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World Leaders Call for Stronger Multilateral Solutions to Debt Crisis

World Leaders Call for Stronger Multilateral Solutions to Debt Crisis

World Leaders Call for Stronger Multilateral Solutions to Debt Crisis

Amid cascading crisis and inequalities, developing countries face major challenges with a complex creditor base as borrowing burdens increase and risks of debt distress grow.

Stronger multilateral solutions are urgently needed to tackle the debt crisis facing developing countries, UNCTAD Secretary-General Rebeca Grynspan said at the opening of the organization’s 13th Debt Management Conference.

The event, which runs from 5 to 7 December in Geneva and online, takes place as a wave of global crises has led many developing countries to take on more debt to address the needs of their populations.

Government debt levels as a share of GDP increased in over 100 developing countries between 2019 and 2021. Excluding China, this increase is estimated at about $2 trillion.

“This has not happened because of the bad behavior of one country. This has happened because of systemic shocks that have hit many countries at the same time,” Ms. Grynspan said. Read her full statement.

With interest rates rising sharply, the debt crisis is putting enormous strain on public finances, especially in developing countries that need to invest in education, health care, their economies and adapting to climate change.

“Almost all developing countries have been left to face an impossible trade-off in a context marred by a pandemic, geopolitical instability and climate distress,” Ms. Grynspan said.

“Debt cannot and must not become an obstacle for achieving the 2030 Agenda and the climate transition the world desperately needs.”

UNCTAD advocates for the creation of a multilateral legal framework for debt restructuring and relief.

Such a framework is needed to facilitate timely and orderly debt crisis resolution with the involvement of all creditors, building on the debt reduction programme established by the Group of 20 major economies (G20) known as the Common Framework.

Vicious debt circle

“We must support UNCTAD’s call for a reform of international monetary and financial governance,” Bolivian President Luis Acre said in a statement delivered by the country’s finance minister, Marcelo Montenegro.

Mr. Montenegro called for re-examining key aspects of the international financial architecture, including the debt sustainability assessments that serve as a basis for negotiations between debtors and creditors in relation to debt restructuring.

As debt burdens rise, developing country governments end up in a vicious circle, unable to invest in achieving the Sustainable Development Goals (SDGs) and grow their economies, making it even harder to pay their debts.

If a country defaults, the terms of debt restructuring are usually set by groups of creditors competing to get the best terms, rather than giving priority to economic and developmental concerns or the sustainability of debt repayments.

“To resolve these issues equitably, this needs to be done in a manner that maintains the debtor countries’ ability to grow and meet its current and future debt obligations, while also fulfilling its commitments to the SDGs,” Sri Lankan President Ranil Wickremesinghe said in a statement delivered by the country’s permanent representative in Geneva, Ambassador Gothami Silva.

“I believe that the United Nations is best placed to find solutions to this end,” Ms. Silva said.  

Four times the climate change investment needed in developing countries

Estimates show that if the median increase in rated sovereign debts since 2019 were fully reflected in interest payments, governments would pay an additional $1.1 trillion on the global debt stock in 2023.

This amount is almost four times the estimated annual investment of $250 billion required for climate adaptation and mitigation in developing countries, according to an UNCTAD report.

“The anachronistic global financial architecture inhibits timely access to affordable development and climate finance,” Belize’s finance minister, Christopher Coye, said ahead of the conference.

Mr. Coye was speaking at UNCTAD’s sixth session of the intergovernmental group of experts on financing for development, held from 30 November to 2 December.

At UNCTAD’s debt management conference, Barbados’ finance minister, Ryan Staughn, said the world needed to find a solution to the debt crisis “that allows countries to be able to continue to respond to the climate crisis without getting ourselves into trouble.”

“I need not tell you the difference between borrowing to build a school or polyclinic versus borrowing to build an airport or a seaport, which have totally different objectives,” Mr. Staughn said in a statement delivered on behalf of Prime Minister Mia Amor Mottley.

The heavy burden of a strong dollar

Ms. Grynspan also drew attention to the impact of the currency composition of debt on public budgets in the context of an ever-stronger US dollar.

International Monetary Fund estimates show that 70% of all the debt in emerging countries and 85% of the debt in low-income countries is in foreign currency.

Since governments in developing countries spend in local currency and borrow in foreign currency, this structure leaves public budgets highly exposed to large and unexpected currency depreciations.

