NEW YORK: The COVID-19 pandemic has had a devastating affect on the economies of many countries. If that was not enough, Russia’s invasion of Ukraine severely disrupted the global market, skyrocketed food prices, and brought some economies to a grinding halt. The UN now has warned that many countries can go the Sri Lanka way if they don’t make radical financial norms.
“We’re witnessing a tragic series of events that are unfolding in Sri Lanka right now that should be a warning to anyone who thinks that you know, it is up to countries themselves to figure out how to deal with this crisis,” said Achim Steiner, Administrator of the UN Development Programme (UNDP), in reference to the South Asian nation’s debt default last month – the first in its history.
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“That default essentially means the country is no longer able to pay – or not only service – its debt, but actually to import fundamental parts of what keeps an economy alive, whether it is petrol or it is diesel, whether it is fuel, whether it is medicines,” UN News quoted Steiner as saying.
This warning came after the UN Food and Agriculture Organization (FAO) released new data that demonstrated that so many people have been affected by hunger across the globe and the number rose to 828 million in 2021, around an increase of 46 million since 2020 and 150 million since the covid-19 outburst. The UN warned that the increase in inflation rates has also seen an increase in the number of poor people by 71 million in three months alone in developing countries.
Hike in interest rates in terms of responding to increased inflation, the risk of recession has been seen more that will deepen the poverty rate globally.
“Unprecedented price surges mean that for many people across the world, the food that they could afford yesterday is no longer attainable today,” says UNDP Administrator, Achim Steiner. “This cost-of-living crisis is tipping millions of people into poverty and even starvation at breathtaking speed and with that, the threat of increased social unrest grows by the day.”
Speaking about the poorer nations, the policymakers are facing a hard time in making difficult choices as the challenge is to balance out short-term relief to the poor. Wherein the developed nations are struggling already with the increase in debt and shrinking fiscal.
“We are witnessing an alarming growing divergence in the global economy as entire developing countries face the threat of being left behind as they struggle to contend with the continuing COVID-19 pandemic, crushing debt levels and now an accelerating food and energy crisis”, says Steiner. “Yet new international efforts can take the wind out of this vicious economic cycle, saving lives and livelihoods — that includes decisive debt relief measures; keeping international supply chains open; and coordinated action to ensure that some of the world’s most marginalized communities can access affordable food and energy.”
The report released by the UN found that targeted cash is more even-handed than blanket subsidies.
“While blanket energy subsidies may help in the short term, in the longer term they drive inequality, further exacerbate the climate crisis, and do not soften the immediate blow of the cost-of-living increase as much as targeted cash transfers do,” says a report author George Gray Molina, UNDP Head of Strategic Policy Engagement. “They offer some relief as an immediate band-aid, but risk causing worse injury over time.”
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