The Era of Crisis and Development Deferred: Center for Global Development

Journal of International Affairs (JIA): Provide an introduction to the Center for Global Development and its day-to-day mission and activities.

Mikaela Gavas (MG): CGD is an independent think tank based in Washington, D.C. and London. Our work is essentially geared towards finding solutions to some of the problems that the world is facing, in particular around how to achieve development in some of the poorest countries. Essentially, we’re guided by a sense that investment and sustainable solutions are at the core of development progress, and we see our role is threefold. First, as change makers, we develop the ideas that lead to smart policy solutions to critical development problems. Second, we see ourselves as agenda-setters, so we do a lot of convening and facilitating of conversations to try and shape the global agenda. Third, we see ourselves as watchdogs, challenging governments, challenging institutions, and challenging the status quo for better approaches to development and therefore better results for the poorest and most vulnerable. That’s what we do, in a nutshell. We have some thematic areas of focus, which are global health, global education, migration and displacement, humanitarian aid, sustainable development finance, as well as quite a large program on governments and institutions. Within that, we focus on the UK and on Europe, so EU institutions and some Member States such as France and Germany. There is also a U.S. Government focus.

JIA: According to CGD, what was the status quo in terms of development and humanitarian response, prior to February 2022?

MG: I think the status quo, and how it got to this point, goes further back than 2022. We are facing unprecedented levels of uncertainty, and the future is not looking quite that bright anymore. This is a result of three big shocks that have happened. The first, obviously, was COVID-19. The second is climate change, which has been going on for some time, but we see the effects increasing and being exacerbated. The third was the Russian invasion of Ukraine. The state of the world is how it is essentially because of the combination of those three shocks. I’ve seen a lot of coverage of this, and people talk about the “perfect storm”—actually, it’s not the perfect storm in the conventional sense of the phrase, as in a one-off conjunction of those events. What we’re facing instead is a confluence of lasting structural insecurities: whether that’s political, socioeconomic, or existential, and they’re all reinforcing each other. That’s the situation we find ourselves in today.

JIA: How specifically are these three shocks interacting and even reinforcing one another?

MG: These three phenomena, these interconnected crises, have had multiple effects, but in particular on some of the poorest countries, which are inherently vulnerable to shocks and have had the least capacity to actually manage things when crises hit. What we’ve seen is that Russia’s invasion of Ukraine has significantly accelerated and exacerbated the slow-down in global growth, which began with COVID but has recently accelerated. What we’re seeing now is economic divergence that is persisting and growing. It actually opened up in 2021, propelled by COVID-19: this divergence between advanced and developing countries. But now we see it’s persisting and growing, and we have serious problems.

The three shocks have essentially fueled inflation, protectionism, debt crises, humanitarian and refugee crises, and also the resurgence of global poverty. I will take each of those in turn.

If we look at debt, public debt has reached critical levels. I think three in five of the poorest countries are at high risk, or are already in debt distress. One in four middle-income countries are at high risk of fiscal crisis. Again, we’re really in the midst of a huge debt crisis, one that we haven’t seen since for decades.

Food prices hit record levels last year. I think they rose by 23% in 2021 as well. This is, in part, because of extreme weather which hurt harvests and agriculture broadly. Then, Russia’s invasion of Ukraine sent energy costs and food prices—specifically the food price index—to an all-time high.

High inflation continues to rise, and the fact that the pandemic caused supply chains to snarl—then you have climate change on top of that, which threatens production across many of the world’s agricultural regions—has also fueled inflation. There are more droughts, more flooding, heat, wildfires, and so on.

Now, a word about protectionism. Actually, it’s protectionism that is exacerbating the chaos in global food markets, brought on by the war in Ukraine. Governments are tamping down on exports of staples. This leads to soaring food prices, and in some cases, the threat of social unrest has led to an increase in export restrictions, such as taxes or quotas. The last time I looked, the war led has led to something like 23 countries turning to food protectionism, according to the International Food Policy Research Institute (IFPRI).

