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Analyzing Global Poverty Reduction in 2022

global poverty reduction in 2022
As the year 2022 drew to a close recent data from the World Bank reveals that this is “the second-worst year” for global “poverty reduction in the past two decades.” The reasons for the “steep slowdown of the global economy” are many – the lingering effects of COVID-19, Russia’s invasion of Ukraine, debt crises and many other sub-factors that exacerbate the situation. New projections show that 7% will still be living in extreme poverty by 2030 – considerably higher than the 3% goal. Global organizations such as Oxfam America, World Bank and its partners, have acknowledged the situation and launched various initiatives to support the poorest and most vulnerable.

The Global Pandemic

The COVID-19 pandemic had the biggest impact on the poorest people around the world. In comparison to pre-pandemic forecasts, the average income of those in the poorest 40% of the worldwide income distribution is 6.7% lower in 2021, while that of those in the top 40% is down almost 3%. The world’s poorest have not yet begun to make up for their revenue losses, worse yet the average income of the bottom 40% decreased by 2.2% between 2019 and 2021.

Due to the pandemic, an additional 163 million people live on less than $5.50 per day, bringing the world poverty rate from 7.8% to 9.1%. Moreover, an additional 97 million people live on less than $1.90 per day. The World Bank believes that three to four years’ worth of progress toward eradicating extreme poverty has been lost globally.

War in Ukraine

The ongoing war in Ukraine has also largely contributed to the rising cost of living and the slowdown of global poverty reduction in 2022. The repercussions of the war, the sanctions imposed on Russia, such as export bans, rose energy prices and caused huge supply-chain issues pushing 51 million people to fall into poverty according to UNDP.

The war has also led to 20 million people’s daily incomes in lower-middle-income countries falling below the poverty level of $3.20, increasing the percentage of the world’s poor to 9%.

Further data from UNICEF reveals that children carry the “heaviest burden of the economic crisis.” Children make up 25% of the world’s population and 40% of the further 10.4 million suffering from poverty in 2022. Estimates show that one in three children that grow up in poverty will continue to live in poverty for the rest of their adult life. According to UNICEF, children can benefit greatly from the introduction of poverty reduction methods, job initiatives and plans for economic growth.

Global Emergency Markets

Several causes, particularly the incredibly quick economic recovery following the epidemic, caused the energy markets to tighten up in 2021. But, once Russia invaded Ukraine in February 2022, the situation quickly worsened and turned into a full-fledged global energy crisis. Natural gas prices hit record highs, which had an impact on electricity prices in several markets. The price of oil reached its highest point since 2008.

In addition to making families poorer, forcing some factories to reduce output or even close their doors and slowing economic growth to the point that some nations are in the midst of a severe recession, higher energy prices have also led to uncomfortably high inflation.

Spate of Debt Crises

During the past year, developing countries increased debt loans in order to keep up with the rising cost of living and aggravated the debt crisis. The World Bank calculations show that 60% of the world’s poorest countries are “either in debt distress or at risk of it.”

Debt-ridden countries are incapable of making high-return investments in education, research and development, and infrastructure projects, significantly slowing down their economic growth and exacerbating global poverty reduction efforts.

Future Outlook

In the face of all the crises and uncertainties that the past few years have brought to the world arena, organizations like the World Bank’s International Development Association (IDA) are stepping up to “ensure the poorest aren’t left behind.” Its new $93 billion IDA20 package, which will run from 2022 to 2025, aims to help developing countries get to grips with the global crisis the world can’t ignore, the World Bank reports.

IDA wishes to prioritize investment in education and health, reinforce food security, take action on the undeniable threat that is climate change, help countries struggling with conflict and development and improve debt sustainability.

Similarly, The United Nations Secretary-General has set up a Global Crisis Response Group on Food, Energy and Finance in the U.N. Secretariat. Its goal is to help the world’s poorest by “making reserves available to countries at risk of hunger and famine, accelerating the deployment of renewable energy and urging international financial institutions to increase liquidity and fiscal space.”

The year 2022 saw an insecure and uneven economic recovery where global development faced a crisis and poverty reduction efforts took a hard hit. However, many international organizations have united in the common goal to create an ecological, more resilient and sustainable future.

