Inflation in India
In 2019, the Global Multidimensional Poverty Index indicated that the Indian government’s poverty reduction efforts led to 271 million people rising out of poverty between 2006 and 2016. This would place India as the country with the “highest rate of poverty reduction.” However, like most other countries, global inflation arising from the COVID-19 pandemic and the Russia-Ukraine war have made Indian citizens more vulnerable to poverty through increased inflation in India.

The Impacts of Inflation

Even before Russia’s invasion of Ukraine caused global inflation to rise, inflation in India was already mounting. The Russia-Ukraine crisis did not cause inflation in India but merely accelerated it. According to the wholesale price index (WPI), “as measured by the WPI, it averaged 11[%] during March-June 2021, 12.2[%] July to October 2021 and 14.1[%] between November 2021 and February 2022,” Frontline magazine reports.

Even before the onset of the COVID-19 pandemic, India noted high unemployment rates. By April 2019, unemployment in India stood at 7.6%, which is almost double the rate from 2017 (about 4%). Petrol and fuel had already more than doubled since 2020. Prices continued to increase after the invasion of Ukraine.

Food Inflation

In India, the costs of essential food products have soared by 50% between 2015 and 2022. This staggering inflation has an especially significant impact on India’s lower middle class and lower class, especially in rural areas. Because, while the prices of many common items have nearly doubled, the “real wage rate” has increased by just 22% since 2015.

In April 2022, the World Bank highlighted that “for each one percentage point increase in food prices, 10 million people are thrown into extreme poverty. If food prices stay this high for a year, global poverty could go up by more than 100 million.”

Poverty Rates in India

India is a country that has long been lauded for its fight against poverty. According to the United Nations, India managed to lift 415 million citizens out of conditions of multidimensional poverty over a 15-year period “between 2005-06 and 2019-21.”

However, like many other countries, the COVID-19 pandemic and the Ukraine-Russia war significantly impacted poverty and inflation in India. According to the Pew Research Center, “the number of people who are poor in India (with incomes of $2 or less a day) is estimated to have increased by 75 million because of the COVID-19 recession.” The World Bank estimated that, globally, the pandemic pushed 71 million additional people into extreme poverty in 2020 and at least one-third came from India, ThePrint says.

However, poverty estimations are not definitive since India has failed to release official poverty estimates since 2011/12. While some researchers estimate that poverty levels in India have increased, others suggest extreme poverty rates did not rise during the pandemic.

Political Response

Despite the general concern over rising rates of poverty and inflation in India, some Indian politicians assert no such concerns. India’s Minister of Finance Nirmala Sitharaman has taken a firm stance that India’s inflation is not a major source of concern for the country. Citing a United Nations Development Programme report, she said in July 2022 that the effect of inflation on India’s impoverished is “negligible.”

She has also stated that India’s welfare program had eased the impact of rising food costs during the pandemic and through the Russia-Ukraine crisis. The Indian government began a program to distribute grain to people most in need under the National Food Security Act, running from April 2020 to September 2022.

In total, it benefited almost 800 million people over the course of 2.5 years. The government also worked to support people financially, paying low-income women ₹500 ($6.08) a month for the first three months of the pandemic, which benefited 2 million women. A recent assessment showed that these programs and other targeted transfer initiatives shielded low-income families from price hikes.

India is putting up a strong fight against inflation and poverty. Although inflation and poverty levels are still high in the country, a strong governmental welfare system remains the solution to reducing impacts on the most vulnerable citizens.

– Padma Balaji
Photo: Flickr

Inflation in Italy
Inflation has been surging worldwide, especially hitting hard Italy. Already facing economic stagnation and record unemployment, the supply chain halt and economic crisis that the Russia-Ukraine crisis has particularly impacted Italy. In fact, inflation in Italy has risen so dramatically that the main industry lobby is warning of an “economic earthquake.”

Rising Inflation and the Economic Crisis

Like most of the EU, energy costs have been surging in Italy. Prices have been rising at an annual rate of 38.3%. This is largely due to the Russia-Ukraine crisis, as Ukraine had previously supplied most of Europe’s natural gas supply. Inflation in Italy is also at an all-time high in Italy; in fact, Italy has the third-highest inflation rate in the EU. In August 2022, the inflation rate jumped to 9%, likely due to the increase in energy and electricity prices.

