As always, given the inequities built into the global economic system, the poorest people in the world have been the hardest hit by slowing economies and rising inflation. Still reeling from the pandemic-induced deterioration of the global economic landscape, low-income countries (LICs) are being hit hard by food and fuel shortages which have resulted in a massive spike in the prices of staples. World Bank economists Carlos Arteta and Sergiy Kasyanenko iterate, in a recently published paper, that this is eroding real incomes, exacerbating food insecurity, and worsening extreme poverty in LICs. Surging world food prices, which reached their highest levels on record this year, are contributing to the rapid rise in LIC inflation. According to data presented in the paper, food consumption accounts for 45 per cent of total household expenditure in low-income economies, and diet is heavily based on staple foods including wheat. All LICs are food-deficit countries reliant on imported foods.
Imports of wheat from just Russia and Ukraine account for about 14 per cent of total caloric intake in a median LIC, compared with just 3 per cent in a median developing economy. Disruptions of wheat imports from Russia and Ukraine and surging global food prices are slowing LIC growth and increasing extreme poverty, particularly in countries where sizable segments of the population were already experiencing acute food insecurity. Sadly, even in poor countries that do not rely on the import of wheat from Russia or Ukraine, millions of people are struggling to afford enough food to avoid hunger. The resultant malnutrition, experts believe, will have very adverse consequences as it will compound the pernicious effects of more than two years of the pandemic on human capital.
Growth forecasts for 2022 presented in the World Bank’s latest Global Economic Prospects report have been downgraded in more than 80 per cent of LICs. Per capita income growth in LICs is projected to be a mere 1.3 per cent, well below that in middle-income countries (2.3 per cent) and high-income countries (2.4 per cent). To make matters worse, as interest rates rise and financial conditions tighten, higher risk aversion would lead to increases in borrowing costs in LICs, say Arteta and Kasyanenko. High levels of public debt and increased non-concessional borrowing could further stall progress in debt relief; approximately one-fourth of all LIC external debt today has variable interest rates, compared to just 11 per cent in 2010.
What, then, can be done to mitigate such an unacceptable situation? Well, for starters, richer nations must show more resolve in dismantling the structural advantages which continue to accrue to them in the post-colonial world, building as they do on the pillage of previous centuries. Equally, the largely corrupt and often venal ruling elites in charge of the welfare of some of the world’s poorest people in LICs must be pressured by the international community to mend their ways. A concerted global effort is necessary to bolster food security, coordinate debt relief, expand vaccination campaigns, and encourage policies that make LICs more resilient to climate change shocks.