“We are witnessing a series of tragic events unfolding in Sri Lanka right now that should serve as a warning to anyone who thinks that, you know, figuring out how to deal with This crisis is up to the nations themselves.” Achim Steiner, Administrator of the United Nations Development Program (UNDP), in connection with the South Asian nation’s default last month – the first default in the country’s history.
“That default essentially means that the country is no longer able to pay – or not just service – its debt, but actually has to import the basic parts of what keeps the economy afloat. at, whether it’s gasoline or diesel, whether it’s fuel, whether it’s medicine,” added Mr. Steiner.
The warning was issued as new data from the Food and Agriculture Organization of the United Nations (FAO) became available.FAO) indicates that the number of people affected by hunger globally has increased to 828 million by 2021, an increase of about 46 million since 2020 and 150 million since the outbreak Coronavirus.
‘Shock after shock’
Speaking at a briefing at the UN Geneva to outline a series of policy recommendations that countries can follow to combat the global food, fuel and financial crisis, the Senior Economist UNDP senior George Gray Molina noted that many countries have faced 36 months “Shock after shock after shock”: first COVID-19then the Russian invasion of Ukraine 24, especially the latter shook the global food and energy supply and caused a surge in inflation.
“With COVID, what we see are effects through the labor market, shutdowns and earnings,” said Mr. Molina. “The official estimate is that 125 million people fall into poverty in about 18 months… what we see right now is that Three months of inflation dragged about 71 million people into poverty. “
UNDP head Steiner suggested that the failure of governments to take decisive and radical action risks sparking widespread unrest.
Pain on the street
“Very quickly, we can also see with the dire economic outlook, a situation where for In many countries, people’s patience and ability to deal with this reality has been exhausted. And as I’ve often said, when politics moves out of our parliament, out of government, into the streets, we’re in a fundamentally different situation. We are very vulnerable at the moment to seeing developments like this happening in more countries.”
Outlining a number of fiscal policy recommendations detailed in the new UNDP report – Tackling the Cost of Living Crisis: Policy Responses to Alleviating Poverty and Vulnerability around the World – Mr. Steiner emphasized that maybe some countries can solve the runaway inflation without resorting to the “blunt tool” of raising interest rates.
“There is potential through multilateral investment banks by paying more capital, to enable them to deliver through targeted lending and crisis response measures,” he said, adding that International Monetary Fund (IMF) may also be involved in this process.
The UNDP Administrator went on to suggest that “the ways and means by which countries can more specifically address their needs” that “do not necessarily contradict measures to pressure inflation” that are used by central banks today.
‘Strong’ speed
According to the UNDP report, the impact of the global food, fuel and financial crisis on global poverty has been “Significantly faster” than the shock of the COVID-19 pandemic.
Analysis of 159 developing countries across the globe indicates that the spike in prices of staples has “immediately and severely impacted the poorest households.
According to UNDP, obvious hotspots have emerged in the Balkans, the Caspian Sea region and sub-Saharan Africa (especially the Sahel region).
Global Crisis Response Team
This report also explores the insights provided by two summaries of the UN Secretary-General’s Global Crisis Response Team on the ripple effect of the war in Ukraine.
The key to the global recovery will be recognition that everyone cares about the benefits of helping countries grappling with dwindling fiscal reserves and high levels of government debt, as well as interest rates. interest rates increase in global financial markets, Mr. Steiner emphasized.
UNDP Administrator Achim Steiner said: “Unprecedented price increases mean that for many people around the world, the food they could buy yesterday is no longer possible today.” . “This cost-of-living crisis is pushing millions of people into poverty and even starvation at breakneck speed and with it the threat of social unrest is increasing day by day.”
Among the strongest takeaways from the UNDP report is the warning that The ‘whole of the developing world’ is in danger of being cut off from the global economy forever.
Mr. Steiner stressed that internationally agreed measures “can get out of this vicious economic cycle” and save lives and livelihoods.targeted cash transfers“Because it is fairer and more cost-effective than general energy subsidies, which “disproportionately benefit the richer.”
But seismic changes in the international financial system will also be needed to ensure that low- and middle-income countries can recover, the UNDP Administrator suggested. “You also have to be smarter about that, and the IMF initially compiled some of the responses to COVID; most developing countries at the end of the day do not dare to borrow against such measures because the rating agencies will immediately downgrade.”
