77 million slipped into poverty due to COVID shocks — UN

Rich countries avoided the worst economic impacts of the coronavirus pandemic but poorer ones continue to deal with debilitating debt, the UN said in a report released on Wednesday, contributing to a global "great finance divide."

According to the report, 77 million people slipped into poverty in 2021 as governments struggled to service debts and secure early vaccine access.

Soaring food and fuel prices amid the Ukraine war are already impacting import-dependent countries, UN officials had previously said.

UN Under Secretary-General Liu Zhenmin, head of the Department of Economic and Social Affairs who led the report. 

Amina Mohammed, the UN Deputy Secretary-General said the new findings were "alarming" and called for "collective responsibility to ensure hundreds of millions of people are lifted out of hunger and poverty."

Unequal borrowing rates worsening pandemic recovery

Produced by the UN's Inter-agency Task Force on Financing for Development, Wednesday's report found that significantly higher borrowing rates for poorer countries had particularly hamstrung pandemic recovery and development spending there.

The poorest countries pumped billions into servicing debts and were forced to cut spending on education and infrastructure, the report noted, while developed countries could borrow far more at "ultra low" interest rates and stave off the worst economic with comparative ease.

On average, rich countries spend 3.5% of their revenue on servicing debt while less rich nations use up to 14% of revenue, four times more, according to the UN.

The report said some 20% of countries will not return to pre-2019 levels of GDP per capita by the end of 2023 — that's before absorbing the costs of the Ukraine war.

Ukraine war likely to burden poorer countries further

Ukraine and Russia are some of the world's biggest food and fuel exporters and additional impacts of the war on developing economies are already becoming visible. Sri Lanka defaulted on its debts this week as the country's foreign exchange coffers dry up. In Nigeria and Kenya, fuel shortages have crippled businesses and forced tired residents into long fuel queues. Even developed economies, including the US and most of Europe, have been struggling with a sudden spike in inflation after more than a decade where inflation had been difficult to stimulate.

The new UN report also comes as poorer countries suffer the worst effects of climate change because of limited funds to adapt.

Meanwhile, humanitarian agencies recorded sharp declines in the amount of aid spending flowing from richer nations to the developing world amid the pandemic, further limiting response capacities to development and climate emergencies.

As NATO allies gear up for a possible Russian offensive, Mohammed of the UN warned "it would be a tragedy'' if rich donor nations increased military expenditures at the cost of cutting aid to developing countries.

The UN said countries should instead intensify debt relief efforts, ensure equal coronavirus vaccine distribution and speed up sustainable energy investment.

"The developed world proved in the last two years that millions can be lifted out of poverty by the right kind of investment," said UN Under Secretary-General Liu Zhenmin, head of the Department of Economic and Social Affairs who led the report. "The international community must build on that progress and ensure developing countries can invest at similar levels, while reducing inequality and securing a sustainable energy transition."

sl/msh (AP)