Prices were rising before Russia’s invasion of Ukraine, which has further disrupted energy markets and food exports, forcing developing countries to pay more to import staples at a time when they are already struggling with increased debts taken on to pay for pandemic responses.
While panic over inflation has led news agendas all over the world, the IMF’s World Economic Outlook released this week estimated it would reach 8.7% in developing economies compared with 5.7% in rich countries. Experts fear millions more will be driven into poverty and that transport and food networks will be affected.
Humanitarian efforts for refugees and populations already facing hunger crises could also struggle to cope with increased prices, at a time when many are already coping with reduced aid funding.
“The rising cost of getting aid into areas like north-west Syria, which is hugely dependent on humanitarian aid, means that it’s the people who need help most who are suffering,” said Jessica Adams, head of communications at Syria Relief.
“Our costs in meeting the needs have gone up – petrol for trucking water into camps costs more, building homes for displaced Syrians in tents costs more as building materials have gone up. This is against a backdrop where donations to Syria are reducing – so in a conflict like Syria … living has become unaffordable.”
The effects of the Ukraine war on oil, and the energy sector as a whole, are being monitored by experts but prices have fluctuated wildly since Russia’s invasion and there is concern about how much oil is being refined and exported as the products ordinary people need.
Rising oil prices are being felt on the forecourts, with petrol up 63% in Sudan, 50% in Sierra Leone and 42% in Ghana compared with 9% in Britain.
“You cannot isolate oil from the other markets – gas prices are higher, coal prices are higher, food prices are higher and you have supply-chain bottlenecks. There are a lot of headwinds that are affecting economics all over the world,” said Bassam Fattouh, director of the Oxford Institute for Energy Studies.
“If you look at it from a consumer’s point of view, they are being hit left and right all over the world.”
Oxfam has estimated that a quarter of a billion people face poverty this year because of rising food and fuel prices, calling it “the most profound collapse of humanity into extreme poverty and suffering in memory”.
The UN’s agencies raised concerns about how rising food and fuel costs will affect their operations, predicting a $136m rise in operational costs in West Africa. In east Africa it has warned of refugee families getting into debt and selling off their belongings because they fear ration cuts.
The UN warned last week of developing countries becoming “collateral damage” of the Ukraine war.
“The developing countries are facing a perfect storm of soaring food and fuel prices with already limited fiscal space and high debt ratios. We need urgent measures to prevent great human suffering and the world tipping into an era of social and political unrest,” said Rebeca Grynspan, secretary general of the UN conference on trade and development (Unctad).
The IMF said the war was derailing post-pandemic economic recovery and estimated global growth would slow from 6.1% last year to 3.6% in 2022. It also said the pandemic had increased debt because of response spending, making vulnerable countries reliant on oil and food imports.
In Sri Lanka, the lack of foreign currency reserves has sparked a movement to bring down the government, which has struggled to import food, medicine and fuel, leading to blackouts and farmers struggling to transport crops.
In Peru there have been anti-government protests over fuel and fertiliser prices, while Egypt has tried to avert similar anger with price controls, punishing non-compliant bakeries and retailers with closure.
Living costs helped fuel the anti-government demonstrations that brought down Sudanese dictator Omar al-Bashir in 2019 and similar protests have emerged against the military rulers who took control in a coup last October.
Kholood Khair, of Sudanese thinktank Insight Strategy Partners, said the rise in food and fuel prices is adding to the grievances being voiced by protesters.
“Gas prices have been rising steadily in the past few months at the same time as the government has been struggling to retain hard currency in the central bank to buy more … the government has very acute supply problems,” said Khair, who added that many of the fuel subsidies have been removed since Bashir’s exit.
“If the Gulf doesn’t come with financial support and in-kind support with fuel, then the generals in Khartoum will find themselves in an ever more precarious position.”
