations with donors to support the most vulnerable segments of the population, by providing cash transfers for poor peri-urban households and credit for micro and small businesses to help them cope with the repercussions of limited economic activity.
Debt relief announcements, as well as a stronger commitment from development partners, are likely to provide Mozambique with a much needed lifeline to navigate the economic consequences of the pandemic.
Pending questions: Towards evidence informed solutions
The challenges posed by COVID-19 raise a series of fundamental questions:
- What is the optimal level of restrictive measures to prevent the rapid spread of the pandemic while minimising its economic impact? Do the benefits of disease containment outweigh its costs given that the majority of low-income earners rely on daily cash wages to get by?
- For 2020, economic growth (2.2 percent) is below population growth (2.7 percent) and inflation is expected to increase to 6.7 percent. What are the strategies to deal with the risk of reduced purchasing power and worsening social inequalities in the context of this pandemic?
- With the reduction in external trade due to the pandemic, what strategies can be adopted to deal with the possible shortage of essential goods at home, considering the weak domestic production capacity?
- More broadly, to what extent should agriculture and agroindustry be engaged as the pillars of food security and economic recovery?
- What reforms and policy initiatives should be laid down in this special period to ensure rural incomes can rise in coming years and alleviate rural poverty?
- The extractive industry is an important pillar of Mozambique's economy. The downward trend in the international price of commodities may affect or create uncertainties in the income projections of this sector and for the country. What options can the government consider to address this dual financial threat?
- The insurgency in Cabo Delgado has its counterpart in the slowdown of economic activity, which has been aggravated in recent times by the intensification of attacks. Cabo Delgado is a province with the highest number of confirmed cases of COVID-19. What specific strategies can be articulated to minimise the combined effect (conflict and virus) on the population?
- What strategy can be adopted to deal with the pandemic in the education sector in the school year 2020, in a context where isolation and social distancing have led to the indefinite closure of all schools?
These, and other questions, are now more relevant than ever. Generating evidence and finding policies that work can help Mozambique navigate these challenging and unchartered waters.
Disclaimer: The views expressed in this post are those of the authors based on their experience and on prior research and do not necessarily reflect the views of the IGC.