That’s another key thing: we have a situation in which all of this has given rise to global hunger. A very grave outlook for a global hunger: around 345 million people today are food insecure, and nearly a million are on the verge of famine. There is acute food insecurity, which is escalating as well, and I believe that by the end of 2023, at least 222 million people across 53 countries are expected to face acute food security and therefore in urgent need of assistance. Almost two-thirds of those are in sub-Saharan Africa, or 123 million people. This is the result of all the things that I’ve mentioned, but also conflict in some of these countries as well, which has been a primary driver of extreme hunger.

Russia’s invasion of Ukraine is also adding to the problem. Looking at poverty, the World Bank has come out with estimates, and the bottom line is that the progress that was made on eliminating extreme poverty has decelerated, and in some cases been completely reversed, if you look at the Middle East and North Africa in particular.^[i] There has been a complete reversal in poverty eradication or poverty reduction. Humanitarian needs have grown exponentially; COVID made things worse in some of the most vulnerable places. But then there was also the war in northern Ethiopia, the collapse in Afghanistan, and now the war in Ukraine, which all have added to the number of crisis spots.

Interestingly, the latest emergency watchlist from the International Rescue Committee ranks countries that are in greatest emergency.^[ii] Ukraine, although still in the grips of war, comes tenth on that list. There are other countries that are in even more dire situations. Somalia and Ethiopia top the list, obviously stricken by drought and war, with hundreds of thousands of people already living in near-famine conditions. Afghanistan dropped from the top spot on the watchlist only because of the severity of the crises in East Africa. Syria is plagued by conflict, food shortages, cholera outbreaks, and so on—the earthquake, as well, that rocked both Turkey and Syria.

There is also the situation with finance, development finance in particular. I think it has become a well-known fact that here we are midway to Agenda 2030 and realizing the Sustainable Development Goals.^[iii] However, we are further away than ever from actually achieving them. There is a growing financing divide which is sharply diminishing the ability of many developing countries to respond to shocks and to invest in recovery as well.

Looking at Ukraine, and how much money has been committed— I believe donors have already committed around 152 billion dollars in humanitarian, financial, and military support—we’re also talking about reconstruction costs estimated at 500 billion and more. Looking at the breakdown, government support by type of assistance, you find that EU institutions are all the main providers of financial aid, especially with this 18 billion euro package of micro-financial assistance,^[iv] whereas the US, and the UK as well, I think, are providing mostly military aid. Then, if you were to look at support adjusted by GDP, for example, you would see that the largest donors to Ukraine in terms of all aid are Estonia, Latvia, and Poland. Then, if you look at commitments versus disbursements, EU countries have the largest commitment rate but also the largest difference in their commitment to disbursement rate, so the disbursement rate is very slow.

JIA: One of CGD’s objectives is agenda-setting. There are geopolitical patterns to funding and energy. How does the center work within that particular dynamic to highlight the significant cases that aren’t getting as much attention, such as Somalia and Ethiopia?

MG: From the start of the crisis, we were quite quick off the mark to come up with our analysis on the implications of the war in Ukraine for development overall and developing countries. We tackled it from various angles. We looked at it from an economic point of view: the Federal Reserve’s interest rate hikes and what that would mean for emerging markets and developing economies. We looked at the food crisis: we came up with a figure for how many people we thought would be pushed into poverty as a result of the food crisis, as well as options for how the development community and donors could respond. We also tried to raise awareness around some of the other crises that have been unfolding, including in Ethiopia, and how the Ukraine crisis would threaten attention and assistance to those countries. We looked at it from a humanitarian point of view: what happens to the rest of the world if aid is diverted to Ukraine? We looked at how we could boost the humanitarian response specifically to the Ukraine crisis as well while not neglecting other areas. We looked a lot at the refugee crisis as well, also in terms of how governments are spending their finite aid resources on housing refugees in their own countries and what that means for the rest of their development budgets. We have also considered vital programs, especially in human development. We looked at this crisis from a debt issue as well, and we continue to look at the debt problem and think about solutions. We’ve come up with a number of solutions around rechanneling special drawing rights and various other tools as well. Lastly, we looked at it from the point of view of the international financial architecture. How can international financial institutions (IFI) themselves make debt relief work for Ukraine? Much broader, how do you get the system as a whole, the multilateral development banks and other IFIs to mobilize additional finance for development, given constrained concessional resources and grant-type resources as well?

