A study by the United Nations Development Program (UNDP) has come up with a revealing report recently. Of the different observations it makes about the global poverty situation since the time of the Covid-19 pandemic, one is rather striking. Some 3.3 billion people, nearly half of humanity, live in countries that spend more on paying interest on debt than on education and health, the report says. That, in other words, means, the debt is one of the reasons behind those countries' being in lingering poverty. It is indeed a paradox that the multilateral lenders like the World Bank (WB) and the International Monetary Fund (IMF) usually extend such loans to the developing world to support its economic development. The stated objectives of the loans are to help the least and less developing countries to stimulate growth and thereby alleviate poverty. But it so happens that rather than developing, the countries that receive those loans fall into a perennial debt trap. The very purpose of those loans, which sounds so lofty, is thus defeated. Elaborating further on the issue, the UNDP chief, Achim Steiner, for instance, notes, 'In highly indebted countries, there is a correlation between high level of debt, insufficient social spending, and an alarming increase in poverty rates'.
Strangely, even if the loans that the recipient developing nations owe to the multilateral lenders might be small in amount, still they are seen to pay more on interest! And the culprit here is the higher rates of interest charged. So, why those countries are falling into poverty in growing numbers needs no further explaining because the money those 'loan-receiving' countries could invest in education, health and poverty alleviation is used up to pay the debt. Now, how to get around the multilateral lenders' 'loan for development' paradox? Well, the UN report suggests a way out by calling for what it termed, 'debt-poverty pause' in economically struggling countries and redirecting the interest to be paid against the debt towards financing social expenditures and thus cushioning their economies against the (macroeconomic) shocks caused by the pandemic, rising cost of living and the impacts of the war in Ukraine.
To be frank, such advice from the UN to the global lenders is not entirely altruistic. For any economic growth on a global scale is inconceivable if the majority of people across the world are unable to buy the goods and services produced by the advanced capitalist world. The interest paid against the loans advanced by the international lenders is nothing but profit that grows in amount if the indebted nations default on repaying those (loans) in time. In this context, the UNDP head has asked the lenders only to write off the extra fees they charge as interest and not the principal amount the (loan) recipient countries owe to them. So, to keep the system going, that is undoubtedly a good piece of advice. There should be no problem reaching a consensus on the issue keeping the greater interests of the global economic system in mind.
Since 2020, the year that the pandemic struck, till now (2023), 165 million people have fallen into poverty. Of them, 75 million are in extreme poverty. The condition of poverty is defined by the UN as one in which the affected people live on less than US$2.15 a day. Obviously, those in extreme poverty cannot earn even this amount (USD2.15 a day) and so have to starve instead most of the time. That is not the end of the story. For, as the UN study further warns, 90 million more will fall below the poverty line, if not into abject poverty, earning US$3.65 a day by the mentioned timeline. However, the nations that could afford to invest in social safety net schemes could somehow avert the worse to befall their people, the UN report further notes.
In fact, the poor economic condition that the peoples, mainly in the global South, has been pushed into as a result of the pestilence and the prevailing war and financial crisis, sees no signs of early recovery, until some action is taken from the global North. In that case, sooner the multilateral lenders take the needed steps to relieve those nations of a part of their debt burden the better. However, a still better option would be to free them completely from the burden of debt. Bangladesh, a developing nation, is also not immune from the global poverty syndrome born of pandemic, economic crisis and war. In its latest release, the Bangladesh Bureau of Statistics (BBS), has shown the poverty rate in the country to be at 18.7 per cent, while the extreme poverty at 5.6 per cent. This is definitely a marked improvement over the 2016's study findings when the poverty rate was at 24.3 per cent, while the extreme poverty at 12.9 per cent. However, considering that the country's total population now stands at 170 million, the poverty figure is still very large.
The government-owned development think tank, the Bangladesh Institute of Development Studies (BIDS), on the other hand, in its study found that 15 million people have slid into fresh poverty following the pandemic that led to loss of jobs and business. This new poor make up half of the country's total poor at the moment. That means, 9.0 per cent of the country's present population has again fallen below the poverty line, though they earlier belonged to the middle income group.
Bangladesh's being the part of the global poverty, the overarching crisis of debt owed to its international cannot be overlooked. An answer to its poverty can be relieving it of the debt burden linked to the international lenders as the UN report suggests.
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