The crises recorded since 2020, such as the Covid-19 pandemic, inflation or the war in Ukraine, have driven 165 million people into poverty, the UN revealed yesterday, calling for a pause in the payment of developing countries’ debts to reverse the trend.
The cumulative impact of the crises led to 75 million people living in extreme poverty between 2020 and the end of 2023 – on less than $2.15 (1.91 euros) a day – and another 90 million people living below the poverty line, with 3.65 dollars (3.25 euros) per day. The projections come from the United Nations Development Program (UNDP).
“Countries that have managed to invest in protective measures in recent years have prevented many people from falling into poverty,” UNDP Executive Director Achim Steiner said in a statement. “But in highly indebted countries, there is a link between high debt, insufficient social spending and an alarming rise in poverty,” he warned.
The UNDP is therefore calling for a “pause” in debt service in these countries, which currently have to choose between paying the debt or helping the population. According to another UN report, released Wednesday, 3.3 billion people, nearly half the world’s population, live in countries that spend more to pay interest on debt than in areas such as education and health.
Despite their lower – but rapidly rising – debt levels, developing countries pay more interest due to rising interest rates.
Faced with this scenario, the UNDP is calling for a “pause” to allocate debt payments to fund social measures aimed at cushioning the effects of economic shocks. The UN believes that “the solution is not beyond the reach of the multilateral system”.
According to UNDP calculations, it would cost $14 billion (€12.5 billion) a year to lift these 165 million people out of poverty, equivalent to 0.009% of global GDP in 2022, and less than 4% of the debt of developing countries.
If the loss of income of people who were already below the poverty line before the recent crises is also taken into account, the cost of relief would be $107 billion (95.3 billion euros), equivalent to 0.065% of GDP, almost 25% of debt service.
“There is a human cost to doing nothing to restructure the sovereign debt of developing countries,” recalled Achim Steiner. “We need new mechanisms to anticipate and mitigate impacts, and to ensure that financial architecture works for the most vulnerable.”
UN Secretary-General António Guterres, who has called for reform of international financial institutions, this week again criticized an “outdated” system that reflects the colonial dynamics of the era in which it was created.
Source: DN
