The worldwide average cost of living has risen more in the last 18 months than during the previous five years combined, according to a report last week by the International Monetary Fund (IMF). It’s also rising faster in what the IMF terms “emerging markets,” or underdeveloped parts of the world that were formerly European colonies, than it is in the industrial core countries.
Recent World Bank data shows that the countries facing the highest inflation include Argentina, Venezuela, Suriname, Ghana, Ethiopia, Zimbabwe, Sri Lanka, Lebanon, Iran, Turkey, and Moldova; trailing close behind them are countries like Colombia, Angola, Nigeria, Egypt, Pakistan, Azerbaijan, Hungary, Ukraine, and Lithuania. Meanwhile, the lowest inflation rates are found in Switzerland, France, Bolivia, China, Vietnam, and Japan.
The IMF noted that increases in food and energy prices - especially transportation costs - are driving the inflation of other goods. As a result, the International Energy Association (IEA) has sounded the alarm that by the end of 2022, as many as 30 million Africans will no longer be able to afford the liquefied petroleum gas, such as butane or propane, that they use to cook food.
“If a household is already spending more than 50 per cent of their income on food [and prices increase even further], that is not being spent on other goods, and that has a spillover effect on economies,” Jacques Nel, head of Africa macro at Oxford Economics Africa, told the Financial Times on Tuesday.
A recent survey of global prices for Agence France-Presse (AFP) found that energy prices in the Eurozone in August were 38.6% higher than the previous August, due in large part to the European Union’s insistence on following a US-led boycott of Russian energy exports, upon which many European nations depend heavily.
In Thailand, the price of instant noodles increased by 17%, while in Mexico, the price of corn flour increased by 13% last month. Brazilians saw the price of pinto beans increase by 23%, while Argentinians have seen a 75% increase in the price of hamburger patties. The aluminum cans used by drink sellers have increased in cost by 70% over the past nine months, driving up the cost of beer and other beverages.
However, the IMF has also stood in the way of some governments’ attempts to shield their citizens from the price increases: on Thursday, Kenya announced it was eliminating some fuel subsidies and reducing others, along with food subsidies, after the IMF compelled Nairobi to slash its budget as part of the terms for receiving an emergency loan in July.
An epidemic of debt has also been part of the fallout of the pandemic. The Washington, DC-based lender has similarly compelled governments from Tunisia to Sri Lanka and Zambia to reduce the involvement of their respective governments in their national economies as a condition for receiving loans.
The response by many nations to rising inflation has been for their central banks to increase interest rates, the reflexive fiscal policy answer to currency depreciation because it reduces incentives for banks to create new money through loans. However, the World Bank also warned on Thursday that doing so carried an increased risk of plunging the global economy into a recession.
While China has one of the world’s lowest rates of inflation, another danger is threatening its decades-long anti-poverty work. A prolonged drought has destroyed crops across the country’s south and central regions, and many farmers who had previously been brought above the threshold of extreme poverty could slip back underneath it as a result, according to the South China Morning Post. Beijing announced last year it had lifted some 800 million people out of poverty since the early 1980s.