Recent crises, from the novel coronavirus pandemic to skyrocketing living costs, have resulted in 165 million people plunge into poverty by 2020, according to the United Nations, which is calling for a “pause” in the repayment of government debts of developing countries to reverse the trend.

Due to the cumulative impact of economic shocks, 75 million people slipped into extreme poverty (income below $2.15 a day) between 2020 and 2023, while another 90 million people are now below the poverty line, meaning they have an income of no more than $3.65 a day, according to estimates of the United Nations Development Program (PNUD, UNDP in English).

“Countries that have been able to invest in protection measures over the past three years have prevented large numbers of people from falling into poverty,” UNDP chief Achim Steiner said in a press release released by his agency.

But “in over-indebted countries, there is a correlation between high levels of debt, inadequate social spending and rising poverty rates that are now causing alarm,” he insisted.

The United Nations Development Program thus recommends a “pause” in the repayment of government debts in countries that are forced to choose between servicing their debts or helping their populations.

According to another UN report released today, some 3.3 billion people, nearly half of humanity, live in countries that spend more on debt service than on education or health.

And developing countries, although the level of debt is lower (but growing faster) pay more interest mainly because of the increase in interest rates.

In these circumstances, UNDP is calling for a “pause” in interest payments to finance social measures designed to mitigate the effects of economic shocks. He estimates that “the solution is not out of scope” for the international system.

In the exposure calculations, to get these 165 million newly bankrupt people out from poverty the cost would be about $14 billion — in other words, 0.009% of global GDP in 2022, or just under 4% of what developing countries spend to service their debts.

Adding in the income losses of people who were already below the poverty line before the recent shocks, the cost of relief spending would reach 107 billion (0.065% of global GDP, about a quarter of the amount spent on servicing debts).

“Inaction to restructure the sovereign debts of developing countries has a human cost,” insisted Achim Steiner. “We need new mechanisms to anticipate and absorb shocks and to make the financial architecture work for the most vulnerable.”

The Secretary General of the UN, Mr Antonio Guterreswho has been calling for reform of international financial institutions, again this week denounced the “antiquated” system which “reflects the colonial dynamics of the era in which it was created”.