By the end of November 2022, at least 88 countries had experienced a depreciation against the US dollar this year. In 31 of these countries, the depreciation was greater than 10%.

In most countries in Africa such a depreciation increases debt servicing requirements by the equivalent to public health spending on the continent, Ms. Grynspan said.

“The magnitude of these figures shows the systemic nature of the problem we are facing. And systemic problems demand systemic solutions,” she said.

Promoting multilateral solutions

UNCTAD promotes multilateral solutions in the areas of capacity-building, debt transparency and debt crisis resolution and relief.

The organization is supporting countries through its Debt Management and Financial Analysis Programme (DMFAS), one of its most successful technical assistance initiatives.

DMFAS offers countries proven solutions for managing debt and producing reliable data for policymaking. Since its establishment over four decades ago, DMFAS has supported 116 institutions – mainly finance ministries and central banks – in 75 countries.

Today, 61 countries, of which nearly three quarters are either low- or lower-middle-income, use the DMFAS software to manage their public debt daily.

One example is Chad, which in January 2022 became the first country to officially request debt restructuring under the  G20’s Common Framework.

On debt transparency, UNCTAD supports the establishment of a publicly accessible registry of debt data for developing countries.

Following the UNCTAD principles on responsible sovereign borrowing and lending, this registry would allow the integration of debt data by both lenders and borrowers at the level of specific transactions.

Transparency would strengthen debt management, reduce the risk of debt distress and improve access to financing.

maritime transport world

World Needs Maritime Trade to Brave Rough Seas of Crises

Secretary-General Rebeca Grynspan calls on the shipping industry to help get food and fertilizers from the Black Sea to global markets.

The world again needs the shipping industry to brave the rough seas of crises, UNCTAD Secretary-General Rebeca Grynspan said on 22 September as she addressed the Global Maritime Forum’s annual summit.

Speaking at a New York navy yard dubbed the “can-do shipyard” at the height of World War Two, Ms. Grynspan said maritime trade is facing a “historic moment of crisis”.

The war in Ukraine has disrupted major shipping routes and supply chains. It has also triggered global food, energy and finance crises that have sparked record prices and could push tens of millions more people across the world into hunger and poverty this year.

Maritime transport has a key role to play in cushioning the blow, since ships carry over 80% of the goods the world trades – including most of the food, energy and fertilizers people desperately need right now.

Ms. Grynspan lauded the work already done to help load and transport food and fertilizers from Ukraine under the Black Sea Grain Initiative brokered by the United Nations and Türkiye.

“I have seen you sail through literally mined waters. I have seen you work the ports in the middle of a war zone,” she said.

But she called on the maritime industry to redouble its efforts.

“There are rougher seas ahead, and we will need your bravery more than ever before.”

Bringing down food prices

Globally, a record 345 million people in more than 80 countries are currently facing acute food insecurity, according to the UN.

As of 12 September, the Black Sea Grain Initiative had enabled over 2.7 million metric tons of grain and other foodstuffs to move from the Ukrainian ports of Odesa, Chornomorsk and Yuzhny (Pivdennyi).

The UN points out that all the grain coming out of the three Ukrainian ports thanks to the initiative benefits people in need, as it helps to calm markets and limit food price inflation.

The initiative is succeeding in one of its key aims: bringing food prices down.

The UN Food and Agriculture Organization’s Food Price Index showed double-digit percentage drops in the cost of vegetable oils and cereals in July and a further 1.9% fall in August

“The Black Sea Grain Initiative and the agreement for unimpeded access to Russian food and fertilizers are now proven concepts,” Ms. Grynspan said.

“But this is only a fraction of what can be done, and what the world needs for prices to come down to affordable levels for the developing countries, or for the world to have enough fertilizers to feed itself next year.”

Even though global food prices are falling, domestic prices in many developing countries are still going up as their currencies struggle to compete with a stronger US dollar, fuelled by rising interest rates.

Preventing lost sowing seasons

Ms. Grynspan said the price of fertilizer – currently three times higher than the average during the previous decade – is particularly worrying since it’s the top input cost for many small farmers around the world.

If farmers cannot afford or don’t have access to the fertilizers they need, they won’t be able to plant their crops.

“We have already lost a sowing season in West Africa because of this,” Ms. Grynspan said.

If the fertilizer market isn’t stabilized, the whole food supply system could be in trouble.

