Addressing the Cost-of-living Crisis in Developing Countries: Poverty and Vulnerability Projections and Policy Responses

Reducing poverty and improving equity
Posted Jul 16, 2022 | UNDP

Among many other effects of the war in Ukraine, supply chain disruptions and price spikes in key commodities have pushed the world towards a dangerous inflationary surge. This will have immediate and devastating effects on household welfare - with those in poverty and near-poverty hit hardest due to their higher energy and food budget share. Over 51 million people have been pushed into extreme poverty at $1.90 a day, and an additional 20 million at $3.20 a day. This UNDP paper estimates the potential effects of food and energy inflation on global poverty and vulnerability and simulates the welfare loss mitigation potential of two policy options: blanket energy subsidies and targeted cash transfers. It finds that a modestly targeted cash transfer mitigates poverty increases at every poverty line, is more equitable than using blanket subsidies, and fiscally more effective.



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