Increasing inflation will have ramifications for Italy. Unlike the rest of the EU, Italian wages have been stagnant for the past decade. In fact, data that the OECD collected found that Italy was the only country in the EU where wages actually declined.

Moreover, unemployment is also at an all-time high in Italy. Currently, the unemployment rate is 7.8%, but things are far worse for Italy’s youth, who have an unemployment rate of almost 21.2%. It is the highest youth unemployment rate in the EU. and one can attribute it to poor education and a largely stagnant economy. In fact, the past decade has had the worst economic gain in Italy since 1861. 

Inflation & Poverty

The poor in Italy have felt the brunt of the economic impact caused by rising inflation. The decline of the Italian economy noticeably correlates with a rising poverty rate. Poverty has increased sharply in recent years, largely due to the pandemic. The recent increase in the cost of living has also pushed many people into poverty, with almost a 10th of the Italian population living below the poverty line.

Governmental Action

Although things may look bleak for Italy’s economy, its government has been working to prevent a catastrophe. Recently, the Italian government approved an aid package worth $17.4 billion. This package aims to curbe energy prices to protect families from rising prices. The nation has budgeted around 35 billion euros to reduce the impact of rising energy and electricity prices.

In addition, the government has also extended bonuses to low and middle-income citizens, including migrants, because they are more susceptible to falling into poverty during this economic crisis.

Like many other countries in Europe and around the world, Italy has faced considerable detriment as a country from recent crises like the global pandemic and the Russia-Ukraine crisis. Despite this, things like the unemployment rate and poverty have still been decreasing according to the most recent estimates. Furthermore, considerable government action has seen to it that Italian citizens are protected from rising prices, shielding them from further economic crises.

– Padma Balaji
Photo: Unsplash

France’s Inflation Relief
Similar to other European countries, the French parliament recently passed a series of bills to help citizens cope with the effects of high inflation that the Russia-Ukraine War caused. In addition to France’s inflation relief package, its energy supply system and international deals further protect its citizens from the direst effects of the energy crisis.

The €20 Billion Reform Package

In early August 2022, the French parliament passed a €20 billion package to offset the cost of the living crisis that the rising inflation caused as part of the PLFR, the 2022 amending finance bill. The bill includes:

  • Increasing welfare payments and pensions by 4%
  • Increasing fuel rebates from €0.18 a liter to €0.30 a liter from September to October
  • Increasing the coefficient used to calculate civil servants’ salaries
  • Prompting private companies to provide employees with tax-free bonuses of up to €6,000.

France’s inflation relief package continues measures the government took early in the year to cope with rising gas and electricity prices. Along with reducing electricity and fuel taxes, the government provided 5.8 million lower-income households with a one-off payment of €100. Separately, the government also called for energy sobriety measures to reduce business and individual energy consumption.

Subsidy measures and one-off payments, however, are also common in other western nations. The U.K. announced more generous one-off payments for pensioners and disabled people along with an energy bill discount for every household. The Institute of Fiscal Studies estimates the U.K.’s reforms will cost about £19 billion (about $22 billion), similar to France’s spending.

Yet, the average British household will likely see their bills triple in size compared to last year while French bills will stay relatively the same. What differentiates France’s inflation relief is the government’s regulation of electricity supply.

France’s Shelter from the Energy Crisis

According to calculations by Bruegel, a Brussels-based think-tank, France will spend about €50 billion to protect its citizens from the effects of the energy crisis by 2030. France is the third greatest spender in Europe after Germany and Italy, which Bruegel estimated will spend €60.2 billion and €49.2 billion, respectively.

In addition to the €20 billion 2022 PLFR, the government demanded that EDF, the 85% state-owned monopoly energy supplier, augment its number of discounted electricity offers in January. As a result, the brunt of the crisis hit EDF rather than the citizens. The discounts and state subsidies greatly shelter French households from the energy crisis.

