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Sunday, August 14, 2022
ROME, Jun 3 2022 (IPS) - Developing countries are facing a combination of crises that are unprecedented in recent times. Over the last three years they have had to face the COVID-19 crisis, the food crisis, the energy crisis, the climate change crisis, the debt crisis and, on top of all this, a global recession. The crises have overlapped, and each has added to the problems created by the previous ones.
There are strong calls for increased aid flows and debt relief, as well as special funds for the countries most affected by high prices, debt burdens or climate change. These actions, much of which will be funded by the developed countries, are needed and necessary to avoid widespread suffering, political turbulence and increased migratory flows.
But these short term actions will not solve underlying problems. There is a need for new thinking; for paradigm shifts; and for new directions by developing countries. So what needs to be done?
Most importantly and most urgently, there needs to be a reform of food systems. Food systems have already shown incredible resilience by coping with COVID related lockdowns, and with the large reverse migrations that took place from urban to rural areas as people lost jobs and incomes. But new directions are needed for food systems to take on the current challenges. Actions are needed in four areas.
Next in terms of urgency is the energy crisis. A large part of the import bill of many developing countries comprises oil and gas. Reducing this dependence is now more urgent than ever. There are two complementary actions needed:
The debt crisis has created a large and growing risk of defaults with the poorest being the most vulnerable. Already in 2019, almost half of low-income and least developed countries (LDCs) were assessed as being at high risk of external debt distress or already in debt distress. Since then, the external debts of developing country have continued to rise and are eating up a growing proportion of export earnings. And this was before the present interest rate hike. Most debt was taken when real interest rate (corrected for perceived risk) were close to zero.
Finally, developing countries need to find ways to cushion themselves against the recessionary effects of slowing growth world trade. In the current system, global trade flows are dominated by USA, China and Europe.
Daud Khan works as consultant and advisor for various Governments and international agencies. He has degrees in Economics from the LSE and Oxford – where he was a Rhodes Scholar; and a degree in Environmental Management from the Imperial College of Science and Technology. He lives partly in Italy and partly in Pakistan.
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