JIA: Is there evidence that support for Ukraine is drawing on funding that would have gone elsewhere? Or does it seem to be the case that it is in addition to what was already out there?

MG: There is evidence that it is diverting funding. If you look at the UK specifically, even before the war started in Ukraine, the UK had gone through a series of bilateral aid cuts. Also, there’s been so much emphasis in the UK on refugee costs, which I think have been estimated to be close to 3 billion dollars per year for 2022 and the same for 2023. This is essentially squeezing the aid budget even further. It’s happened in Sweden and the Netherlands as well, but beyond that there are other countries who have ensured that that money is essentially additional to aid.

If you look across the board at all donors, what you see is that concessional resources in essence are flat-lining. There is evidence that that money is being diverted away from other programs. Additionally, if you look at the share of global aid going to African countries from both France and Germany, it’s fallen quite significantly, in part, I think, due to an increase in refugee costs that essentially never leave the donor country. In France, for example, the share of aid to Africa feel from more than 50% in 2011 to less than 40% in 2021. In Germany, it dropped from 35% in 2011 to 29% over the same time period.

JIA: Is there a way to similarly assess the shift in energy or rhetorical emphasis? Is there evidence that the war is drawing attention away from some of these other crises?

MG: Certainly. Ukraine has pretty much taken over the headlines everywhere. We hardly hear about Afghanistan or Ethiopia. When a disaster has struck, such as the devastating earthquake in Turkey and Syria, it got raised in the headlines for a couple of days. It’s since dropped off again. We’re back to Ukraine. It’s absolutely clear that the war is what’s preoccupying the West—certainly, it’s front and center, because of the geopolitical ramifications, which some of these other crises maybe don’t have for Western donors.

JIA: What about outside of the West, for example in terms of South-South cooperation or shifts in rhetoric?

MG: Part of it, I think, is the response from the West when the war broke out. Europe is experiencing its biggest refugee crisis since the Second World War and the ramifications of this war. The EU triggers its temporary protection mechanism, which basically grants forcibly-displaced Ukrainians legal status, access to the labor market, social benefits and education, and so on. This is in stark contrast to any dealings with refugees from anywhere else in the world, and especially with those from Africa. There was this view, and there continues to be this view, that echoes across the African continent, that essentially not all armed conflicts are treated with the same level of resolve that many of the conflicts in Africa get. This a sentiment, I don’t know exactly how to phrase it, certainly a skepticism from the African continent, in particular. It’s not only about this bifurcated approach to Ukraine versus other countries, but also the fallout from the roll-out of the COVID-19 vaccines, the broken promises on climate change, and so on. There is this real questioning now from African countries about the hypocrisy, if you like, of the West.

JIA: Does there seem to be any reversion to the mean, or do these feel like more lasting changes? The figures from France and Germany suggest a long-term transformation in the composition of aid. What do we know about these shifts?

MG: The rhetoric you hear coming out of France and Germany and other European countries is attempting to be much more conciliatory: “We want to work with our African partners”—this whole push on initiatives such as the localization of aid, getting aid to where it’s needed most and to the people who need it most, and so on. There are shifts in language around climate change as well, and investments in gas and oil projects. I think that is softening as well a little bit, partly because Europe especially is trying to scale back its dependence on Russian oil and gas and so it’s looking for alternatives. But the rhetoric is very much, “We want to bring you back into the fold.” I haven’t really seen any action to match that rhetoric just yet. Again, a lot of talk: “We’re going to be investing billions in the building of African infrastructure and connectivity.” Nothing’s materialized just yet.

