GENEVA (AN) — Skyrocketing food and energy prices caused by Russia’s invasion of Ukraine pushed 71.5 million more people into extreme poverty particularly in some of the poorest parts of Africa, Asia and Europe, the United Nations Development Program reported on Thursday.
UNDP blamed the “ripple effects” from the Russian invasion on February 24 for the disruptions in food and energy markets that brought on inflation, hitting those already living in poverty and near-poverty the hardest.
In low-income countries, families spend 42% of their household incomes on food but as Western nations moved to sanction Russia, the price of fuel and staple food items like wheat, sugar and cooking oil soared. Ukraine’s blocked ports and its inability to export grains to low-income countries further drove up prices, pushing tens of millions quickly into poverty.
“The cost of living impact is almost without precedent in a generation… and that is why it is so serious,” UNDP Administrator Achim Steiner said at the launch of the report.
Some of the most vulnerable countries are in Europe and Central Asia due to proximity to Russia and Ukraine, UNDP says in its report, but a large number of the ones with “medium-to-high vulnerability” are in the Middle East and Africa, especially those with economies heavily reliant on imported commodities, tourism and remittance flows.
“Unprecedented price surges mean that for many people across the world, the food that they could afford yesterday is no longer attainable today,” UNDP Administrator Achim Steiner said. “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.”
International organizations such as the World Bank and International Monetary Fund define extreme poverty as living on US$1.90 or less a day, but in the fall it will be readjusted to US$2.15 a day to reflect rising prices. For lower middle-income countries, the line is set at US$3.20 a day; for upper middle-income countries, it’s US$5.50 a day.
Soaring inflation rates have seen an increase in the number of poor people in developing countries by 71 million in the 3 months since March 2022. The impact on poverty rates is drastically faster than the shock of #COVID19.
— UN Development (@UNDP) July 7, 2022
Cash transfers work best
During the first three months after war, 51.6 million more people fell into poverty living on US$1.90 or less a day, the report estimates. That’s a rise to 675.5 million people, up from 624 million previously — pushing the number affected to 9% of the world population, up from 8.3%.
Another 20 million people crossed the poverty line living on US$3.20 a day, making for a net cumulative figure of 71.5 million people, the report says.
The total number of people who are living in poverty, or are vulnerable to poverty, is 5.164 billion, or 68.6% of the world’s population. “This indicates that soaring food and energy prices has worsened the conditions of the existing poor population,” it says.
UNDP’s report, based on an analysis of 159 countries, concludes that providing the hardest-hit people with direct cash transfers is more effective than some of the other ways that countries have tried to make up for inflation such as trade barriers, tax rebates and blanket energy subsidies.
“We find that a modest targeted cash transfer more than mitigates poverty increases at every poverty line, is more equitable than using blanket subsidies and is fiscally more effective,” the report says.
The lead author of the report, George Gray Molina, who is UNDP’s head of strategic policy engagement, said that “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.”
Just a day earlier, five other U.N. agencies reported that global hunger soared to affect almost one-in-10 people on the planet last year even before Russia’s war in Ukraine upended the world’s ‘bread basket.’ Their estimates show that between 702 million and 828 million people, or 9.8% of the world population, went hungry in 2021.
Before the war, the report notes, Russia was the world’s largest and second biggest exporter of natural gas and crude oil, respectively, while Russia and Ukraine together accounted for almost a quarter of global wheat exports, 14 percent of corn exports, and more than half of sunflower oil exports.