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A quarter of a billion more people could be pushed into extreme poverty this year because of Covid-19, rising global inequality and food price rises supercharged by the war in Ukraine, a new Oxfam report warned today.

First Crisis, then Catastrophe, published ahead of the World Bank and IMF Spring Meetings next week (18-24 April), shows that 860 million people could be living in extreme poverty – on less than $1.90 a day – by the end of this year.

The World Bank had projected Covid-19 and worsening inequality could push an additional 198 million people into extreme poverty during 2022, reversing two decades of progress. But Oxfam now estimates that rising global food prices alone will push a further 65 million people into extreme poverty this year, a total of 263 million – equivalent to the populations of the UK, France, Germany and Spain combined.

Katy Chakrabortty, Oxfam Head of Advocacy said: “It’s clear that a herculean response is needed to tackle the catastrophe facing humanity. Multiple global crises are causing misery for millions of people and just moving aid around to each crisis is not enough; low-income countries need debt cancellation to be able to invest in social safety nets and progressive taxation on the wealthiest is needed now more than ever to provide huge funds for protecting the most vulnerable.

“In addition to the shocking extreme poverty figures, millions of people are already experiencing severe levels of hunger across East and West Africa, Yemen and Syria. The number of undernourished people could reach 827 million this year.”

The report notes that a wave of governments are close to defaulting on their debts and are being forced to slash public spending to pay creditors and import food and fuel. The world’s poorest countries are due to pay $43 billion in debt repayments this year, which could otherwise cover the costs of their food imports. Global food prices hit an all-time high in February, surpassing the peak crisis of 2011. Oil and gas giants are reporting record-breaking profits, with similar trends expected to play out in the food and beverage sector. 

People in poverty are being hit harder by these shocks. Rising food costs account for 17 per cent of consumer spending in wealthy countries, but as much as 40 per cent in Sub-Saharan Africa. Even within rich economies, inflation is super-charging inequality: in the US, the poorest 20 per cent of families are spending 27 per cent of their incomes on food, while the richest 20 per cent spend only seven  per cent.

For most workers around the world, real-term wages continue to stagnate or even fall. The effects of Covid-19 have widened existing gender inequalities too — after suffering greater pandemic-related job losses, women are struggling to get back to work. In 2021, there were 13 million fewer women in employment compared to 2019, while men’s employment has already recovered to 2019 levels.

The report also shows that entire countries are being forced deeper into poverty. Covid-19 has stretched all governments’ coffers but the economic challenges facing developing countries are greater, having been denied equitable access to vaccines and now being forced into austerity measures.

Despite Covid-19 costs piling up and billionaire wealth rising more since Covid-19 than in the last 14 years combined, governments — with few exceptions — have failed to increase taxes on the richest. An annual wealth tax on millionaires starting at just two per cent, and five per cent on billionaires, could generate $2.52 trillion a year —enough to lift 2.3 billion people out of poverty, make enough vaccines for the world, and deliver universal healthcare and social protection for everyone living in low- and lower middle-income countries.

Oxfam is calling for urgent action to tackle the extreme inequality crisis threatening to undermine the progress made in tackling poverty during the last quarter of a century:

  • Introduce one-off and permanent wealth taxes to fund a fair and sustainable recovery from Covid-19. Argentina adopted a one-off special levy dubbed the ‘millionaire’s tax’ that has brought in around $2.4 billion to pay for pandemic recovery.
  • Cancel all debt payments for developing countries that need urgent help now. Cancelling debt would free up more than $30 billion in vital funds in 2022 alone for 33 countries already in or at high risk of debt distress.
  • Reallocate at least $100 billion in Special Drawing Rights (SDR), without burdening countries with new debt or imposing austerity measures. The G20 promised to deliver $100 billion in recycled SDRs but only $36 billion has been committed to date. A new SDR issuance should also be considered and distributed based on needs rather than countries’ quota shares at the IMF.