Less Deaths Yet Less Jobs: How Some Countries Avoided a Pandemic but Could Not Avoid Economic Fallout

This article was originally written by Aryan Aggarwal on Café Economica on 14 June 2020.

When thinking about the economic fallout due to the on-going pandemic, the countries with the highest mortality rate first come to mind.

It is no doubt that the UK, US, Italy, France, India, the ones worst affected in terms of number of deaths,all steer towards one of the worst recessions in their history. Exhausted medical resources, often harsh lockdown conditions ,and the loss of lives coupled with the fear invoked in residents has amplified the economic downturn.

However, many countries while having low case count, are on track to face economic chaos. Lower remittances, currency depreciation, decreased demand for exports, locusts and debt repayments troubles many.

Say Goodbye to Remittances

Remittances are transfers of money, which are sent out with no financial return expected. Gifts, donations, sending money back home are all various forms.

Sending money home to family members form the largest share of remittances flow in almost every country. In under-developed and developing countries these flows can amount to billions of dollars, annually. Primarily due to the outward migration of young workers to the developed world. The biggest recipient of remittances in terms of percentage of GDP are countries in Asia and Sub-Saharan Africa.

According to the World Bank, remittances will fall from $554bn to $445bn. Given projected fall in remittances, the biggest impact will fall on African and Asian countries.

Mainly due to jobs being cut-back and salaries being reduced in the developed world- where workers from under-developed countries often migrate to.

Currency Crash

Currency prices for most countries are determined by the laws of demand and supply. As demand for the country’s exports increases, so does the demand for the country’s currency. As people need the local currency to pay the exporters. A lack of diversification has led to many under-developed countries dependent on commodity exports for their export revenue. Decline in global demand for various metals, oil, food stocks has thus caused trouble.

A classic example is the country of Zambia. Copper consists of the largest portion of exports. And recent crash in copper prices has caused demand for the local currency (kwacha) to crash.

Source: Financial Times

However, this is not the only factor at play. According to the Institute of International Finance, since January 2020, foreign investors have withdrawn $95bn from stocks and bonds from emerging markets. Roughly 4 times greater than the outflow in 2008 (the last global financial crisis). This has indeed increased the supply of currencies as foriegn investors sell their assets which they often own in the local currency. Increased supply and less demand. Drastic Depreciation.

A decline in currency prices adds another problem. As the local currency can now buy fewer dollars, or any other respective foriegn currency, any payments now add extra pressure to the country. Zambia is not alone in suffering from a currency crash combined with more expensive debt payments.

Debt Trouble

Recently South Africa’s debt was downgraded into junk status by the credit-rating agency Moody, which was followed by a sharp sell-off of South African bonds. Almost all governments now issue bonds (a promise of repayment in the future). Which are also owned either by foreign citizens (primarily investors) or foreign governments.

Decline in commodity prices causing falling revenue, combined with currency depreciations, has made foreign debt harder to pay. As worries about a government’s ability to repay its debt increase, it’s bonds become more risky and hence are downgraded.

South Africa has a similar story. Increased stress on national banks, lower GDP due to lockdown has raised worries over the country’s ability to repay its debt. On the other hand, Zambia has already called in financial advisors to restructure its debt (a move often taken once a country is near bankruptcy).

Nigeria which depends on oil for almost 50% of government revenue has already called for aid. And many fear that Angola which also has a similar export structure as Nigeria could be next to experience a sovereign debt crisis.

This has made many leaders demand relief on debt-repayments for under-developed countries. French President Emmanuel Macron and Tidjane Thiam, former chief executive of Credit Suisse, are among few who have argued for a freeze on interest payments for a couple of years. However, when developed countries themselves face economic chaos, this might be unlikely.

Locusts Incoming

In any normal year, these problems would be enough to mark the period as a catastrophic time. Yet new problems seem to be incoming month after month in 2020.

Asian countries such as Pakistan and India, and African countries such as Djibouti, Ethiopia, Kenya and Uganda. All face another problem: Locusts.

While the first wave passed in January and February. These insects who eat their body weight on a daily basis, had laid eggs and now return in a greater capacity.

Source: Financial Times

The damage is already significant, with experts estimating a total of $8.5 billion (without any economic intervention), and the $500 million World Bank pledge to aid countries seems small in comparison.

If the problem is not dealt with swiftly, locusts could emerge roughly 400 times greater in number (due to the exponential increase), compared with their levels in January. The economic fallout could exceed tens of billions of dollars.


Yes, these are unprecedented times. Economic, political and social chaos looms large in almost all countries. But, as in any country, in times of crisis it is the poor sections who bear the greater injuries, in the global community, it is the poor countries who are the most damaged. The World Bank predicts that most African will slip into a recession for the first time in 25 years, with expected growth to be between -2.1% and -5.1% in 2020. While little can be done by us, talking about these issues, can motivate those in power to reach out to those in dire need.

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