Photo: NRC

Why Covid-19 must reshape global crisis funding

By Jan Egeland|Published 27. Oct 2020
Covid-19 is the first global pandemic in a century. It has provided a real-time stress test that demonstrates how the international crisis system performs under extreme pressure. And it has exposed fundamental weaknesses in how disaster response is financed.

This opinion piece was first published on the World Economic Forum's website.

In multiple places across Somaliland, our aid workers scrambled to move funding from farming to urgently needed handwashing programmes when Covid-19 hit. But funding could not be easily or quickly transferred to boost emergency health activities. Global crisis financing is often bound by rules that delay aid reaching those who need it most. These micro-paralyses of aid were replicated countless times across relief operations.

Covid-19 is the first global pandemic in a century. It has provided a real-time stress test that demonstrates how the international crisis system performs under extreme pressure. And it has exposed fundamental weaknesses in how disaster response is financed.

My organization, the Norwegian Refugee Council, commissioned a study to reflect on what the pandemic response tells us about the fitness of the international crisis financing system. Three key lessons learned from that research must be used to reshape global crisis financing now, because the next global emergency is not a century away.

1. Funding is slow to reach those who need it the most
The current financing machinery struggles to move quickly to where it can do the most good. For example, most money from international financial institutions (IFIs) comes in the form of loans, which are only accessible to countries able to afford them. The poorest and heavily indebted nations may be unable or reluctant to increase their borrowing. Only 11% of funds committed by these institutions have benefitted low-income countries so far.

There are also stark regional variations in where countries donate when giving to the United Nations’ global aid appeals. Higher-profile countries are better funded than more neglected, forgotten crises. Most of Africa, Latin America and the Caribbean are funded at well below the 20% average across the global appeal.

To ensure future funding reaches the people most in need, we need to write a new set of rules that prioritizes the most vulnerable. This means international financial institutions should revisit their allocation criteria, and their mix of loans and grants.

Donor nations must also allow aid funding to be flexible, so that when a sudden disaster hits, money can be quickly moved to where it will make the most impact. Flexible funding can save more lives. It has proven an exceptional tool for aid organizations responding to rapidly evolving needs. And yet, flexible funds remain a marginal portion of funding, despite global commitments to do better.

The bottom billion is left behind again.

2. The initial response to the emergency was fast, but there was little money to meet the economic devastation that followed.
The UN launched a series of plans and appeals shortly after the pandemic was declared. International financial institutions also began to mobilize large sums. The World Bank initially made $160 billion available in grants, loans and equity investment, and the IMF made $250 billion available. However, initial funding injections tapered off after April. The UN global Covid-19 appeal was only a quarter funded by September. Many aid organizations recorded a dramatic drop in donations from private individuals and fundraising events, the result of lockdowns and economic uncertainty.

Funding reduced despite humanitarian needs increasing, and evidence is emerging that the socio-economic impacts of the pandemic have hit the very poorest hardest. The World Food Programme warned that the number of people severely hungry could soar from 146 million to 270 million by year-end. My organization published a report which found that 77% of conflict-affected people surveyed across eight countries had lost a job or income from work. The economic shock to already displaced and vulnerable communities is pushing them into a downward spiral.

To address the secondary impacts of this pandemic and the next emergency we face, we must scale-up investments in systems that enable government-led responses to shocks, including in social protection, improved public health and better preparedness for crises.

3. Humanitarian groups have still too few partnerships with the private sector and development agencies.
In 2004, I coordinated the UN’s international response to the Indian Ocean tsunami, that prompted the largest aid effort of its kind and spanned 14 nations. A global community of corporations galvanized to support the humanitarian relief effort. Today’s pandemic has so far affected every country on the planet. Despite this, too many of the world’s most vulnerable people are suffering alone.

Funding provided by international financial institutions for the Covid-19 response to a selection of national governments was many times what was made available for the global humanitarian and health response for Covid-19. The humanitarian sector needs to be in much closer dialogue with these financial powerhouses to ensure money is distributed fairly and equitably across the globe.

We need to bridge the divide between the humanitarian world, the international financial institutions and the private sector. This means creating spaces where we can speak to each other and find new ways of working. Businesses and investors should not be seen simply as a source of additional funding. Smarter ways must be found to blend private sector expertise and financial instruments with humanitarian approaches, to make crisis response better than before.

Rebooting the system

In 2016, the first ever World Humanitarian Summit pledged to reform crisis funding through its Grand Bargain initiative – an agreement between some of the largest donors and humanitarian organizations committed to improving the effectiveness of humanitarian action. But political will was lacking for substantive change to occur. Today’s pandemic creates a moment of opportunity for policymakers.

The challenges facing the international crisis financing system have never been greater. We must use this moment to reshape crisis funding and make the world more equitable.

Incremental reforms will not deliver a system fit to respond to the type and volume of demand that the coronavirus pandemic has created. A fundamental rethink of how we prepare and respond is needed, and it must go beyond the humanitarian community because the solutions require far greater resources, expertise and networks. Crisis funding needs to be remodelled and reshaped, so we are better prepared for the mega-disasters of tomorrow.

This opinion piece is based on research undertaken by the Norwegian Refugee Council in its Make or Break report on reshaping global crisis funding. Read the report here.