Following the money: Why a COVID-19 marker might not help

The COVID-19 crisis has generated a huge response all over the world. A sense of urgency to address the immediate health threats marshalled health teams across the globe. The scale of the socio-economic collapse, which dwarfs the 2008 crash, mobilised unprecedented public and private funding for recovery.

The IMF estimates that over US$9 trillion of fiscal support has been provided globally. Yet, most of the support is provided in advanced economies, accounting for 8.6% of their GDP, compared to 2.8% of the GDP of emerging economies and only 1.4% of the GDP of low-income countries, which have only very limited fiscal space to respond to the crisis. How much development finance has been mobilised to support developing countries' efforts?

Insufficient transparency

 

Along with the sombre dance of numbers around the toll COVID-19 takes on human life, a flurry of initiatives aims to track these responses. These are quite helpful both, as a transparency and learning exercise, and to identify how each country has adopted socio-economic measures to address the COVID-19 impact. Although financing for development has a critical role to play in the responses to the Corona-crisis, it has been difficult to get an overview of how development finance has been channelled. Tracking initiatives are welcome but cannot grasp the full range of financial flows and measures and often remain ad hoc and complex to decipher.

The EU published an overview of the data on the Team Europe external response to COVID-19, according to which nearly €36 billion have been mobilised by 5 June. For the most part, this is not fresh money but funds that have been redirected in the emergency response to COVID-19, now framed in the context of Team Europe a joint effort between the EU and member states to address the crisis announced last April.

This overview is welcome but falls short of providing good quality data on Europe’s international response to COVID-19. It is hard to find detailed contributions by each participant, let alone what these resources are meant for exactly. It is not possible to outline who does what and where with aggregated data only. No distinction is made between emergency response and longer-term intervention, or the type or dimension of actions (be it health, support to small and medium enterprises, gender or climate).

Some of this more detailed information is available to the EU services but has not been made public. Compared with member states, the European Commission has been more transparent in releasing information on its global response (as summarised in Table 1 of our recent paper) and on its long-term budget proposal, with an additional proposal for €10.5 billion from the new temporary recovery instrument ‘Next Generation EU’ for its external development activities. Still, the EU could release more meticulous and user-friendly information, including making a better use of its own aid platform.

The contribution of European bilateral finance institutions to the Team Europe global response also remains unclear: it is not yet identified as such and might have been included (or not) in EU member states contributions. The Association of European Development Finance Institutions (EDFI), which is committed to increased cooperation among DFIs – notably through the DFI Alliance – as a response to COVID-19, is currently gathering data, hopefully available soon.

The European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD) have been more forthcoming in outlining their COVID-19 response. But the data provided by the Council do not fully coincide with the public information put forth by the two institutions. The EIB announced a €5.2 billion participation to the Team Europe response, over €1.5 billion less than the €6.77 billion accounted for by the Council. Why? If the EIB has made further commitments, shouldn’t it be proudly communicating about it? On the contrary, after scaling up its Solidarity Package of emergency financing for COVID-19 from €1 billion to €4 billion, the EBRD has proudly announced that all its activities for the 2020-2021 period, worth €21 billion, should be committed to countering the economic impact of COVID-19. Yet, the Council overview sticks to a €4 billion figure from the EBRD.

So, the COVID-19 response seems to be tainted by a confusing lack of transparency. Hopefully, future data will be more coherent, detailed and easy to interpret.

Would a COVID-19 marker help?

 

To answer the growing need for increased transparency when it comes to the COVID-19 response, the European Union is considering the idea of a COVID-19 marker in the Development Assistance Committee’s (DAC) reporting system of the Organisation for Economic Co-operation and Development (OECD).

The Council conclusions proposing the marker welcome a ‘joint monitoring system, in line with OECD-DAC guidance and including a possible COVID-19 marker, to ensure accountability and transparency in the use of resources mobilised and allocated’ under Team Europe. According to DEVCO Director-General Koen Doens, a marker would:

“not only creat[e] transparency on let’s say the EU donors, but […] in a broader club of development finance providers.”

 

For instance, the DAC markers on gender- or climate change-related expenditures allow to track spending for priorities across projects, irrespective of under which sector or purpose projects have been recorded in the DAC system. Without the markers, these contributions would go unnoticed. A similar marker for COVID-19 response would improve transparency and visibility of these resources. But is the marker the right means to achieve such a good end? Not really.

The bureaucratic hurdles to get the marker established and consistently used risk to take too much time, potentially years, and energy. By the time an agreement is reached, and data are published following the 18-months DAC publication schedule, they risk to be outdated. The International Aid Transparency Initiative (IATI) has published guidelines for COVID-19 reporting already two months ago, in conversation with the World Health Organization, the UN Office for the Coordination of Humanitarian Affairs (UNOCHA)’s Centre for Humanitarian Data and Financial Tracking Service (FTS) and its data community.

The marker could provide useful information for donors’ accountability, a rightful preoccupation of many organisations, but it would not serve the purpose of timely monitoring – essential in such a rapidly evolving crisis, where needs suddenly emerge and evidence-based decisions need to be taken swiftly. Originally intended to track alignment to objectives, the use of markers to measure the scale of flows can lead to overestimation, for example in donors’ reporting of their aid spending on climate change.

Some might argue that it would probably make sense to agree on the parameters to report the emergency COVID-19 response in the DAC. But the UN OCHA Financial Tracking Service already provides an extremely useful service in tracking humanitarian funding in real-time from different sources, although it does have its limitations. Also, given the broad socio-economic consequences of the current pandemic, a COVID-19 marker would make little sense for the medium and longer-term recovery phases, as it might become all-encompassing, and risks becoming a simple labelling or re-branding exercise.

Besides, the response to this ever-changing crisis includes financing flows well beyond official development assistance. It is very unlikely that countries like India or China will report to the DAC system. The DAC would also miss sizable flows such as commercial flows, South-South cooperation or national responses of developing countries themselves.

A more sustainable approach to transparency

 

The COVID-19 crisis has unfolded in the midst of misinformation wars and diplomatic battles. In such an environment, more and better quality data are urgently needed. Efforts should focus on enhancing transparency, which starts with the capacity to collect and publicly release data,published in formats that allow for independent and timely use. There is no single system able to capture all flows, and no system to showcase outcomes. An all-encompassing system is unlikely to emerge any time soon. A full picture can only be achieved joining up data from different sources.

The development community is already working to strengthen national statistical systems and make the most out of a scattered, yet precious, landscape of data sources. Rather than promote a dedicated COVID-19 marker, whose establishment risks to defeat the purpose of its existence, the EU could put more weight behind initiatives such as IATI. Supporting local data ecosystems in developing countries is also fundamental to have a comprehensive picture of the response and its outcomes.

It is probably an unfashionable thought, but the COVID-19 pandemic shall pass. Looking into the future of a post-crisis world, the resulting legacy of better data, stronger national data systems and more integrated data sources will be much more valuable for transparency and accountability than a COVID-19 marker of limited use beyond the emergency phase.

The views are those of the authors and not necessarily those of ECDPM.