“The food affordability crisis that we are dealing with today may become a food availability crisis next year because of the fertilizer issue if we don’t intervene,” Ms. Grynspan said.

“We need more ships. We need bigger ships,” she said. “We need you. The world needs you.”

“The seas are rough. Let’s brave them together.”


Global Trade Hits Record $7.7 Trillion in First Quarter of 2022

But the positive trend for international trade may soon come to an end amid tightening policies and geopolitical frictions.

The value of global trade rose to a record $7.7 trillion in Q1 2022, an increase of about $1 trillion relative to Q1 2021, according to UNCTAD’s Global Trade Update published on 7 July.

The growth, which represents a rise of about $250 million relative to Q4 2021, is fueled by rising commodity prices, as trade volumes have increased to a much lower extent.

Though expected to remain positive, trade growth has continued to slow during Q2 2022.

“The war in Ukraine is starting to influence international trade, largely through increases in prices,” the report says.

It adds that rising interest rates and the winding down of economic stimulus packages will likely have a negative impact on trade volumes for the rest of 2022.

Volatility in commodity prices and geopolitical factors will also continue to make trade developments uncertain.

Trade growth strong for both developed and developing countries

According to the report, trade growth rates in Q1 2022 remained strong across all geographic regions, although somewhat lower in the East Asia and Pacific regions.

Export growth has been generally stronger in commodity-exporting regions, as commodity prices have increased.

Trade in merchandise goods reached about $6.1 trillion, an increase of about 25% relative to Q1 2021, and a jump of about 3.6% relative to Q4 2021.

The value of merchandise exports from developing countries was about 25% higher in Q1 2022 than in Q1 2021. In comparison, this figure is about 14% for developed countries.

Merchandise trade between developing countries also strongly grew during Q1 2022

Trade in services grew to about $1.6 trillion, an increase of about 22% relative to Q1 2021, and a rise of about 1.7% relative to Q4 2021.

Substantial increases across sectors

The report shows that most economic sectors recorded substantial year-over-year increases in the value of their trade in Q1 2022.

High fuel prices are behind the strong increase in the value of trade in the energy sector.

Trade growth was also above average for metals and chemicals.

By contrast, trade in the transportation sector and in communication equipment has remained below the levels of 2021 and 2019.

Slower economic growth, war in Ukraine dim prospects

The report says the evolution of world trade for the remainder of 2022 is likely to be affected by slower-than-expected economic growth due to rising interest rates, inflationary pressures and concerns over debt sustainability in many economies.

The report states that the war in Ukraine is affecting international trade by putting further upward pressure on the international prices of energy and primary commodities.

In the short term, because of the inelastic global demand for food and energy products, rising food and energy prices would likely result in higher trade values, and marginally lower trade volumes.

Other factors expected to influence global trade this year are continuing challenges for global supply chains, regionalization trends and policies supporting the transition towards a greener global economy.

multinational containers activity

Plans For a Minimum Tax On Profits Of Multinationals will Have Major Implications for Investment Policy

Developing countries could lose out on tax revenues due to capacity and legal constraints on the implementation of needed reforms

The proposed introduction of a minimum tax of 15% on the foreign profits of the largest multinational enterprises (MNEs) has major implications for international investment and investment policy, according to the UNCTAD World Investment Report 2022 published on 9 June.

The report entitled International tax reforms and sustainable investment provides a guide for policymakers to navigate the complex new tax rules and to adjust their investment strategies.

The proposed reforms, planned for 2023 or 2024, aim to discourage multinationals from shifting profits to low-tax countries. Key implications are:

  • Increased tax revenues from multinationals for most countries.
  • Higher taxes on foreign profits of multinationals.
  • Potential downward pressure on new investment by multinationals.
  • Reduced effectiveness of low tax rates and fiscal incentives to attract investment.
  • Urgent need for investment promotion agencies (IPAs) and special economic zones (SEZs) to review investment attraction strategies.

“While the tax reforms are going to increase revenue collection for developing countries, from an investment attraction perspective they entail both opportunities and challenges,” said UNCTAD Secretary-General Rebeca Grynspan.

She added: “Developing countries face constraints in their responses to the reforms, because of a lack of technical capacity to deal with the complexity of the tax changes, and because of investment treaty commitments that could hinder effective fiscal policy action. The international community has the obligation to help.”

Impact in countries

Tax rates on the foreign profits of multinationals will increase. Foreign affiliates that pay tax rates below the minimum on profits reported in host countries will be subject to a top-up. Also, multinationals will reduce profit shifting and pay host-country rates on a larger profit base.

