165 million people fell into poverty due to Covid, Ukraine war, says UN; calls for 'debt-poverty pause'
This article discusses how the Covid-19 pandemic, cost-of-living crisis, and war in Ukraine have led to a significant rise in global poverty, urging a debt-poverty pause, as highlighted in a United Nations report
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FollowAccording to the United Nations, the Covid-19 pandemic, the cost-of-living crisis, and the war in Ukraine have collectively pushed 165 million people into poverty since 2020. In response, the UN is urging a pause in debt repayments for developing countries. A study by the United Nations Development Program reveals that by the end of 2023, 75 million individuals will have fallen into extreme poverty, living on less than $2.15 a day, while an additional 90 million will fall below the poverty line of $3.65 a day.
The report highlights that the poorest individuals bear the greatest brunt, with their incomes projected to remain below pre-pandemic levels in 2023. "The poorest suffer the most and their incomes in 2023 are projected to remain below pre-pandemic levels," the report said.
UNDP chief Achim Steiner emphasized the importance of investing in safety nets, which has helped prevent a significant number of people from descending into poverty. "Countries that could invest in safety nets over the last three years have prevented a significant number of people from falling into poverty," Steiner said in a statement.
"In highly indebted countries, there is a correlation between high levels of debt, insufficient social spending, and an alarming increase in poverty rates," he added.
The report advocates for a "debt-poverty pause" in economically struggling countries, redirecting debt repayment towards financing social expenditures and mitigating the effects of macroeconomic shocks. "The solution is not out of reach for the multilateral system," the report said.
Another UN report reveals that nearly half of the global population, approximately 3.3 billion people, live in countries where more money is spent on servicing debt interest than on education and health.
Developing countries, despite having lower debt levels, often face higher interest payments due to higher interest rates. The annual cost of lifting the 165 million newly impoverished individuals out of poverty is estimated at over US$14 billion, equivalent to 0.009 percent of global output and slightly less than 4 percent of total public external debt service for developing economies in 2022.
Factoring in income losses among the pre-existing poor, the estimated mitigation cost would reach approximately US$107 billion, accounting for 0.065 percent of global GDP and about a quarter of total external public debt service.
UNDP chief Achim Steiner emphasizes the human cost of inaction in not restructuring sovereign debt in developing countries. He calls for new mechanisms to anticipate and absorb shocks, making the financial architecture more inclusive and effective for the most vulnerable populations.
"There is a human cost of inaction in not restructuring developing countries' sovereign debt," Steiner said. "We need new mechanisms to anticipate and absorb shocks and make the financial architecture work for the most vulnerable."
Secretary-General Antonio Guterres, who has been advocating for a reform of international financial institutions, recently criticized the outdated global financial system, stating that it still reflects the power dynamics of the colonial era in which it was established.
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