– Ralitsa Pashkuleva
Photo: Flickr

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The World Bank’s RESPITE Initiative

World Bank’s RESPITE Initiative
West Africa consists of 16 countries with a population of 419 million people. West Africa’s access to electricity is one of the lowest on a global scale, with “only 42% of the total population and only 8% of the rural population having access to electricity.” The COVID-19 pandemic has also contributed heavily to West Africa’s energy poverty. More recently, the ongoing war between Russia and Ukraine has significantly contributed to the rising food, oil and energy costs throughout the world and Africa has experienced the brunt of these consequences with high electrification costs, food crises throughout the region along with adverse effects of changing weather patterns.

However, with the World Bank’s introduction of the Regional Emergency Solar Power Intervention Project (RESPITE), the solution to sustainable and cost-effective and reliable access to electricity throughout West Africa will be more transparent with the introduction of solar and hydroelectric power along with answers to the issues that Africa is currently facing. Here is some information about the World Bank’s RESPITE initiative.

What is the World Bank’s RESPITE Initiative?

The World Bank in collaboration with the International Development Association (IDA) introduced RESPITE in December 2022 as a response to West Africa’s energy crisis through the introduction of renewable energy. The IDA is financing the initiative. The project has the approval for $311 million coupled with an additional $20 million in grants “to help facilitate future regional power trade and strengthen the institutional and technical capacities of West Africa Power Pool (WAAP) to undertake its regional mandate.”

The initiative involves the nations of Chad, Sierra Leone, Togo and Liberia. RESPITE’s main objective is to “rapidly increase grid-connected renewable energy capacity and strengthen integration in the participating countries.” RESPITE involves the “installation and operation of approximately 106 megawatts of solar photovoltaic with battery energy and storage systems, 41 megawatts expansion of hydroelectric capacity and will support electricity distribution and transmission interventions across the four countries,” the World Bank reports.

RESPITE’s Necessity

RESPITE comes as a necessity since West Africa suffers from the lowest access to reliable electrification, which has resulted in millions being unable to live in comfort as food is unable to be refrigerated and fans or air conditioning does not function, and children are unable to do their homework. The gravity of the energy crisis that all of Africa not just West Africa, faces is dire because, by 2030, there will be only three countries in West and Central Africa that will have the capability to supply their people with stable electricity, which means that more than 263 million people will be unable to have access to electricity by 2030, according to the World Bank.

RESPITE’s necessity also comes from the aftermath of the COVID-19 pandemic that adversely affected Africa’s development within the energy sector. The pandemic caused more than 100 million people to lose access to electricity and slowed the region’s progress toward affordable accessibility. Furthermore, with the rise of supply chain issues beginning in 2021, when countries began to recover from the pandemic, costs for batteries, solar panels and other essential parts increased significantly.

Furthermore, access to energy is detrimental to daily activities, including but not limited to education, health, hygiene and food. With the pandemic disrupting the affordability and access to electricity, by 2030, more than 2.4 billion people in Africa will be unable to access clean cooking, according to Energy Monitor. Remedying Africa’s energy poverty comes with its challenges. However, the solution to this is introducing off-grid renewable energy. Access to energy is critical to the region’s economic development.

Benefits of the World Bank’s RESPITE Initiative

RESPITE helps to create a path towards providing electricity to every person in West Africa that it is a part of because it answers the current power supply crisis that it is currently facing and simultaneously solves issues such as changing weather patterns through renewable energy and the food crisis. According to the World Bank, RESPITE was introduced as an emergency measure to address West Africa’s energy poverty by introducing renewable energy. In addition, the introduction of RESPITE in the nations of Chad, Libya, Sierra Leone and Togo creates the foundation for establishing a stable power trade since these four countries are members of the Economic Community of West African States (ECOWAS).

According to Boutheina Guermazi, World Bank Director for Regional Integration for sub-Saharan Africa, the Middle East and Northern Africa, RESPITE helps enhance the existing regional integration with ECOWAS members within the energy sector. At the same time, the initiative helps “create economies of scale, increases the potential for regional trade through investments in transmission and generation infrastructure to integrate the markets physically, and develops regional public good by facilitating knowledge sharing and capacity building,” the World Bank reports.

Forward Thinking

The IDA, also known as the “World Bank’s fund for the poorest,” has supported the development of more than 113 countries. On average, it has contributed more than $21 billion, which continues to increase. More than 61% of the funds have gone to Africa alone. In addition, the World Bank over the last three years has “doubled its investments to increase electricity access rates in Central and West Africa. We have committed more than $7.8 a billion to support 40 electricity access programs, of which more than half directly support new electricity connection,” the World Bank stated.