The estimated rise in the effective tax rates faced by multinationals is conservatively estimated at 2 percentage points. This corresponds to an increase in tax revenues paid by multinationals to host countries of about 15% – closer to 20% for large firms that are directly affected by the reforms.

Both developed economies and developing economies are expected to benefit substantially from increased revenue collection. Offshore financial centers stand to lose a substantial part of revenues collected from foreign affiliates.

For smaller developing countries – which generally have lower rates – the application of the top-up tax could make a major difference in revenue collection.

However, the flipside of increased tax revenues is the potential downward pressure on the volume of investment that the increase in tax on foreign direct investment activities will exert. UNCTAD estimates that cross-border investment in productive assets could decline by 2%.

Policy implications

The planned reforms will have major implications for national investment policymakers and investment promotion institutions, and for their standard toolkits. Fiscal incentives are widely used for investment promotion, including as part of the value proposition of most special economic zones.

International investment policymakers and negotiators of international investment agreements (IIAs) need to consider the potential constraints that IIA commitments may place on the implementation of key provisions of the reforms.

If (often developing) host countries are prevented by IIAs provisions from applying top-up taxes or removing incentives, the tax increase to the minimum will accrue to (mostly developed) home countries. Host countries would lose out on tax revenues without providing any benefit to investors.

“The tax revenue implications for developing countries of constraints posed by international investment agreements are a major cause for concern,” the report notes, adding that the international community, in parallel with or as part of the negotiations of the tax reforms, should alleviate the constraints that are placing developing countries at a disadvantage.

“We need to vastly scale up technical assistance to support implementation of the reforms, and we need a multilateral solution to remove implementation constraints posed by IIAs. As a stop-gap measure, we need a mechanism to return top-up revenues raised by developed home countries that should have accrued to developing host countries,” the report says.

Meanwhile, the report shows that global foreign direct investment recovered to pre-pandemic levels in 2021 but uncertainty looms in 2022.


The United Nations Conference on Trade and Development (UNCTAD) is the UN’s leading institution dealing with trade and development. It is a permanent intergovernmental body established by the United Nations General Assembly in 1964.

UNCTAD is part of the UN Secretariat and has a membership of 195 countries, one of the largest in the UN system.

UNCTAD supports developing countries to access the benefits of a globalized economy more fairly and effectively. We provide economic and trade analysis, facilitates consensus-building and offer technical assistance to help developing countries use trade, investment, finance and technology for inclusive and sustainable development.


Global Foreign Direct Investment Recovered To Pre-Pandemic Levels In 2021 But Uncertainty Looms In 2022

Flows of foreign direct investment (FDI) recovered to pre-pandemic levels last year, hitting nearly $1.6 trillion but the prospects for this year are grimmer the latest UNCTAD World Investment Report said.

The report entitled International tax reforms and sustainable investment said that to cope with an environment of uncertainty and risk aversion, developing countries must get significant help from the international community.

“The need for investment in productive capacity, in the Sustainable Development Goals (SDGs) and in climate change mitigation and adaptation is enormous. Current investment trends in these areas are not unanimously positive,” said Rebeca Grynspan, Secretary-General of United Nations Conference on Trade and Development (UNCTAD).

“It is important that we act now. Even though countries face very alarming immediate problems stemming from the cost-of-living crisis, it is important we are able to invest in the long term.”

Coming off a low base in 2020, global FDI flows rose 64 percent to $1.58 trillion last year with momentum from booming merger and acquisition (M&A) activity and rapid growth in international project finance due to loose financing and major infrastructure stimulus packages.

While the recovery benefitted all regions, almost three-quarters of the growth was concentrated in developed economies as FDI flows rose 134% and multinational companies posted record profits.

Flows to developing economies rose 30% to $837 billion – the highest level ever recorded – largely due to strength in Asia, a partial recovery in Latin America and the Caribbean and an upswing in Africa. The share of developing countries in global flows remained just above 50%.

The reinvested earnings component of FDI – profits retained in foreign affiliates by multinational companies – accounted for the bulk of the global growth, reflecting the record rise in corporate profits, especially in developed economies.

The top 10 economies for FDI inflows in 2021 were the United States, China, Hong Kong (China), Singapore, Canada, Brazil, India, South Africa, Russia and Mexico.