France’s inflation relief method contrasts with Britain’s, where Ofgem, an energy regulator, determines price caps to protect consumers while maintaining supplier profit margins. The British model encourages using renewable energy and nuclear power by putting cheaper sources at the forefront of supply. Still, it fails to protect its users when the price of wholesale gas increases. Since the beginning of the Russia-Ukraine War, British gas costs increased more than six times. As the energy suppliers are not state-owned, consumers and suppliers are compelled to pay more. The government has not yet announced energy subsidies.

International Ties

As part of the European Union, France also follows reforms taken within the bloc, which saw the euro hit a record 8.6% inflation rate. By March 2023, the EU aims to reduce gas consumption by 15%, which amounts to about a third of the gas it imported from Russia in 2021.

France also took steps to diversify its supply. Along with temporarily re-opening a coal power plant in Saint-Avold to generate electricity, France will send Germany and Belgium excess gas. In exchange, the neighboring states will supply up to 70% of France’s electricity.

As Russia completely cut off natural gas supplies for the nation in June, France switched to energy suppliers from Norway, the United States, the Gulf and Algeria. Furthermore, Emmanuel Macron chose to go to the United Arab Emirates for his first presidential visit after his re-election. The resulting strategic energy cooperation agreement secured fuel and gas supplies for the western nation and re-established relations with the UAE.

The Impact of Combined Efforts

France’s inflation relief follows a multi-lateral approach. International agreements, state intervention in energy supply, and welfare measures combine to tackle the process from multiple angles. As a result, citizens do not suffer the most significant effects of rising energy. The reforms especially shelter lower economic classes, which feel the cost of living crisis the most strongly and present a step forwards in addressing the most salient issue for French voters.

Elena Sofia Massacesi
Photo: Flickr

Poverty in Argentina
Currently, 37% of people live below the poverty line in Argentina and are struggling due to the inconsistency of prices and jobs from inflation and changes in unemployment. Poverty in Argentina affects over 17 million people in the country, learn more about the unique struggles in Argentina.

Historic Inflation and Recent Economic Disaster

Argentina has felt the effects of intense inflation since the 1980s, but in recent months has seen record increases in these rates. The year-on-year inflation rate is the highest it has been in the past 30 years, exceeding 60 points, according to Peoples Dispatch. This increase has hurt those in the lowest income bracket the most, but the poverty rate is on the rise. It is estimated that 2,800 people are forced into poverty every day.

Despite that alarming amount, economists predict more could be hurt as the inflation rate could reach 90% by the end of 2022. The instability of inflation has made prices different on a variety of items that change weekly. This hurts those struggling to afford groceries and other necessities. The recent economic instability is a huge threat to those living in Argentina.

Unemployment, the Working Poor and the COVID-19 Pandemic

World events, such as the COVID-19 pandemic further impacted poverty in Argentina. The poverty rate hit between 46% and 47% towards the end of June 2020, at the height of the COVID-19-induced shutdown. The high poverty rate was due in part to the 3.5 million jobs lost during the pandemic. In 2020, the poverty rate related to an income of 14,718 pesos, or $193, per month.

The unemployment rate dropped to 7% at the beginning of 2022, however, the poverty rate includes 28% of Argentinians who hold jobs. The research found that from 2018 to 2022 that due to inflation and a combination of currency devaluation wages lost 20% of their purchasing power. The increase in unemployment during the pandemic increased the poverty rate, but as the unemployment rate decreased, the poverty rate did not.

The effects of outside events, like war or pandemics are global, but Argentina’s sensitive economy sees drastic changes easily. Changes in habitable actions and consumption also show the increase in poverty. For example, in 2021, Argentinians consumed the lowest amount of beef per capita (47.8 kilos) since the 1920s, Peoples Dispatch reported. The changes in unemployment and the increase in the working poor are changing poverty in Argentina.

The Future of Poverty in Argentina

The IMF began working with the Argentinian government in May 2018 and has a plan to help those most at risk. This calls for actions like the central banks to be independent and protect social spending. Those in poverty in Argentina need help since they are sinking even deeper into poverty.

