new York – Skyrocketing inflation rates have led to an increase of 71 million in the number of poor people in developing countries in the three months since March 2022, warns the United Nations Development Program (UNDP) in a statement. report released today.
As interest rates rise in response to soaring inflation, there is a risk of triggering new recession-induced poverty, which would further deepen the crisis, accelerating and worsening poverty around the world.
Developing countries, grappling with depleted fiscal reserves, high levels of sovereign debt as well as rising interest rates in global financial markets, face challenges that cannot be resolved without urgent policy attention. global community.
Analysis of 159 developing countries globally indicates that soaring prices of key commodities are already having immediate and devastating effects on the poorest households, with hotspots evident in the Balkans, countries of the Caspian Sea region and sub-Saharan Africa (especially the Sahel region). , according to UNDP estimates.
This report zooms in on the lessons provided by the two memoirs of the UN Secretary-General’s Global Crisis Response Group on the repercussions of the war in Ukraine.
“Unprecedented price increases mean that for many people around the world, the food they could afford yesterday is no longer affordable today,” says UNDP Administrator Achim Steiner. “This cost of living crisis is pushing millions of people into poverty, even starvation, at breakneck speed, and with that, the threat of increased social unrest grows by the day. »
Policymakers responding to the cost of living crisis, particularly in poorer countries, face difficult choices. The challenge is to balance meaningful short-term support for poor and vulnerable households at a time when most developing countries face shrinking fiscal space and growing debt.
“We are witnessing a growing and alarming divergence within the global economy as entire developing countries face the threat of being left behind as they struggle to cope with the ongoing COVID-19 pandemic , to crushing debt levels and now to an accelerating food and energy crisis,” says Steiner. “Yet new international efforts can end this vicious economic cycle, saving lives and livelihoods – this includes decisive debt relief measures; keep international supply chains open; and coordinated action to ensure that some of the world’s most marginalized communities can access affordable food and energy.
Countries have attempted to mitigate the worst impacts of the current crisis through trade restrictions, tax cuts, block energy subsidies and targeted cash transfers.
The report finds that targeted cash transfers are fairer and more cost-effective than general subsidies.
“While general energy subsidies may help in the short term, in the long term they accentuate inequality, further exacerbate the climate crisis, and do not cushion the immediate shock of rising costs of living as much as energy subsidies do. targeted cash transfers. » says report author George Gray Molina, head of strategic policy engagement at UNDP. “They offer some relief as an immediate band-aid, but may cause even more serious injury over time.”
The report shows that energy subsidies disproportionately benefit the richest people, with more than half of the benefits of a universal energy subsidy going to the richest 20% of the population. On the other hand, cash transfers mainly go to the poorest 40% of the population.
“Cash in the hands of people who are feeling the consequences of skyrocketing food and fuel prices will have a widespread positive impact,” Molina says. “Our modeling shows that even very modest cash transfers can have dramatic and stabilizing effects for the poorest and most vulnerable in this crisis. And we know from responses to COVID-19 that developing countries must be supported by the global community to have the fiscal space to finance these projects.
He added that to free up the necessary funds, a two-year moratorium on public debt should be considered to help all developing countries – regardless of their GDP per capita – recover from these shocks. This echoes recent calls from international financial institutions for increased liquidity for developing countries.
The COVID-19 pandemic alone has pushed developing countries’ debt to a 50-year high, equivalent to more than two and a half times their income, according to the World Bank.
The countries facing the most serious impacts of the crisis, all levels of poverty combined, are Armenia and Uzbekistan in Central Asia; Burkina Faso, Ghana, Kenya, Rwanda and Sudan in sub-Saharan Africa; Haiti in Latin America; and Pakistan and Sri Lanka in South Asia. In Ethiopia, Mali, Nigeria, Sierra Leone, Tanzania and Yemen, the impacts could be particularly harsh at the lowest poverty lines, while in Albania, the Kyrgyz Republic, Moldova, Mongolia and in Tajikistan, the impacts could be most severe.
Click on here to read and download the report
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UNDP is the leading United Nations organization fighting to end the injustice of poverty, inequality and climate change. Together with our extensive network of experts and partners in 170 countries, we help nations build integrated, sustainable solutions for people and the planet.
