Pandemic Drained Foreign Exchange Reserves for Emerging Economies

Most of the world’s developing economies saw foreign exchange reserves dwindle during the COVID-19 pandemic.

That’s according to a report Sunday (April 9) by the Financial Times (FT), citing fDi Markets analysis of central bank data from 75 nations collected by Haver Analytics, the latest sign of the ongoing effects of the pandemic.

The figures show that the important cover ratio, often used to measure foreign exchange reserves, declined by at least 25% in more than half the countries surveyed. The biggest drop happened in Bolivia, followed by Sri Lanka, Lebanon and Pakistan, all of which fell by at least 75% since March 2020.

The FT noted that the loss of reserves hinders these countries from paying down their fiscal deficits and covering the costs of food, fuel and essential goods imports.

These findings come on the heels of a report last week showing that Americans are still working less than they did before COVID appeared.

The number of Americans working is a percentage point lower than in February 2020, while the amount of time people are working is about an hour less than it was during that pre-pandemic month, according to a paper published in the Brookings Papers on Economic Activity.

Put together, those trends have left the American workforce with a loss that’s equivalent to 2.4 million workers, according to the paper, written by University of Maryland Professor Katharine Abraham and Ph.D. student Lea Rendell.

These declines can be attributed a few trends that were underway before the pandemic and others that originated with the virus, according to the report.

Roughly 40% of the loss, about 1 million workers, is due to the pre-pandemic trend of baby boomers leaving the workforce upon reaching retirement age, the summary said.

However, the larger portion of that decline, about 1.4 million workers, was likely due to COVID-related factors, such as workers putting off searching for a new job after getting payments related to  the health crisis and shutdowns.

Others may have avoided work due to fear of catching the virus, or cut back on work hours due to the effects of long-COVID and realigning their work-life balance in the wake of the pandemic, per the report.

Another report late last year by The New York Times found 3.5 million people missing from what would have been projected to be today’s workforce, based on pre-pandemic trends. A substantial number of those “missing workers” — 2 million — have permanently retired.