Poor Countries Face a Mounting Catastrophe Fueled by Inflation and Debt
“Inflation is the most important factor in determining the real value of a currency.”
Global growth slowed down due to the pandemic. The fallout from the pandemic has hobbled efforts by the major economies to recover from this pandemic. The war has injected new uncertainty and undermined economic confidence around the world, and oil and gas prices have increased because of the war. The sharpening of this confrontation has forced countries in Europe and other parts of the world to rethink their dependence on Russian energy and seek alternatives.
Russia’s economy faces slowdown. Though Ukraine continues to adopt sanctions against the Russian government, the Russian economy has been spared from a crippling collapse. However, Russia’s central bank chief warns that the country is likely facing a steep economic downturn. As its inventory of imported goods run out, Russia’s economy will be affected by the shortage.
Trade barriers go up. The government tries to protect people from shortages and high prices. But trade barriers make things more expensive and hard to get.
Food shortages are causing problems in East Africa. A drought is affecting crops. Supermarkets are limiting the amount of sunflower oil people buy.
Prices of essential metals soar. Palladium prices rise as Russia exports less of the metal. Nickel prices rise as Russia exports more of the metal.
Investors were worried about Turkey’s debt problems, but they didn’t dump the Turkish Lira. Instead, they sold off other currencies, including the US Dollar. This caused the price of the US Dollar to rise. As a result, the value of the Turkish Lira dropped.
Inflation in Turkey is high because of the lira devaluation. Farmers are struggling with rising prices for animal feed, fertiliser and pesticides. Indonesia imports fertilizer from Russia. This causes Indonesian farmers to limit their application of fertilizer. This leads to reduced yields.
“The current situation is worse than ever before”. This sentence is written as a quote from a farmer in West Java.
Impossible Debts
Two years ago, when Rubaba Zafar and her Husband, Muhammad Ali, left the village in rural Pakistan for a new life in Islamabad, they were optimistic. There were no jobs in the Village. Islamabad is a big City, and they thought there would be some Opportunity for them here.
A poor family lives in a slum. Their income is low. They struggle to pay the rent. They need to work hard to make ends meet.
Pakistan’s government is having trouble paying back its debts because of high inflation and low growth rates. This means that they are going to be in the same situation as the Pakistani government was before.
Ms. Zafar needs help paying off debts. She should apply for a loan or other financial aid.
Downward Mobility
In Brazil, the poor are suffering because of the high prices of LPG. People are using more wood than before to cook and heat up their homes. This causes deforestation.
“The war in Ukraine threatens to erase decades of economic growth across Latin America. In Brazil, Venezuela, Argentina, Colombia and Mexico, the region’s biggest economies, inflation could reach 20 percent or more this year, according to analysts. That would be the highest rate since the early 1980s. The International Monetary Fund says it expects inflation to average 6.5 percent this year in the region, compared with 3.3 percent last year. The IMF predicts inflation will rise further next year as oil prices fall.
There are no prospects for growth. I think we’re going to have another lost decades. Ruth Maclean reported. Salman Masood from Islamabad. Elif Ince from Turkey. Flávia Milhorace from Brazil. Muktita Suharto from Indonesia. And Brenda Kiven from Cameroon. Renato Días from Brazil.
