Economy 4 June 2020 Trouble in paradise: the particular problems of island nations in the Covid-19 crisis Income sources cut and high levels of public debt paint a gloomy future for small island developing states. Getty Rebuilding in Codrington, Barbuda in 2017 after Hurricane Irma Sign UpGet the New Statesman's Morning Call email. Sign-up Antigua and Barbuda imports at least 80 per cent of its food, according to estimates by the United Nations’ Food and Agriculture Organisation (FAO). The government is now providing its citizens with seedlings to try to lower the country’s reliance on food imports and feed itself. It is also distributing food to tourism sector workers, as Covid-19 puts a halt to activity in this sector. Antigua and Barbuda is one of the 58 "small island developing states", or SIDS, first grouped as such in 1992 during the United Nations Conference on Environment and Development, recognising their particular commonalities in terms of vulnerability when compared with other developing nations. Small problems These common threats are what puts the SIDS in a particularly difficult situation when Covid-19 is added to the mix. David Laborde Debucquet, senior research fellow at the International Food Policy Research Institute, explains how their smallness plays a major role in their vulnerability. “Based on their size, they could not mitigate internally a drought or a cyclone,” unlike a destination such as Mozambique or Brazil, where only a part of the country is disrupted when a disaster or disruptive event occurs, he says. Laborde adds that SIDS typically have a “high population density or low availability of cropland per capita”, which contributes to their vulnerability. “This has become even more problematic over time: in the past 50 years the arable land per capita has fallen by one-third at the global level but by 50 per cent in SIDS. So, even without a ‘risk’ agenda, thinking that these countries could feed themselves is an unrealistic proposition based on the existing population,” he says. According to the FAO, at least ten SIDS rely on imports to meet more than 30 per cent of their food needs. Some, such as the Maldives, Trinidad and Tobago, Antigua and Barbuda and Saint Lucia, import between 70 per cent and 85 per cent of their food. However, simply boosting the production capabilities of the islands might not be the answer to the problem. “Any increase in domestic production could lead to serious challenges in terms of sustainability, either by increasing intensive practices – for examples, those that could lead to soil erosion, and most of the SIDS have vulnerable soils – or through the extension of cropland in areas with high biodiversity,” Laborde adds. Tourism takes a hit The SIDS’ ability to meet their food needs is dependent on their financial capabilities to bring in food imports, and their finances are now bearing the brunt as Covid-19 disrupts both supply chains and their main sources of income, such as tourism. Máximo Torero, the FAO’s chief economist, explains that SIDS economies are reliant on this sector, which has been all but wiped out by the pandemic. Data from the World Tourism Organisation shows a global fall of 22 percentage points in international tourist arrivals during the first quarter of 2020. The Covid-19 crisis could translate into a year-on-year decrease of between 60 and 80 percentage points in 2020, the WTO estimates. Moreover, Torero adds that these economies are dependent on remittances from nationals working abroad for their foreign exchange supply, and this income is projected to go down by 20 percentage points. The effect is already being felt in the SIDS economies. Everly Paul Chet Greene, Antigua and Barbuda’s minister of foreign affairs, immigration and trade, says that the government has registered as much as a 75 per cent loss in overall revenues since the pandemic started. Ways of reopening the island to tourism are now being assessed. “The government is looking towards the recovery of an important industry for the economic survival of the country. Spearheaded by the Ministry of Tourism, consultations with tourism stakeholders are ongoing to establish operational protocols for the full value chain of the industry. This is to ensure that visitors and residents feel safe in our country as we seek to restart this sector,” Greene says. Public debt pressures Torero explains that SIDS will have a problem of liquidity as a consequence of the pandemic and will need about $5.5bn in financial assistance from the International Monetary Fund and the World Bank to make up for their cuts in income sources. In addition, SIDS have a debt-to-GDP ratio of 72 per cent on average. Torero explains that although some of them do not have these high levels of public debt, additional financial relief measures should be taken into consideration. Ways to tackle the economic crisis caused by the lockdown within SIDS are complex, but Laborde believes that continuing to encourage economic diversification is fundamental in order to overcome the situation and better prepare for future adversities. Active risk management is also necessary in the long term, he adds, through insurance products or sovereign funds. “These instruments should be developed and funded in collaboration with development partners, and capture a holistic approach of risk: climatic, geologic - volcano, tsunami - economic and epidemiologic. This is a necessity to guarantee a continuous capacity to pay for imports, in particular food, without relying on discretionary interventions at every crisis,” Laborde explains. Ultimately, reviewing tax policies should be on the agenda to overcome the difficulties imposed by Covid-19, as well as the other problems that are intrinsic to the islands, but also to ensure that they are not caught in a “vulnerability trap”, adds Laborde. “Taxing tourism [which can bring many negatives to a destination], increasing fees on fishing permits, having access to a ‘biodiversity fund’ for both on-land and under-the-sea assets, and reviewing the ‘tax haven’ strategy will have to be revisited. This will require addressing the collective actions faced by SIDS that are too often competing with each other, [which prevents them from providing] more favourable access conditions to foreign agents,” concludes Laborde. Blunting the brunt of Covid-19 on SIDS will require both inter-island and international collaboration, both Laborde and Torero agree, in order to avoid a food access catastrophe in paradise. Marina Leiva is a senior reporter at NS Media Group. › How Viktor Orbán turned the Treaty of Trianon into a dangerous political weapon Subscribe To stay on top of global affairs and enjoy even more international coverage subscribe for just £1 per month!