Additionally, in May 2022, the Total Basic Food Basket increased by 4.6%. This means that a family of two adults and two children in Greater Buenos Aires must require an income of 99,677 pesos (or $796) per month to stay above the poverty line, according to Peoples Dispatch. This increase shows how difficult it is to survive in Argentina due to the fickle movements of the economy.

Changing economy and the socioeconomic inequalities that often affect employment rates further complicate poverty in Argentina. The recent increase in inflation implies there is a strong need for stability to save those falling below the poverty line every day.

– Ann Shick
Photo: Wikipedia Commons

Global economic growth is on a steep downturn, due primarily to the consequences of the COVID-19 pandemic and supply chain shortages from the Russia/Ukraine conflict. The World Bank and the Organization for Economic Cooperation and Development (OECD) had each predicted that global economic growth in 2022 would reach more than 4% earlier this year. At the beginning of June, they scratched the original estimates, saying that economic growth would barely reach 3%, indicating a possible crisis of global stagflation.

Economic Downtown After the Pandemic

At the end of 2021, many global organizations, including the United Nations and the International Monetary Fund, predicted that the global economy would see a post-pandemic boom. However, because of the conflict in Ukraine and the COVID-19 shutdown in China, the global supply chain took a significant hit. In turn, inflation is rising at an alarming rate, especially in global economic powerhouses like the United States and England. This is cause for concern not only for rich countries but for small and developing countries as well, which often rely on economic overflow from large nations.

Stagflation

The World Bank and the OECD declared that the global economy is at risk of stagflation, which is a combination of high, sustained inflation and stagnating growth. Global stagflation poses a risk for everyone, but poor and developing countries would face the worst of it. Many developing nations’ economies rely on exports to wealthy nations, meaning a global economic slowdown would seriously harm them. Additionally, high interest rates and low growth would make it nearly impossible to pay back large quantities of debt. The World Bank has predicted that some nations will default on their debts, which would mean a decline in living conditions.

The most recent stagflation crisis took place in the 1970s when the global economy saw aggressive inflation and low economic growth. The current situation is worrying to many economists and activists because at that time living standards and economic well-being took a drastic downturn in many developing countries in Latin America and the Middle East.

Avoiding Stagflation

The good news is that the circumstances of the current economic situation differ significantly from the stagflation crisis of the 1970s. Most central banks are now independently operated and the global economy is less reliant on low energy prices, two factors that provide some relief to poorer countries.

The OECD believes that a stagflation crisis can be avoided, but economic powerhouses and international organizations need to take serious action. There are significant factors in play that are preventing governments from stepping in, primarily the fact that developing nations have already accumulated record levels of debt.

To avoid stagnation, the World Bank suggests worldwide policymakers focus on five key areas. They need to:

  1. Limit the harm caused by the war in Ukraine by coordinating the crisis response in terms of delivery of food and medicine and support of refugees.
  2. Counter the high prices of oil and food by increasing supplies of key commodities.
  3. Escalate debt relief as debt distress spreads from low-income countries to middle-income countries.
  4. Continue to strive to contain COVID-19 globally through strong immunization programs.
  5. Continue to invest in clean energy and energy efficiency and decrease their reliance on fossil fuels.

The United States Steps Up with Aid

Support from the United States could come from protecting and enhancing the International Affairs Budget, emergency COVID-19 relief and direct collaboration with the governments of developing nations concerning exports and investments. The United States has taken a step in the right direction by supporting the Partnership for Global Infrastructure and Investment (PGII), which will pledge $600 billion to the global economy over the next five years.

Ella DeVries
Photo: Flickr

Food Crisis in Sri Lanka
Record inflation and soaring fuel costs are igniting a food crisis in Sri Lanka. Skyrocketing prices leave more than 6 million Sri Lankans food insecure. Because people are not certain when their next meal will be, they reduce their food intake and that results in their poor nutrition. The health of Sri Lankan pregnant women and children is particularly at risk due to a lack of quality nutrition.

Sri Lanka Food Crisis Specifics

According to the World Food Programme (WFP), about three out of 10 households (nearly 6.26 million Sri Lankans) are uncertain of where their next food will come from. More than 60% of households are resorting to rationing their food and do not obtain sufficient nutrition. As one Sri Lankan woman  said, “These days, we don’t have a proper meal but eat only rice and gravy.” In June 2022, WFP Deputy Regional Director for Asia and Pacific Anthea Webb explained, “Pregnant mothers need to eat nutritious meals every day, but the poorest find it harder and harder to afford the basics.”