JIA: Is there a cyclicality to commitments? Are there certain times of the year when those get made, or does it happen irregularly? Is there a chance that those actions are forthcoming, or is there more smoothing, and so it’s easier to detect the trend?

MG: There are certain summits where grandiose statements are espoused. That happens quite frequently, and we will probably see a number of those summits come up this year, including the Macron summit on financing in June, and before that the spring meetings. But actually, there is a sense, certainly from CGD’s perspective, that the next 18 months are going to be absolutely crucial doing something, having some sort of step change in terms of the international financial architecture. We think the moment is conducive to actually push for a real reform of the system.

The World Bank, for example, puts more effort into addressing global challenges, but at same time, ramps up its focus on poverty reduction in-country; they’re deploying the right instruments to do this and that. They are galvanizing support around additional finance and maximizing or optimizing the use of their balance sheets to release more money. We see a really critical window in the next 18 months, as well as with the U.S. nominee for the World Bank presidency.^[v] There is hope on the horizon there. But we’re all a bit weary of the consistent stream of summits where big announcements are made without any real follow up.

JIA: How does CGD actually go about trying to bring forward that change?

MG: It’s a combination of our research and analysis, getting the numbers out there and the analysis right, as well as raising awareness around those things. It’s also talking to our networks and contacts in institutions. But most importantly, to be honest, it’s working in partnership with some of the other think tanks around the world—not just in the West. We’ve set up a partnership with a Moroccan think tank, with South African, Indian, and a Brazilian think tank. We’re ramping up our partnerships with think tanks around the world to make sure that it’s not just coming from these little guys in D.C. Rather, it’s a shared analysis and a much louder voice from the think tank community about what really needs to be done and how that agenda needs to be shaped.

JIA: How does CGD go about forging those partnerships? What is the atmosphere in this era of expanding crises yet diminishing funding?

MG: We’ve worked with some of these partners on other things. For us, it’s a question of going out there, finding the people talking to them, and inviting them to join us in the endeavor. Our fellows also have strong contacts in academic institutions and elsewhere in developing countries. They also help facilitate those partnerships.

I can’t speak about the conversation in Washington. My sense from colleagues is that the atmosphere is conducive to having those conversations, especially following Treasury Secretary Janet Yellen’s speeches or her announcements. They seem to be on the same page.

In London, however, it’s been very difficult. It’s a really tough environment. The whole aid system and development agency which used to be the Department for International Development, or DFID, has now been completely subsumed into the reconstituted Foreign Office as the Foreign, Commonwealth and Development Office (FCDO). It has broken down over the last few years. Not only has it lost a large chunk of money, but it’s lost huge amounts of critical expertise: those long-standing development experts that made up DFID. They don’t exist anymore. They’ve either retired or left, to think tanks or NGOs or the academic community. When I say they’ve been lost, it’s lost from the machinery of government but gained in the civil society.

Andrew Mitchell, appointed the Minister of State for Development and Africa, has come in seeing these massive problems and is really trying to do something about it. They’ve just released the new, revised Integrated Review, the “Integrated Review Refresh 2023”^[vi] for the 2021 Integrated Review of Security, Defence, Development and Foreign Policy. And it’s nice to see some of that more ambitious language about reaching the poorest countries, doing everything to set out a new global health strategy, being prepared for pandemics, tackling antimicrobial resistance, and so on. This dual focus on climate change and helping countries to adapt to climate change, to mitigate its effects alongside a real focus on poverty reduction and securing economic development, suggests that things are looking up a little—again, at least on the rhetoric side. Money, however, is going to be a problem and, I think, will be for the foreseeable future.

JIA: In the current context, which is the more serious loss: funding or expertise?

