High oil and wheat prices are hammering countries that borrowed heavily last year to finance pandemic aid, leaving little public money for measures that would mitigate rising costs, officials said in a statement. new report.
Many countries resort to large energy subsidies which will be less effective in reducing poverty than programs aimed at helping those who suffer the most, the UN agency warned.
As the Federal Reserve and other central banks raise interest rates to fight inflation, officials worry that slowing economies could tip into a recession that would make the situation even worse. World leaders must “stabilize a global economy that is facing multiple crises right now that are translating within months into a huge impact on people’s livelihoods, incomes and ability to feed their families,” he said. Steiner.
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The United Nations development agency is the latest international body to warn of the escalating costs of the conflict in Ukraine. The World Bank last month lowered its growth forecast, warning that the global economy could be heading for a 1970s-style episode of rising prices and sluggish growth known as ‘stagflation’. .
Energy and fuel prices soared after Russia invaded Ukraine, with oil jumping more than 30% and wheat 70%. Both have retreated in recent weeks, although analysts at Capital Economics expect commodity prices to remain at elevated levels.
“We expect higher prices to be with us for a long time,” said Caroline Bain, chief commodities economist for Capital Economics.
Steps taken by several countries to ban crop exports as prices soar punished the nations that depend on imported food, such as Bangladesh, Lebanon and the Republic of Congo, two World Bank officials said in a blog post on Wednesday.
The 5 countries hardest hit by the grain crisis in Ukraine
In early June, 34 countries, including Russia, Kazakhstan and Turkey, had imposed restrictions on shipments of wheat and other agricultural products, said the message from Mari Elka Pangestu, director general of the development policy of the bank, and Axel Van Trotsenburg, managing director. of operations.
Poverty, measured by the number of people surviving on less than $3.20 a day, rose faster in the first three months of the war than in the first 18 months of the pandemic, according to George Gray Molina, Chief Economist of the United Nations Development Agency.
But the economic situation had worsened even before the start of the fighting. Last year’s extreme weather events, including drought in Africa, have pushed up the cost of agricultural imports. And oil prices began to rise in 2021 as demand picked up during the global economic recovery from the pandemic.
The countries hardest hit by the current inflationary spike, such as Uzbekistan, Sri Lanka and the Kyrgyz Republic – have few resources to combat the latest calamity. Already weighed down by heavy debt, they will need help from rich countries and multilateral organizations. Up to 80 countries “urgently” need debt relief, Steiner said.
But existing programs aimed at easing the debt-servicing costs of poor countries have made little headway, leaving Steiner to reiterate earlier calls for world leaders to act.
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The war-related effects are felt on governments that are already facing daunting challenges, including mitigating the effects of climate change and reversing educational losses suffered during the pandemic, the report said.
For now, policymakers in dozens of countries are focused on easing the financial burden on households struggling to afford more expensive food and fuel. Many governments rely on block energy subsidies, which are easy to administer but unnecessary. By making energy more affordable for rich and poor alike, they encourage consumption.
Cash payments targeted at low-income people are more effective in curbing the growth of poverty. But they are more difficult to implement, requiring systems such as biometric control and digital payment systems.