At an astonishing rate of 57.4% inflation, increasing food prices have resulted in two out of five households living without enough food to support their families. In the “farming estates sector” which includes tea plantations and other similar “estates,” more than half of households live with food insecurity. These households are worse off than urban populations and other rural dwellers. Rural and urban households are depleting their savings or using credit to buy essentials. “Poor families in cities and those who work on estates have seen their incomes plummet while market prices have soared,” a WFP spokesperson commented.

Stories of Family Struggles

Perhaps one can better understand Sri Lanka’s food crisis by hearing about family struggles. Chandrika Manel, a mother of four children, expresses how crucial the situation is when she says, “even buying bread is a struggle. There are times I [give them] milk and rice, but we don’t cook any vegetables. They’re too expensive.” Sahna, a pregnant 34-year-old who has three children and is due in September, is nervous about the future, uttering, “My children are miserable. They’re suffering in every possible way. I can’t even afford a packet of biscuits or milk for my babies.” Acute malnutrition could increase dramatically from 13% to 20%. Further, the current 35,000 malnourished children could double according to Dr. Renuka Jayatissa, President of the Sri Lanka Medical Nutrition Association.

UN Warns of Humanitarian Crisis

The United Nations Children’s Fund (UNICEF) is appealing for significant funds to hold off a humanitarian crisis. UNICEF found that depleting gas and medical supplies forced 70% of Sri Lankan families to reduce their food intake in 2022. “We’re trying to avoid a humanitarian crisis. We’re not yet at children dying, which is good, but we need to get the support very urgently to avoid that,” said Christian Skoog, UNICEF’s representative in Sri Lanka.

On the positive side, UNICEF has noted a sense of solidarity and community among Sri Lankans.  For example, Pastor Moses Akash began a community kitchen a month ago after meeting a single mother who survived off of jackfruit for three days. Akash meets people who have not had a meal in four months and believes the number of people waiting in line for food will increase from 50 to 250 a day because of the up-to-80% increase in food prices in June.

WFP Taking the Lead to Combat Sri Lanka’s Food Crisis

To address Sri Lanka’s food crisis, humanitarian organizations are taking the lead. The WFP kick-started an emergency relief fund of $60 million for food and nutrition to help 3 million who are in vulnerable sectors like women and children. Each month the WFP gives $40 meal vouchers to pregnant women in impoverished areas. The WFP also collaborates with local governments that provide prenatal care. Thus far, the organization has provided 88% of the 2,375 vouchers to assist 3 million people with food, sustenance and school lunches. Going against this support, 61% of Sri Lankan households are using the approach of lowering the quantity of food consumption and obtaining more food with less nutrition. Unfortunately, the food relief agency expects an estimate of 200,000 families will use that approach as the crisis continues.

The US announces $20 million in Additional Assistance for Sri Lanka’s Food Security

On July 5, 2022, at the G7 Summit in Germany, United States President Joe Biden announced that the U.S. committed to an additional $20 million in aid to Sri Lanka to feed more than 800,000 children and 27,000 pregnant women in the next 15 months. The relief grant encourages strong school nutrition for students and includes meal tickets for pregnant women. The plan also supports 30,000 croppers to improve cultivation in impoverished communities that are living in debt. U.S Ambassador to Sri Lanka Julie Chung underlined that the United States is devoted to food security, public health and promoting economic stability for the people of Sri Lanka. She commented, “This aid will feed Sri Lankan children, combat food insecurity and demonstrates our enduring commitment to the health & well-being of the Sri Lankan people.”

Despite the catapulting of inflation which can threaten the health of children and expecting mothers, humanitarian organizations including the World Food Programme and the United Nations are leading the way in avoiding a humanitarian crisis. The U.S. response to the food crisis in Sri Lanka also improves the odds of avoiding a dire humanitarian crisis.

