A vast majority of COVID-19 recovery funds disbursed in developing countries, including Bangladesh, have gone to big corporations instead of being directed towards welfare, small firms or those working in the informal economy, according to a report.
The FTC Tracker Report and partners analysed data from a total of nine countries: Kenya, South Africa, Sierra Leone, Bangladesh, India, Nepal, Honduras, Guatemala, and El Salvador.
After analysing the data, the report found a staggering 63 percent of pandemic-related funds went on average to big businesses in eight of the nine surveyed countries.
Besides, only a quarter of the funds went to social protection, said the report.
However, the total corporate stimulus is likely to be even larger, as these numbers do not include expected revenue shortfalls from tax cuts, especially in Bangladesh and India, or the cost of tax amnesty programmes, as in Bangladesh and Honduras.
Matti Kohonen, director of the Financial Transparency Coalition, said that "By the end of 2021, 150 million people are expected to fall into extreme poverty due to the pandemic. But in most countries the main bailout funds are going to big corporations, while those most impacted by this crisis in the Global South – the poor, informal workers, and smaller businesses – are being left out. This threatens to further widen the gap between rich and poor, and increase countries' mounting debt, all while undermining countries' healthcare and social protections systems."
The report said that Kenya spent 92 percent of Covid-related bailout funds to big corporations, rather than to those facing poverty. This made Kenya's corporate tax rate the lowest in East Africa, fuelling tax competition.
Sierra Leone fared slightly better, with 74 percent of announced funds going to big trading corporations – but that proportion increased to 92 percent when taking into account funds that have actually been allocated.
Only one country surveyed, Guatemala, spent more bailout money on social protections than on other categories, totalling 54 percent, followed by India (38 percent), South Africa (32 percent), and Honduras (23 percent).
Only two percent of funds in the countries surveyed went to support workers in the informal sector, even though they often make most of the workforce. Some countries – like Bangladesh, South Africa, Nepal, and Honduras – did not allocate any funds for these workers. This comes despite the fact that, for instance, Bangladesh sees 87 percent of its workforce work in the informal sector, similarly to Kenya.
Additionally, much of the money allocated to small and medium sized businesses never reached these companies.
In Bangladesh, for instance, only a third of funds allocated for smaller businesses had been disbursed by the time of the FTC's survey.
Similarly, in Guatemala much of the money allocated to small and medium sized businesses was diverted to other projects.
The FTC's new report also warns about a lack of transparency of the recovery funds, including those provided by the World Bank and the International Monetary Fund.
In Kenya, for instance, the World Bank provided $50 million in immediate funding to support the country's emergency response – funds that are now unaccounted for. This is partly due to most international monitoring systems looking at initial funding announcements, rather than tracking the actual disbursement of funds.