States in the Horn of Africa have displayed economic and political resilience to the immediate effects of the pandemic.
The Horn of Africa has been confronted with COVID-19 at a time when its societies have been grappling with a combination of extreme humanitarian, security, and economic challenges, including insurgencies, ethnic conflict, food insecurity, external debt burdens and a locust swarm. While many of the political and economic consequences of the pandemic in the region have been in line with global patterns, it has also reinforced existing national pathologies. The question of how best to manage the pandemic and its broader effects has created acute conflicts and exacerbated major domestic political rifts.
States in the Horn of Africa have, however, displayed economic and political resilience to the immediate effects of the pandemic. But the social, economic and humanitarian consequences could possibly get progressively worse during the pandemic and in its aftermath. The real danger lies in the long-term interaction between the political and economic impacts of the pandemic. In particular, there is a possibility that socio-economic impacts combined with elite-level rivalry might fuel political violence. Given the political and economic fragility of the region, this might pave the way for a mutually reinforcing poverty-conflict cycle.
This specialized report analyses the political and economic impacts of COVID-19 in the Horn of Africa, and charts pathways forward. The report is intended to serve as a key source of information for policy practitioners, government officials, scholars and students. Below, we highlight some of the key findings from the report.
COVID-19 has in many ways pushed the political and economic capacities of states and societies in the Horn of Africa to their limits but has in the process also displayed their resilience.
The two largest states in the region, Ethiopia and Sudan, have since 2018 been trying to consolidate their political transitions. In South Sudan, political leaders have managed to commit to a new peace deal. In 2020, Somalia was poised to hold its first direct democratic elections since 1969. The prospects of these positive trends have been severely jeopardised by a chain of events unleashed by the pandemic. COVID-19 has in many ways pushed the political and economic capacities of states and societies in the Horn of Africa to their limits but has in the process also displayed their resilience.
The most divisive issue has been the ethics of holding elections during COVID-19. The arrival of the pandemic coincided with election years for Ethiopia and Somalia, which were immediately engulfed in a constitutional crisis. In both states intense political and legal disputes raged over whether the incumbent had the legal right to postpone the elections, followed by exchanges of various threats between incumbents and opposition groups. Ethiopia opted to postpone voting indefinitely, while Somali authorities have been making contradicting statements on the issue.
States that aren’t scheduled to hold elections this year have been less destabilised by the pandemic. Djibouti and Eritrea have imposed some restrictions on movements of people and trade with neighbouring countries, but their domestic politics haven’t been significantly affected by COVID-19. South Sudan was faced with the pandemic just as its unity government was formed and when key elements of its peace agreement had to be implemented, and while its fragile political settlement has not collapsed it has seen a spike in communal violence in recent months.
There is now a broad consensus that given developments so far, there will be a steep global economic downturn throughout 2020 (and quite possibly further) that will hit hardest in developing countries.
The full health impact of COVID-19 in the Horn of Africa remains to be seen. So far, governments in the region have responded well, initiating fairly proactive measures to prevent the spread of the pandemic. In the economic realm, however, things are not looking very bright. There is now a broad consensus that given developments so far, there will be a steep global economic downturn throughout 2020 (and quite possibly further) that will hit hardest in developing countries. COVID-19 has also caused disruptions to cross-border capital flows, loss of investment confidence, and a decline in remittances. In the Horn of Africa, the global contraction in investments will hit Ethiopia and Sudan hardest, since they are the largest recipients of foreign direct investments in the region. The fall in remittances is especially worrying for Eritrea and Somalia, two countries that are among the world’s most dependent on this flow of resources.
There has been a variation in fiscal and institutional capacity to take measures to support the domestic economy. Ethiopia has the most detailed and expansionary of all the fiscal stimulus plans by countries in the Horn of Africa, yet the sum of Ethiopia’s plan announced in early April amounts to less than 0.1% of the US$2 trillion stimulus announced in late March in the United States (less than 0.3% if measured by per capita). The difference in the fiscal capacity between countries is the main reason we should be more concerned about the economic impact of COVID-19 in low-income and middle-income countries rather than high-income countries.
A mass mobilisation of financial resources is needed to deal with the negative economic knock-on effects.
A mass mobilisation of financial resources is needed to deal with the negative economic knock-on effects. One obvious way to ease the financial constraints that countries in the Horn of Africa are facing during this crisis is to suspend debt repayments, seeing that all countries in the region struggle with external debt overhang. In a positive development, G20 leaders have agreed to freeze bilateral government loan repayments for low-income countries until the end of the year. But more can be done. Given the severity of the crisis, creditors should suspend debt repayments until at least the end of 2021. The International Monetary Fund should also consider boosting its stimulus package to developing countries — including a large new issue of IMF Special Drawing Rights — unconditional on domestic market reforms and on terms favourable to developing countries.