MG: Both, really. Where it has an impact is on the ground, in dealing with development programs and projects. The budget cuts were inevitable, to be honest, and it wasn’t just the budget cuts: it’s also the incredible shift that’s happened in terms of the motivations and purposes of development. Whereas previously, there was a very clear strategic objective on poverty reduction, which is in the interest of everyone, it has shifted quite substantially over the years to a much more foreign policy strategic component. This is not necessarily a bad thing—it’s how it’s rolled out that’s the problem.

JIA: What are some other long-term trends in the development space that are either caused or exacerbated by the crises of climate change, COVID-19, and the Russian invasion of Ukraine?

MG: There is one related to climate change. Speaking of aid and the finite resources we have, it is being squeezed by donor refugee costs as well as by climate. The financing set aside for climate was to be new and additional; that was the intention. Yet nearly half of it is either re-packaged as climate funding or taken from other aid programs. If you look at how that money is spent, most of it is spent on climate mitigation projects in middle-income countries, which really is debatable as to whether that’s the best use of the aid.

There is also the share of funds that are allocated to multilateral organizations. It’s well known that the comparative advantage of multilateral organizations really lies in the way they are able to address transparent boundary issues, essentially global challenges. But if you look at the share of funds that are being allocated to these organizations, you don’t see any increase. On the contrary, some of these organizations have borne the brunt of the bilateral cuts. Will that continue in the future? Who knows. But the job of development today is really about addressing global challenges, fighting poverty and vulnerability challenges in-country, and strengthening contingency, finance, and stabilization capacity to keep these crises from worsening and spreading. That’s a huge job for a small aid budget to contend with.

JIA: There has been an incredible amount of funding committed to the war effort, with much of it slowly being disbursed. What are the prospects for increased support in the next six months to a year? Is it business as usual, or are there more medium- or long-term development projects or ideas being floated out there as well?

MG: On Ukraine, certainly when it comes to reconstruction, there will need to be some pretty innovative and creative ideas. The EU has actually been something of a frontrunner in this, because they managed to pull together this package of 18 billion euros for micro-financial assistance for Ukraine, which will go some way, certainly in the short term, to help address those needs. But the way that they did this was to essentially take the headroom between what Member States have committed to the EU budget and the ceiling that was set, and then they used that headroom to leverage it on financial markets. That’s quite innovative, really. And I think that’s the sort of thinking that will need to ramp up in order to go about reconstructing Ukraine in the long-term.

I also get a sense that at some point, and it’s already settling in, the war fatigue is going to get to countries. You can already start to see it happen: the focus on the war fading a little bit, and it will continue to fade with time, especially as it has triggered massive negative supply shocks in a global economy that’s still reeling from COVID-19 inflationary pressures and economic downturn.

[i] World Bank, “March 2023 global poverty update from the World Bank: the challenge of estimating poverty in the pandemic,” March 29, 2023, https://blogs.worldbank.org/opendata/march-2023-global-poverty-update-world-bank-challenge-estimating-poverty-pandemic.

[ii] International Rescue Committee, “2023 Emergency Watchlist,” December 12, 2022, https://www. rescue.org/report/2023-emergency-watchlist.

[iii] See, for example, UNDP, “Halfway There: Sustainable Development in 2023,” https://feature.undp. org/2023-halfway-there/.

[iv] European Commission, “Commission proposes stable and predictable support package for Ukraine for 2023 of up to €18 billion,” November 9, 2022, https://ec.europa.eu/commission/presscorner/detail/ en/ip_22_6699.

[v] After this interview was conducted, the U.S. Government announced its nomination of former Mastercard CEO Ajay Banga to be the next president of the World Bank. Banga was elected to the position on May 3, 2023. 

[vi] UK Cabinet Office, “Policy paper: Integrated Review Refresh 2023: Responding to a more contested and volatile world,” March 13, 2023, https://www.gov.uk/government/publications/integrated-reviewrefresh-2023-responding-to-a-more-contested-and-volatile-world.