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Companies, not poor, get most COVID-19 aid in developing world, says study

People gather at a street shoe market in Dhaka, Bangladesh, May 19, 2019. REUTERS/Mohammad Ponir Hossain - RC19625B4410

Last updated on 2021-04-26

By Nita Bhalla ,Reuters 

NAIROBI (Thomson Reuters Foundation) – Developing countries have used most of their COVID-19 recovery funds to bail out big business, neglecting millions of people who have been pushed into poverty, including cash-in-hand workers, women and the disabled, a study showed on Thursday.

In eight countries, an average of 63% of pandemic-related state aid went to big businesses, while 26% went to social protection schemes, 10% to small and medium-sized enterprises, and only 1% to informal sector workers.

The findings by the Financial Transparency Coalition (FTC) civil society group were based on spending in Kenya, South Africa, Sierra Leone, Bangladesh, Nepal, Honduras, Guatemala and El Salvador.

India was analysed separately because of government changes to the definition of a small business during the pandemic.

“By the end of 2021, 150 million people are expected to fall into extreme poverty due to the pandemic,” the FTC’s director, Matti Kohonen, said in a statement.

“(But) those most impacted by this crisis in the Global South – the poor, informal workers, and smaller businesses – are being left out,” he said as the group called for tax hikes on big companies and the rich to tackle growing inequality.

COVID-19 has unleashed an economic storm that has hit the poor and vulnerable hardest, with women and marginalised workers facing the worst of job losses. The World Bank warns up to 150 million people are at risk of living on less than $1.90 a day.

The latest estimates by the International Monetary Fund show the world economy shrunk by 3.3% in 2020, and numerous studies have detailed how the crisis has exacerbated economic inequalities.

In Africa, Kenya allocated 92% of its pandemic-related funds to corporations, followed by Sierra Leone with 74%, according to the FTC research.

Nepal and South Africa were close behind, channeling 68% and 66% to big businesses respectively. Bangladesh gave corporates 63%, while neighbour India earmarked 21% of state aid to big businesses.

In Central America, El Salvador allocated 44% to companies, followed by just 5% in Honduras and 3% in Guatemala, which was the only nation to spend more than half of its funds on social protection schemes.

India dedicated 38% of the aid to welfare schemes, a share that reached 32% in South Africa.

Despite making up most of the workforce in all nine countries, informal workers got just 2% of state aid on average.

Bangladesh, where cash-in-hand workers represent 85% of the labour force, they were allocated nothing, as was also the case in South Africa, Nepal and Honduras.

Other vulnerable groups, such as women, the disabled and the elderly, fared even worse, receiving less than 1%.

Chenai Mukumba, research manager at Tax Justice Network Africa – an FTC member, said the allocations given to corporates were disproportionate and did not always prevent job losses.

“Once you’ve given these resources to corporates, you have no control whether it’s going to support their workers and save jobs or elsewhere, and we often don’t see the trickle-down effect,” Mukumba said.


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