– Jacara Watkins
Photo: Flickr

Bitcoin in Argentina
Economic consequences from the COVID-19 pandemic and supply chain shortages have ramped up inflation in Argentina to record levels. At its peak, economists estimated that inflation in Argentina reached a 60% increase since the beginning of the pandemic. The rapid deflation of the peso pushed about 37.7% of the population of Argentina below the poverty line by significantly reducing their purchasing power, signaling a serious economic crisis. The adoption of bitcoin in Argentina is helping people to fight against inflation and poverty.

Bitcoin in the Developing World

In recent years, many developing nations have turned to bitcoin for a couple of different reasons. First, bitcoin is decentralized, meaning that international organizations like the International Monetary Fund (IMF) do not regulate it. Second, bitcoin is highly effective at containing inflation and is a relatively steady asset as opposed to standard market investments and savings.

The cryptocurrency penetration rate in Argentina has reached 12%, Cointelegraph reported. This is more than double most other countries in Latin America. Due to the success of bitcoin in Argentina, the central bank motioned to forbid financial institutions from operating with digital assets.

The IMF and the World Bank claimed that cryptocurrency in developing countries is dangerous, because it opens doors for money laundering and economic volatility, according to Politico. Bitcoin is also an environmental hazard. “If Bitcoin were a country, it would be among the top 30 energy users in the world,” Foreign Policy reported. This means that as bitcoin increases in popularity around the world, it could harm the environment and worsen changing weather patterns.

The Key to Sustainable Global Development

Many economists believe that bitcoin and other forms of cryptocurrency hold the key to sustainable global development. This would be particularly beneficial to the world’s poorest nations and communities. Decentralized finance allows people to build entire financial ecosystems without intervention from world banks, according to Foreign Policy. Because of decentralized financial blockchains, people across the world have broader access to capital and can easily and securely transfer money.

People in the developing world usually experience exclusion from modern cryptocurrency systems due to their technological complexities and the necessity of online financial literacy. Because of this, the expansion of bitcoin in Argentina and other developing nations marks a victory in the fight against global poverty.

One of the greatest advantages that bitcoin offers to a country like Argentina is that it can provide a “financial identity” to people who have not had access to financial institutions like banks. As of 2022, 1.7 billion people across the world lack access to modern financial services, according to Foreign Policy. Therefore, providing access to financial assets is a priority in the fight for global development.

Bitcoin as a Method of Reducing Poverty and Inflation

The success of bitcoin in Argentina and other developing nations is catching attention around the world, particularly from the federal governments of rich countries like the United States and global organizations like the IMF. The IMF and the World Bank are actively working to prevent countries like Argentina from adopting bitcoin as a legitimate form of national currency. However, their efforts are failing because multiple countries in the Central African States, as well as El Salvador, have already motioned to adopt Bitcoin as a national currency, according to Politico.

While Argentina has not yet officially adopted bitcoin, the nation is experiencing significant economic growth and optimism for the reduction of the alarmingly high poverty rate. As economic complications from the pandemic and global conflicts increase, many countries in the developing world are finding significant successes in financial systems that have traditionally only benefitted rich nations.

– Ella DeVries
Photo: Flickr

Inflation In Uganda
Uganda is in a state of having to combat inflation and rising prices for its citizens as global events, such as the COVID-19 pandemic and the Russia-Ukraine war, continue to interrupt normal streams of trade and supply. As a result, Uganda’s government has already begun implementing actions and constructing a broad policy that seeks to help keep the negative effects of inflation from causing more economic instability in the future.

The Current Impact of Inflation

Uganda is a country that is heavily reliant on crude and other imported material in order to make necessities such as cooking oil and soap. The cost of gasoline went up by 32% by February 2022 and soap went up to 57% at the same time.

As a result of this influx of prices, the Ugandan monetary policy committee increased the interest rate benchmark from 6.5% to 7.5%. This is the first time the committee has increased the interest rate benchmark since 2018. This has come at a time when Ugandan citizens already face higher prices and taxes which will remain at the same rate.

Uganda’s leaders are taking these steps in hopes of counteracting the risks of further global complications. Whether it be recurring waves of COVID-19, the impact of the Russian invasion of Ukraine or rising prices, Uganda will continue to look to other methods of revitalizing its economy and keeping up the fight against poverty.

