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05 Nov 2014
Investments in kick-starting economies and long-term development urgently needed
New York — The Ebola outbreak in West Africa is impairing the ability of governments to raise revenues, increasing their exposure to domestic and foreign debts and may make them more dependent on aid, according to the latest study (PDF) on the socio-economic impact of the crisis carried out by the UN development agency.
“We need to make sure that the Ebola outbreak does not lead to socio-economic collapse,” said Abdoulaye Mar Dieye, the Director of the Regional Bureau for Africa at the United Nations Development Programme (UNDP). “This crisis is already taking a toll on budgets and reducing the governments’ policy leeway to make much-needed investments in critical areas such as health and education for their citizens.” He added that the effects of the Ebola crisis will last long after the epidemic is brought under control.
In total, the governments of Guinea, Liberia and Sierra Leone are experiencing a shortfall of US$ 328 million to be able to function at pre-crisis levels, the study shows. The gaps are caused by increased spending to tackle the Ebola crisis and fiscal constraints resulting from a slowdown of economic activities such as tourism, mining and trade.
Because of Ebola, government expenses have risen by about 30 percent in all three countries and fiscal deficits are rising.
In addition, Liberia has had to sacrifice 20 million dollars-worth of infrastructure development and Sierra Leone 16 million since the beginning of the crisis. Guinea has just revised its budget to reflect the new reality.
Because of these financial constraints, the three countries are resorting to domestic and international borrowing and have already taken financial packages from the International Monetary Fund (IMF) and the World Bank.
“These countries were heavily reliant on aid but beginning to see healthy rates of economic growth and opportunities for business, economic diversification and domestic resource mobilization,” said Dieye. “We need to avoid a situation where these countries increase their dependence on external sources of financing.”
The study also urges governments and national and international partners to continue investing in development activities and make sure every dollar spent on tackling the emergency is an opportunity to invest back in the community and economy for the long haul.
Guinea, Liberia and Sierra Leone had experienced encouraging rates of economic growth over the past ten years — at 2.8, 10 and 8 percent respectively — sustained by mining, forestry, agriculture and services. The countries were just beginning to capitalize on that growth to increase their investments in basic social services and safety nets.
Now, because of the Ebola crisis, extractive industries and trade in goods and services have begun to slow down. In Liberia, for instance, half of the mining and agricultural concessions have reduced their activities.
Exports of fruit and vegetables from the Northeast of Guinea to neighboring countries have been down 90 percent.
The services industry has also taken a toll. In Freetown, Sierra Leone, one of the most visible consequences of the outbreak has been the closure of nearly all bars, restaurants and nightclubs. This has forced the nation’s largest brewery to scale down operations culminating in a loss of 24,000 jobs within the supply chain. According to UNDP, this number is only a small portion of the ballooning job losses expected during this crisis.
Further, the outbreak of Ebola, in just six months, has led to severe loss in household incomes, totaling 35 percent in Liberia, 30 percent in Sierra Leone and 13 percent in Guinea.
UNDP is at the forefront of the fight against Ebola, mobilizing communities against the disease, helping people recover from the crisis and assisting governments to continue to provide basic services, and to develop Ebola impact assessments and recovery plans.
Nicolas Douillet, Communications Specialist, UNDP Africa Nicolas.firstname.lastname@example.org +1.212.906.5937