The global cost-of-living crisis is pushing an additional 71mn people in the world’s poorest countries into extreme poverty, a new report published by the UN Development Programme (UNDP) on Thursday has warned.
Achim Steiner, UNDP administrator, said an analysis of 159 developing countries showed that the surge in key commodity prices this year was already slamming parts of Sub-Saharan Africa, the Balkans, Asia and elsewhere.
Among the countries facing the most severe consequences of surging prices, according to the report, are Armenia, Uzbekistan, Burkina Faso, Ghana, Kenya, Rwanda, Sudan, Haiti, Pakistan, Sri Lanka, Ethiopia, Mali, Nigeria, Sierra Leone, Tanzania and Yemen.
The UNDP called for tailored action.
It was seeking direct cash handouts to the most vulnerable and wanted richer nations to extend and widen out the Debt Service Suspension Initiative (DSSI) they set up to help poor countries during the Covid-19 pandemic.
“This cost-of-living crisis is tipping millions of people into poverty and even starvation at breathtaking speed,” Steiner said. “With that, the threat of increased social unrest grows by the day.”
Institutions like the UN, World Bank and International Monetary Fund have a number of ‘poverty lines’ — one for the poorest countries where people live on $1.90 or less a day.
A $3.20-a-day line for lower middle-income economies and a $5.50-a-day line in upper middle-income countries.
“We project that the current cost-of-living crisis may have pushed over 51mn more people into extreme poverty at $1.90 a day, and an additional 20mn at $3.20 a day,” the report said, estimating it would push the total globally to just over 1.7bn people.
It added that targeted cash transfers by governments would be more “equitable and cost-effective” than blanket subsidies on things like energy and food prices that richer parts of society tend to benefit more from.
“In the longer term they drive inequality, further exacerbate the climate crisis, and do not soften the immediate blow,” the UNDP’s Head of Strategic Policy Engagement, George Gray Molina, said.
The last two years of the pandemic have also shown that these cash-strapped countries would need support from the global community to fund these schemes.
They could do so, Molina said, by extending the G20-led Debt Service Suspension Initiative by two more year and expand it to at least 85 countries from a currently-eligible 73.
? The euro’s tumble towards parity against the dollar has pushed the European Central Bank (ECB) back against a wall, leaving its policymakers with only painful and economically costly choices.
Letting the currency fall would push up already record high inflation, raising the risk of price growth becoming entrenched at a rate well above the ECB’s target of 2%.
But fighting back against 20-year lows for the euro would require more rapid interest rate hikes, which could add to the misery for an economy already facing a possible recession, looming gas shortages and sky-high energy costs that are depleting purchasing power.
The bank has so far played down the issue, arguing that it has no exchange rate target, even if the currency does matter.
Even the accounts of its June policy meeting published on Thursday indicated no particular concern.
But the market moves are now too big to play down.
“The euro’s weakness reinforces the notion that the ECB is behind the curve,” Dirk Schumacher, head of European macro research at Natixis CIB, said. “Given how high inflation is, a stronger euro would be quite helpful because it lowers inflation.” – Reuters