– Arijit Joshi
Photo: Wikimedia Commons

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Bulgarian Protesters Fighting for Raised Minimum Wages

Bulgarian Protesters
In mid-November 2022, Bulgarian protesters took to the streets outside the Balkan country’s Parliament building to fight for a livable minimum wage. Increasing inflation sparked the movement, and fears of minimum wage freezes prompted Bulgaria’s two largest employee unions to begin protests calling for raises in the minimum wage. The protests started right before winter because many are experiencing energy poverty and cannot afford to heat homes. Without an increase in the minimum wage, Bulgaria could have thousands, if not millions of its citizens, drop into energy poverty and lose its stance in the “eurozone.”

Bulgarian Minimum Wage

Bulgarian protesters are tackling the issue of minimum wage outside the Parliament building because the minimum wage is crushing the lower classes. Bulgaria has one of the lowest minimum wages in Europe. Bulgaria’s minimum wage is not keeping pace with the continuously-rising inflation, as inflation has effectively outpaced the national wage increases. The minimum wage stands at BGN710 or €362 per month. However, despite the pay increases, due to the amount of taxes taken out of most minimum wage earners’ pay, they only take home about €281.

By 2020, the poverty rate in Bulgaria reached 22.1%. The updated figures show the actual number of Bulgarians in poverty is likely much higher. About 35% of Bulgarians are considered the “working poor,” according to Radio Bulgaria. To be “working poor” one must have a job, work 27+ weeks a year, in the labor force, but still fall below the poverty line. The term “working poor in Bulgaria refers to those supporting themselves on minimum wage.

Bulgaria’s working poor have no way out of their poor status as long as the minimum wage remains as low as it is. With the inadequate pay, many Bulgarians fear the costs of living, specifically energy costs, might increase and force them into “energy poverty.”

Bulgaria’s Energy Poverty

Energy poverty is the lack of access to modern energy sources and services. It is one of the main causes of Bulgarian protesters taking to the capital. Energy poverty is one of the dominant challenges the Bulgarian government has faced since the Parliamentary and presidential election of 2021, as it is one of the poorest energy nations in Europe. In 2020, 27.5% of Bulgarian homes did not have adequate heating and 22.2% of Bulgarian homeowners and property renters were late or in debt due to overwhelming energy bills.

Bulgaria depends on Russia for 75% of its gas, making it one of the nations most reliant on Russian gas. The European Union held off on implementing the same bans on Russian oil that the U.S. did, but Russia slashed its gas exports and EU members scramble to seek alternate natural gas providers. The oil pipeline transporting Russian gas and oil to Eastern European nations, including Bulgaria, will remain open but with limited quantities. The minimal gas imports are likely to cause gas prices to soar again. Prices have been fluctuating wildly. The EU is in talks to set a cap on Russian gas prices, which the EU will decide on by December 5, 2022.

Until the EU sets that cap, though, Bulgarians dependent on Russian gas while only earning minimum wage will continue to struggle. Fears of living in energy poverty are motivating Bulgarian protesters as they head into the region’s coldest months of the year.

Protests and Their Implications

Bulgarian protesters are led by the nation’s top two labor unions. Bulgaria’s labor unions are a force to be reckoned with and are responsible for a significant number of Bulgaria’s workforce. Around 15% to 17% of Bulgaria’s workforce is involved with labor unions. Nationwide, there are two dominant labor unions, with countless smaller unions covering various employees and their protective needs.

Bulgaria is a member of the EU and is on its way to being a member of the “eurozone.” To be a member of the zone, one must meet four critical criteria: price stability, sustainable public finances, an inflation rate that is not more than 1.5 percentage points higher than the rate of the three best-performing member states, and exchange-rate stability. Bulgaria met the criteria required to join the eurozone, which should go into effect on January 1, 2024. However, with inflation continuing to rise and a lackluster minimum wage impacting the economy, Bulgaria could lose its spot in the eurozone.

Bulgarian protesters are calling for Parliament to raise the minimum wage before an economic freeze takes hold, Al Jazeera reports. Should a freeze happen, the minimum wage will remain low in the current inflation crisis, and the government will lose its spot in the eurozone. Without an increased minimum wage, Bulgaria’s economy will not have the proper structure to lift its poor citizens out of their financial danger.

