How economic disparities undermine East Africa’s growth
East Africa remains among the most unequal places on the continent, with the richest 10 percent of the population earning more than half the population of 415 million citizens, says a new report.
According to The inequality crisis in East Africa: Fighting austerity and the pandemic by Oxfam and Development Finance International (DFI), the huge economic inequalities have undermined the region’s growth.
While income is increasingly concentrated in the hands of a few in Kenya, Uganda, Tanzania, Rwanda, Burundi, South Sudan, Somalia, Ethiopia and the Democratic Republic of Congo, more than 200 million people are struggling to meet basic needs such as education and healthcare.
“South Sudan, Rwanda and Uganda are the most unequal, ranking among the world’s 40 most unequal countries. Kenya, Tanzania, Burundi and Somalia are in the most unequal third of countries. Only Ethiopia has below-average inequality,” the report states.
The inequality has made it impossible for the region to eradicate poverty by 2030.
According to the report, Covid-19 pandemic has worsened the situation, as more citizens who were living just a shock away from poverty, slid deep into dehumanising economic lives.
Covid-19, drought and locust infestations that have all happened within the past two years have sent at least 22 million people into poverty within East Africa, data collated by the study from different bodies revealed.
“The UN estimates that the pandemic will result in 11 million more people living in poverty in the DRC, as well as six million in Tanzania and 2.4 million in Uganda. The World Bank estimates that 900,000 Rwandans (7 per cent of the population) will have fallen into poverty in 2020–21.”
Across sub-Saharan Africa, Oxfam and DFI estimate the pandemic will send 52 million more people into poverty.
“With very few assets, lower education levels, precarious employment and low skills, most of the new extreme poor people were already just a shock away from extreme poverty,” it noted.
The report paints a bleak picture of the region what with stretched health systems and protracted school closures, before warning that the rate of poverty will continue to rise even this year.
“Lower growth will continue in 2022, though its severity will depend mainly on the rollout of Covid-19 vaccines, which has been shockingly slow in most East African countries. As of mid-January 2022, a dismal four per cent of the population had been fully vaccinated in the region,” the report added.
It observes the huge impact low spending on education, social protection and health by governments in the region has had on economic welfare of households, with at least seven per cent of people spending more than 10 per cent of their income on healthcare.
This spending is considered catastrophic, since it has the impact of sliding households into poverty.
East African countries, the report observes, are spending less than 10 per cent of budgets on health and 7 per cent on social protection (less than half of global average).
“In short, when Covid-19 hit, half of East Africa’s citizens had inadequate access to healthcare, 90 per cent lacked social protection and 80 per cent lacked labour rights to cope with the pandemic,” it stated.
While also noting that many governments have already slowed on fiscal support programmes created when Covid struck despite having been insufficient and are planning austerity measures that will an annual 4.7 per cent cut public spending in the period to 2026, the research firms warn the situation is likely to escalate.
“It is now clear that the economic impact of the pandemic will be felt well into the future in most low- and lower-middle-income countries. To allow maximum space for recovery, the DSSI should be extended into 2022, transformed from a suspension into a cancellation initiative and include all multilateral and commercial creditors,” it said in relation to public debts, that on average are consuming 54 per cent of the region’s revenues.
The report added that it is only DR Congo and Burundi may not require comprehensive debt cancellation and reductions to ensure that their debts are sustainable going into the future, to free up resources to tackle inequality and prepare for economic shocks.
Credit: Source link