According to the United Nations, 165 million people have fallen into poverty since 2020 as a result of the Covid-19 pandemic, the cost-of-living issue, and the war in Ukraine. The organization is calling for a halt to debt repayments for emerging nations.
A study by the United Nations Development Program estimates that as a result of these shocks, 90 million more people will live below the poverty line of $3.65 per day and 75 million more will have fallen into extreme poverty, which is defined as living on less than $2.15 per day, between 2020 and the end of 2023.
“The poorest suffer the most and their incomes in 2023 are projected to remain below pre-pandemic levels,” the report said.
“Countries that could invest in safety nets over the last three years have prevented a significant number of people from falling into poverty,” UNDP chief Achim 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.”
The report called for a “debt-poverty pause” in economically struggling countries “to redirect debt repayment towards financing social expenditures and countering the effects of macroeconomic shocks.”
According to the paper, “the solution is not out of reach for the multilateral system.”
3.3 billion people, or almost half of humankind, live in nations that spend more on debt interest than on healthcare and education, according to a separate UN report released on Wednesday.
Additionally, developing nations pay more interest despite having smaller levels of debt, in part due to higher interest rates.
Taking the 165 million newly poor people out of poverty would cost more than US$14 billion year, or 0.009 percent of global production, and less than 4% of developing economies’ total public external debt servicing in 2022, according to the analysis.
According to the report’s authors, the mitigation cost would be roughly US$107 billion, or 0.065 percent of the world’s GDP and about a fourth of the entire foreign public debt payment, if the income losses among the already impoverished prior to the shocks are also taken into account.
“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.”
Earlier this week Secretary General Antonio Guterres, who has been pushing for a reform of international financial institutions, denounced “our outdated global financial system, which reflects the colonial power dynamics of the era when it was created.”
