The Covid-19 pandemic, the cost-of-living crisis and the war in Ukraine have pushed 165 million people into poverty since 2020, the United Nations said on Thursday. The UN is calling for the world's wealthiest economies to pause debt repayments by developing countries to ease the burden.
Because of the shocks of the past three years, 75 million people will have fallen into extreme poverty, defined as living on less than $2.15 a day, between 2020 and the end of 2023 – and 90 million more will fall below the poverty line of $3.65 a day, according to a study published by the United Nations Development Programme.
The report says that the poorest suffer the most, with their incomes in 2023 projected to remain below pre-pandemic levels.
"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 contrast, he said, "in highly indebted countries, there is a correlation between high levels of debt, insufficient social spending, and an alarming increase in poverty rates".
165 million more poor as debt service payments crowd out social protection, health & education expenditures in developing countries. Top priority for @G20 & #IFIs to speed & scale up #debt response & restructuring. @UNDP report proposes Debt-Poverty Pause👉https://t.co/kCt7gDYLw2 pic.twitter.com/6hunBLuvP0
— Achim Steiner (@ASteiner) July 14, 2023
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 another UN report published on Wednesday, some 3.3 billion people, nearly half of humanity, live in countries that spend more on paying interest on debt than on education and health.
And developing countries, despite having lower levels of debt, are paying more interest, partly because of higher rates.
'Outdated system'
According to the UNDP report, the annual cost of lifting 165 million newly poor people out of poverty would be over $14 billion – 0.009 percent of global output.
If the income losses among the already poor prior to the shocks are also included, the mitigation cost would reach some $107 billion, or 0.065 percent of the world's GDP, the report's authors estimated.
"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 UN 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".
(With newsagencies)
