Inflation hits developing countries hardest as war in Ukraine pushes up prices | Global development
Prices were rising before Russia’s invasion of Ukraine, which further disrupted energy markets and food exports, forcing developing countries to pay more to import commodities at a time when they are already struggling with increased debt incurred to pay for pandemic responses.
As panic over inflation made headlines around the world, the IMF’s World Economic Outlook released this week estimated that it would rise to 8.7% in developing economies from 5.7 % in rich countries. Experts fear millions more will be pushed into poverty and transport and food networks will be affected.
Humanitarian efforts for refugees and populations already facing hunger crises could also struggle to cope with rising prices, at a time when many are already facing cuts in aid funding.
“The rising cost of delivering aid to areas like northwestern Syria, which is heavily dependent on humanitarian aid, means that it is the people who need help most who are suffering.” said Jessica Adams, communications manager at Syria Relief.
“Our costs to meet the needs have increased – gasoline to truck water to the camps is more expensive, building homes for displaced Syrians in tents is more expensive as building materials have increased This is in a context where donations to Syria are dwindling – so in a conflict like Syria…living has become unaffordable.
The effects of the war in Ukraine on oil and the energy sector as a whole are being watched by experts, but prices have fluctuated wildly since the invasion of Russia and there are concerns about the amount of oil refined and exported as products that ordinary people need.
Rising oil prices are being felt on the forecourts, with oil up 63% in Sudan, 50% in Sierra Leone and 42% in Ghana compared to 9% in Britain.
“You can’t isolate oil from other markets – gas prices are higher, coal prices are higher, food prices are higher and you have bottlenecks in the supply chain. There are a lot of headwinds affecting the economy all over the world,” said Bassam Fattouh, director of the Oxford Institute for Energy Studies.
“If you look at it from a consumer’s perspective, they’re being hit left and right all over the world.”
Oxfam has estimated that a quarter of a billion people are facing poverty this year due to rising food and fuel prices, calling it ‘humanity’s deepest collapse into extreme poverty and suffering in memory”.
UN agencies have raised concerns about the impact of rising food and fuel prices on their operations, predicting a $136 million increase in operational costs in West Africa. In East Africa, he warned of refugee families going into debt and selling their assets because they fear ration cuts.
The UN warned last week that developing countries would become “collateral damage” from the war in Ukraine.
“Developing countries face a perfect storm of soaring food and fuel prices with already limited fiscal space and high debt ratios. We need urgent action to prevent great human suffering and the world from sliding into an era of social and political unrest,” said Rebeca Grynspan, Secretary General of the United Nations Conference on Trade and Development (UNCTAD). .
The IMF said the war was derailing post-pandemic economic recovery and estimated global growth would slow from 6.1% last year to 3.6% in 2022. It also said the pandemic had increased debt due to response costs, making vulnerable countries dependent on oil and food. imports.
In Sri Lanka, the lack of foreign currency reserves has sparked a movement to overthrow the government, which has struggled to import food, medicine and fuel, leading to power outages and struggling farmers. trouble transporting crops.
In Peru, there have been anti-government protests over fuel and fertilizer prices, while Egypt has tried to avoid similar anger by controlling prices, punishing non-compliant bakeries and retailers with closures.
The cost of living helped fuel anti-government protests that toppled Sudanese dictator Omar al-Bashir in 2019 and similar protests erupted against military leaders who took control in a coup last October .
Kholood Khair, of Sudanese think tank Insight Strategy Partners, said rising food and fuel prices add to the grievances voiced by protesters.
“Gas prices have risen steadily over the past few months as the government struggled to keep hard currency at the central bank to buy more…the government has very acute supply problems,” Khair said, who added that many fuel subsidies have been removed since Bashir’s departure.
“If the Gulf does not come with financial support and in-kind support with fuel, then the generals in Khartoum will find themselves in an even more precarious position.”