During the first wave of COVID-19 in 2020, poverty rates in Uganda went from 27.5% to 32.7%, with the employment rate going down during the second lockdown in 2021. These complications along with the increased oil and consumer prices could result in slow growth, below 6%, through 2023 and 2024 for the Ugandan economy. All of this highlights the need for more structural economic transformation and how inflation in Uganda will be tackled.

Ongoing Strategies

Though there are many obstacles to the ongoing development of Uganda, there is a myriad of programs, partners and policies that are also working towards a brighter future. According to the World Bank, the primary financial investment that is going into fighting poverty and inflation in Uganda is the International Development Association. It is offering a low service rate of 0.75% on disbursed credit with loan repayments stretched over 38 years. Major projects funded by the IDA in Uganda include The Electric Access Scale-Up Project ($568 million) which improves energy accessibility, Investment for Industrial Transformation and Employment ($200 million) and Additional Financing to Uganda COVID-19 Response and Emergency Preparedness Project ($164.3 million).

The aforementioned projects will seek to improve economic recovery for Uganda amid the COVID-19 pandemic by fortifying its public health and response institutions.

With funding continuing throughout the rest of the fiscal year 2022 through the IDA and government awareness of the issues at hand, there is hope that inflation in Uganda can subside eventually and allow citizens to enjoy the growth of the Ugandan economy. Despite complications due to global conflicts of war, supply interruptions, the COVID-19 pandemic and future uncertainty, there is hope for Uganda to become a prosperous economy by 2040, according to the World Bank.

– Albert Vargas
Photo: Flickr

Inflation in Turkey
Turkey is one of many countries that the consecutive crises the world is facing, from the COVID-19 pandemic to the Russian invasion of Ukraine, have affected. Each crisis has its consequences on Turkey’s economy. The Turkish government has also taken actions that have led to the devaluation of the lira, which has contributed to rising inflation rates in Turkey. In fact, Turkey’s inflation rate for the month of May 2022 reached 73.5%, the highest rate in 24 years. Similar to other countries, inflation in Turkey sparked an increase in the prices of basic resources, leading to a significant impact on the impoverished. These circumstances force the government to implement reforms to protect Turkey’s most vulnerable people.

Causes of the Inflation in Turkey

Even before the coronavirus outbreak and the war in Europe, inflation in Turkey was slowly taking place as the state grappled with significant debt amid the Turkish lira progressively losing its value. The citizens of Turkey consider the Turkish president responsible for the degradation of the nation’s economic situation, given that he insists on keeping interest rates low, according to the New York Times.

The onset of COVID-19 led to further degradation of the economic situation in Turkey due to the disruption in the supply chain. However, Turkey successfully managed this crisis and stood among the few countries noting a positive growth rate for the year 2020.

On the other hand, the recent war between Russia and Ukraine had a serious impact on the Turkish economy. Turkey has important economic ties with both countries and sees its economy affected not only by the increase in the price of energy products but also by the impact this crisis has on agricultural trade, tourism and construction projects in which Turkey is involved.

Poverty and Inflation

The unconventional strategies that the Turkish president adopted, in addition to the two major crises the world now faces, strongly impact inflation in Turkey. Unfortunately, the rise in the prices of food and energy affects low-income households most, according to the World Bank.

A poll indicates that in May 2021, just 53.6% of the Turkish population could meet their basic needs. High inflation and the devaluation of the Turkish lira are “fast eroding the purchasing power of the minimum wage, public-sector salaries and pensions.” In fact, prices are skyrocketing. Electricity bills are reaching unprecedented cost levels and the price of a kilogram of flour has doubled in less than four months, dramatically rising from 110 lira in January 2022 to 220 lira in April 2022, The Guardian reported. Inflation also harshly impacts farmers as they struggle to keep up with large industrial corporations, “with the prices of agricultural producers falling well behind those of industrial producers,” leading to decreased revenues.

Solutions

The methods of the Turkish President Erdoğan, in the form of lowering interest rates, have not been effective in reducing inflation in Turkey. In fact, economic experts consider Erdoğan’s strategy economically unorthodox.

