Over the past three months, 71 million people have fallen into poverty because of spiking food and energy prices, made worse by the Russian invasion of Ukraine, the United Nations warns.
The countries seeing the worst impacts include low-income nations but also middle-income countries that depend on imports, according to a report published by the U.N. Development Programme on Thursday. The inflation problem is moving “faster than the shock of the COVID-19 pandemic” and has led to the “largest cost-of-living crisis in a generation,” UNDP Administrator Achim Steiner told reporters ahead of the report’s launch.
There is a risk of starvation in some parts of the world, he noted. The regions most vulnerable to poverty are the Balkans, the Caspian Sea area, and sub-Saharan Africa.
Targeted help: Steiner warned governments that the blanket subsidies they’re putting in place to relieve pressure on their citizens will make things worse in the long run since more than half of the benefit goes to the wealthiest 20% in society. Also, fuel subsidies exacerbate climate change by encouraging fossil fuel consumption, he added.
“Subsidies are not as good as targeted cash transfers,” he said.
Debt relief: Steiner said international institutions and the largest economies need to take steps on debt relief, including a moratorium on official debt for two years, along with measures to enhance liquidity. He warned, without naming names, that some countries were “stepping back” from efforts to help vulnerable nations. “We are already in a spiraling economic set of developments right now,” Steiner said.
The so-called common framework on debt relief from the G-20 group of rich and developing economies is widely seen as a failure.
Recession risk: Last month saw lower prices for food, according to the World Bank, with a 4.7% decline. And July kicked off with sharp drops in energy prices. However, economists are warning that grain prices could soon hit a floor, while the fall in energy might be a signal of a coming recession.
George Gray Molina, a top UNDP economist, said such a downturn would mean the world would see “36 months of shock after shock after shock.”
About the author
Shabtai Gold
Shabtai Gold is a Senior Reporter based in Washington. He covers multilateral development banks, with a focus on the World Bank, along with trends in development finance. Prior to Devex, he worked for the German Press Agency, dpa, for more than a decade, with stints in Africa, Europe, and the Middle East, before relocating to Washington to cover politics and business.