World has 165 million more poor, as debt consumes governments’ funds

A punishing series of economic shocks over the past three years drove 165 million people into poverty worldwide and left debt-swamped developing nations unable to afford adequate schooling, medicine and other social services, according to a report from the United Nations Development Program.

Some of the world’s poorest countries borrowed heavily since 2020 to cope with the pandemic, soaring food and fuel bills caused by the war in Ukraine, the fastest inflation in four decades and higher interest rates.

Now, dozens of governments — most in Africa and the Middle East — are spending more than twice as much of their revenue repaying debt as they do on social programs. About 3.3 billion people live in countries that spend more on interest payments to banks or official lenders than they devote to educating or caring for their citizens.

“What this means is a government that can no longer pay its teachers; a government that can no longer employ doctors and nurses in hospitals; that cannot provide the medicines for rural health centers,” said Achim Steiner, UNDP administrator. “And this is what it translates into: less health care, less education, no social safety nets that are able to provide temporary relief for people who, through no fault of their own, find themselves in a situation where they literally cannot feed their family anymore.”

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Battered by repeat economic challenges, governments throughout the developing world find their financial resources exhausted. Unable to fund necessary social and economic programs, they risk sliding into disarray.

“Poverty and the inability of the state to be of assistance, to be a service provider, is beginning to polarize societies,” Steiner said. “Political polarization, radicalization, the loss of political stability — a country that is no longer able to import fuels, provide medicines or even basic food supplies becomes an unstable society.”

UNDP officials called for world leaders to agree on a formal pause in debt payments when they gather at September’s Group of 20 leaders summit in New Delhi. Doing enough to lift the 165 million newly poor out of poverty would cost around $14 billion, the agency said, amounting to a fraction of 1 percent of the global economy.

World leaders so far have done little to ease the developing nation debt burden, despite years of debate and repeated warnings by the UNDP and other anti-poverty organizations. Only four countries have sought help under a 2020 program developed by the G-20 known as the common framework; just two governments reached agreement with their creditors to ease their required payments.

One stumbling block will be getting global banks and other private creditors who hold 63 percent of developing nation’s external debt to support relief, according to the U.N.

The need for help is acute. More than two dozen developing countries devote more than 20 percent of their revenue to debt payments, the highest number since 2000, when the last major debt relief initiative was launched, UNDP said.

Swelling debt loads threaten to lock dozens of countries in poverty.

Lebanon, for example, spends more than three times as much on interest payments as it does on education and more than twice as much as it does on health. Even Brazil, an emerging economic power, spends more on interest than health care for its 214 million people, according to U.N. data.

Despite ample borrowing in response to the pandemic, the debt burden is far lower in the United States. From 2019 to 2021, the U.S. government spent five times as much on health care as it did on interest and two-and-a-half times as much on education.

In Germany, where government debt is lower than in the United States, the government devotes 10 times as much revenue to health or education as it does to interest payments.

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The increase in poverty that has occurred in parallel to the rising debt burden has occurred largely in the ranks of countries the U.N. calls “lower-middle-income,” such as Egypt, Honduras, India and Vietnam, with annual per-person incomes ranging from $1,136 to $4,465.

Globally, the rapid-fire economic crises of the past three years pushed as many people into poverty as the combined population of the nine largest U.S. states: California, Texas, Florida, New York, Pennsylvania, Illinois, Ohio, Georgia and North Carolina.

For its latest report, UNDP defined poverty as living on less than $3.65 per day, barely enough for a cup of coffee at an American Starbucks.

The recent economic deterioration reversed anti-poverty gains achieved before the pandemic, returning the total number living on less than $3.65 to the 2018 level around 1.6 billion people.

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