The sharp rise in food and energy prices has increased the number of people living in extreme poverty by a further 71 million in the past three months, according to the United Nations.
The United Nations Development Program (UNDP) said in a report released Thursday that tax cuts and general energy subsidies are less effective than direct payments to the worst affected in lifting them out of poverty.
“The report concludes that targeted money transfers are fairer and more cost-effective than general grants,” the UNDP said. Measures such as lowering taxes on gasoline help in the short term, but they increase inequality and exacerbate the climate crisis in the long run, because people can drive more cars when gasoline prices are lower.
According to the UNDP, it is mainly the richest 20 percent of the population who benefit from energy subsidies. Targeted financial support, on the other hand, would mainly benefit the poorest.
The report cites the corona pandemic and the war between Russia and Ukraine as the causes of the current crisis, which prevented grain exports. Poor households in countries in the Western Balkans, Caspian Sea and Sub-Saharan Africa are particularly hard hit. If interest rates rise due to increased inflation, dozens of developing countries run the risk of being unable to pay for food or energy imports.