Ending poverty for Bulgarians is possible, especially if the government raises the minimum wage, and the efforts to reach this goal earned the attention of the World Bank’s International Development Association (IDA). Bulgaria joined in November 2021, a recent but significant change. The IDA has granted $458 billion to 114 countries through grants with 0% interest. The funds go to programs that decrease poverty and improve the economic status of a nation. Joining the IDA is symbolic of Bulgaria’s progress away from the title of “developing.” Bulgaria’s economy is improving, but inflation and a lower minimum wage could halt any potential improvements. With the IDA’s assistance and a raised minimum wage, Bulgaria has a phenomenal chance of securing those better futures.

– Clara Mulvihill
Photo: Flickr

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Japanese Foreign Aid is Crucial During COVID-19

Japanese Foreign AidJapan has been a controversial figure in foreign aid for a number of reasons. The nation is famous for its strict policies in terms of refugees and immigrants, only accepting 20 refugees out of 19,000 asylum-seeking applicants in 2017. However, historically, Japan has taken the ranks as a leading provider of foreign aid, especially during the 1990s. Even today, Japan ranks fifth in global foreign aid. While impressive, Japan faces criticism for its decreases in providing aid abroad when the nation takes in so few asylum seekers. However, currently, Japanese foreign aid is making a name for itself through the country’s significant contributions throughout the COVID-19 pandemic.

International Development Association (IDA)

In December 2021, Japan pledged to give $3.4 billion to the International Development Association (IDA) of the World Bank, a record donation for the nation. The aim of this contribution is to provide developing nations with the resources necessary to rebuild after the economic losses brought on by the COVID-19 pandemic. Japanese Finance Minister Sunichi Suzuki announced, “Now is the time for global solidarity,” according to Reuters. Japanese foreign aid to the IDA will significantly help developing nations facing the highest levels of poverty globally.

COVID-19 Vaccines

Japan has extended its support to other nations beyond simply providing monetary donations. In September 2021, Japan doubled its goal of providing 30 million COVID-19 doses, extending this number to 60 million doses globally. Japan had distributed the first 30 million vaccines to nations with vaccine shortages, such as Taiwan, Vietnam and Indonesia.

The vaccines will continue to reach nations in need and may extend beyond Asia. This donation is crucial in eliminating the health care disparities among nations, especially as the impoverished in developing nations suffer the most from a lack of COVID-19 vaccines. Overall, this is beneficial for all nations because the intensity of the pandemic could calm as vaccine distribution accelerates.

Supporting Latin America and the Caribbean

When Japan is not directly sending vaccines, it donates to organizations that distribute vaccines. Japan donated more than $11.1 million to UNICEF in August 2021 to support Latin America and the Caribbean (LAC). The funds will support the storage of vaccines at ideal temperatures and assist in achieving “effective and inclusive vaccination” across the LAC region. Much of this donation will directly aid in the creation of vaccine sites and the payment of staff and health workers to operate such facilities.

UNICEF reports that children in the LAC region are enduring social, educational and emotional impacts due to COVID-19. Japanese foreign aid in the form of the donation will increase vaccination rates for normality to resume. UNICEF has coordinated much of the efforts to drive donations for vaccines in the LAC region, a region reporting more than 40 million cases and 1.4 million deaths by the close of July 2021, accounting for 20-30% of the global toll of COVID-19 cases. Thus, UNICEF applauds Japan for its donation to accelerate vaccination efforts in the LAC.

Current Top Aid Provider

According to data from the Overseas Development Institute, among the Group of Seven nations, Japan has donated the most in global aid for COVID-19 at $5.1 billion in 2020. In comparison, Germany pledged $4.4 billion while France committed $1.9 billion and Canada gave $1.0 billion. Falling on the lower end of the donation spectrum, Britain gave $990 million while the United States gave $103 million and Italy committed $50 million. However, the United States could surpass Japan’s total donations as the Biden administration has expressed several foreign aid commitments during the COVID-19 pandemic with more to come.

Nonetheless, Japan is contributing greatly to the overall mission of aiding developing countries amid COVID-19, whether it be through monetary or in-kind donations.

Now more than ever, critics affirm that developed countries can do more to support developing nations. Japan has certainly stepped up to the plate during this time of global crisis. Japanese foreign aid has become crucial for developing countries and their recovery from the pandemic.

– Rachel Reardon
Photo: Flickr