Nevertheless, to ease the economic situation for citizens, in February 2022, the Turkish government decided to address rising inflation by reducing the value-added tax (VAT) on basic food items from 8% to 1%. In March 2022, the government reduced the VAT on a number of other essential products too. In agriculture, the government reduced VAT “on all kinds of certified seed, seedling and sapling deliveries” to 1%. The government also reduced the VAT on certain hygiene products from 18% to 8%.

In addition, in 2021, the government provided the most impoverished with energy bill subsidies to the value of $12.2 billion. The government is thus aiming to support 50% of the price of natural gas and 25% of the price of electricity. In December 2021, the government also rose the minimum wage by 50% to help struggling citizens enduring the impacts of high inflation rates.

Looking Ahead

With a government following unusual economic policies and global crises affecting the proper functioning of the economy, inflation in Turkey continues increasing, exacerbating situations of poverty. Despite all that, Turkey has a strong economy capable of exporting large quantities of diverse products, which helped the nation surpass many challenges in the past. With the gradual lifting of COVID-19 restrictions, the country can fully reopen its doors to tourists, which will also give the nation an economic boost during this crisis.

– Youssef Yazbek
Photo: Flickr

Inflation in Germany
The month of April ended with one of the highest levels of inflation in Germany, with the inflation rate reaching 7.4%. and estimated to increase even more in May, potentially attaining 7.9%  or the highest rate in 50 years. The numbers can quickly become worrying, given that the purchasing power of the German people is decreasing, which puts additional pressure on the government along with the European Union to find solutions and get out of this crisis. Inflation in Germany is due to many external factors, not only affecting the country but the whole world. As always in times of crisis, the poorest are the most affected by the situation, waiting for their government to come up with solutions for relief.

Causes of the Inflation Increase

Among the most common causes of the increase in inflation rate around the world are the Coronavirus outbreak and the disruption in the supply chains it led to. Increasing the prices of goods, making them unaffordable for many people. More recently, the Russian-Ukrainian war had an important impact on the economy of European countries and especially Germany. In fact, Germany used to import 55% of its gas from Russia last year, which is not possible anymore given the sanctions the European Union placed on Moscow. This sudden cut in gas supplies became very problematic, leading to skyrocketing prices of oil, petrol and other energy products necessary for many aspects of people’s life. Similar to many other countries, the inflation in Germany is the result of consecutive crises creating disequilibrium in the economy of the country. However, Germany is more affected than others given its dependence on Russian oil and gas.

Effect of Inflation on the Poorest

While inflation in Germany is affecting everyone, the poorest, as often in times of crisis are those who struggle the most. The supermarkets must increase the prices of basic products such as meats or diaries, the increase generally ranges between 20% to 50%, making it impossible for people already in a delicate financial situation to keep the same living standards. Keeping the living standards has been harder since the increase in prices of food has accompanied skyrocketing prices of energy products. For example, in March the price of heating oil increased by 99.8% compared to last year. This drastic augmentation in prices of household necessities makes it more and more difficult for the lower income as well as the middle-income class to make ends meet.

With the timid increase in salaries barely keeping up with the increase in the living cost, one of 10 Germans are now using their savings and sometimes taking loans to be able to survive through this crisis according to a survey from April 2022.

Solutions

To get through the inflation in Germany, the state is coming up with different solutions to support its people. The lower house of parliament took some relief measures such as one-time payments to the poorest, a child supplement and reductions in electricity costs. The government also lowered taxes on fuel, making it cheaper for customers. The rise in energy prices would have potentially led to a cut in the investment of German companies, leading to closing businesses and increasing the unemployment rate. However, the actions the government took were enough to bring back the trust. Despite the crisis, the government expects the unemployment rate to decrease in 2022 going from 5.7% to 5% in one year, according to Reuters, which shows the strength of the German economy.

A Look Ahead

Hence, all the crises the world is going through, have an important impact on the inflation in Germany. However, the German economy showed once again its resilience while the German government took and is ready to take more measures to support its population during difficult times. This difficult period will also allow the country to start building its independence from foreign suppliers of basic needs.

– Youssef Yazbek
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