Over 71 Million Plunge Into Poverty!

A spike in inflation rates pushed 71 million people into poverty in developing nations since March 2022, according to a recent UN Development Programme report. The report revealed that interest rates are likely to rise following soaring inflation, resulting in further recession-induced poverty to exacerbate the crisis. 

With depleted fiscal reserves, high levels of sovereign debt, and rising interest rates on global financial markets, developing countries face challenges that require urgent international attention. 

Source: https://www.undp.org/

According to UNDP estimates, an analysis of 159 developing countries globally further had indicated that price spikes in key commodities are already having immediate and devastating impacts on the poorest households, with clear hotspots in the Balkans, countries in the Caspian Sea region and Sub-Saharan Africa (in particular the Sahel region).  While most developing countries are grappling with shrinking fiscal space and ballooning debt, the challenge is how to provide meaningful short-term relief for poor and vulnerable households. 

It was also revealed that a number of countries have tried to mitigate the worst effects of the current crisis by implementing trade restrictions, tax rebates, blanket energy subsidies, and targeted cash transfers. A targeted cash transfer is more equitable and cost-effective than a blanket subsidy, said the report. 

More than half of the benefits of a universal energy subsidy go to the richest 20% of the population, according to the report. By contrast, cash transfers mostly go to the poorest 40% of the population. 

And Sri Lanka is not the only country that is a basket case. According to the World Bank as many as 12 other countries are at risk of an economic crisis. Pakistan, Tunisia, Egypt, Turkey are all candidates for IMF bail-outs. El Salvador and Argentina make-up the top 6. The problem with each is the lack of fiscal discipline, low revenue base and high debt to GDP. In every instance the poor will suffer more than the rich or the elites, when they were hardly responsible or benefited from the profligacy of their political masters. Could we learn from lessons of others?

Reference:

UNDP: Cost-of-living crisis plunge 71 million people into poverty, Focus Malaysia, 8 July 2022