2022 prospects

This year, the business and investment climate has changed dramatically as the war in Ukraine results in a triple crisis of high food and fuel prices and tighter financing. Other factors clouding the FDI horizon include renewed pandemic impacts, the likelihood of more interest rate rises in major economies, negative sentiment in financial markets and a potential recession.

Despite high profits, investment by multinational companies in new projects overseas were still one-fifth below pre-pandemic levels last year. For developing countries, the value of greenfield announcements stayed flat.

Signs of weakness are already emerging this year. Preliminary data for the first quarter shows greenfield project announcements down 21% globally, cross-border M&A activity down 13% and international project finance deals down 4%.

“UNCTAD foresees that the growth momentum of 2021 cannot be sustained and that global FDI flows in 2022 will likely move on a downward trajectory, at best remaining flat,” the report underline. “However, even if flows should remain relatively stable in value terms, new project activity is likely to suffer more from investor uncertainty.”

Variations among regions: overview of Africa, Latin America and industrialized economies

FDI in Africa hit a record $83 billion last year but this was significantly affected by a single intrafirm financial transaction in South Africa in the second half of 2021. Flows rose in Southern Africa, East Africa and West Africa while Central Africa stayed flat and North Africa fell.

Developing Asia, which receives 40% of global FDI, saw flows rise in 2021 for the third straight year to an all-time high of $619 billion. FDI in China grew 21% and in Southeast Asia by 44% but South Asia went the other way, falling 26% as flows to India shrank to $45 billion.

In 2021, FDI in Latin America and the Caribbean rose 56% – with South America’s growth of 74% sustained by higher demand for commodities and green minerals.

For structurally weak, vulnerable and small economies rose by 15% to 39 trillion, however influx to the least developed countries, landlocked and small island developing states combined accounted only for 2.5 percent of the world total in 2021, down from 3.5 percent in 2020. The impact of the pandemic intensified fragility and investment in sectors relevant for the SDGs – especially food, agriculture, health and education – continued to fall.

“In 2022, FDI flows to developing economies are expected to be strongly affected by the war in Ukraine and its wider ramifications, and by macroeconomic factors including rising interest rates,” the report said. “Fiscal space in many countries will be significantly reduced, especially in oil- and food-importing developing economies.”

Investing in Sustainable Development Goals

After taking a significant hit in the first year of the pandemic, international SDG investment jumped 70% last year. But most of the recovery growth came in renewable energy and energy efficiency, where project values reached more than three times the pre-pandemic level.

“While the 2021 recovery in value terms is positive, investment activity in most SDG-related sectors in developing economies, as measured by project numbers, remained below pre-pandemic levels,” the report said.

“Across developing Asia, investment in sectors relevant for the SDGs rose significantly,” the report said. “International project finance values in these sectors increased by 74% to $121 billion, primarily because of strong interest in renewable energy.”

International project finance is increasingly important for Sustainable Development Goals and climate change investment. Some positive steps in these areas in 2021 could be tested this year.

Announced international project finance deals hit a record of 1,262 projects last year and more than doubled in value to $656 billion.

The introduction of a global minimum tax on foreign direct investment will have important implications for the international investment climate but both developed and developing countries are expected to benefit from an increased revenue collection.


The United Nations Conference on Trade and Development (UNCTAD) is the UN’s leading institution dealing with trade and development. It is a permanent intergovernmental body established by the United Nations General Assembly in 1964.

UNCTAD is part of the UN Secretariat and has a membership of 195 countries, one of the largest in the UN system.

UNCTAD supports developing countries to access the benefits of a globalized economy more fairly and effectively. We provide economic and trade analysis, facilitates consensus-building and offer technical assistance to help developing countries use trade, investment, finance and technology for inclusive and sustainable development.

The conflict is tightening global liquidity, especially for developing countries, as investors flock to assets perceived as less risky.

Ukraine War Risks Further Cuts to Finance Development

The financial fallout from the war in Ukraine could widen the already huge gap in financing needed to achieve sustainable development goals (SDGs) and lead to cascading credit downgrades and debt defaults in developing countries, UNCTAD said.

The gap in financing needed to achieve SDGs, such as ending poverty and halting climate change, now sits at $17.9 trillion for the 2020-2025 period, new UNCTAD estimates show. This puts the current annual gap at $3.6 trillion – more than $1 trillion wider than before the COVID-19 pandemic – without even factoring in the effects of the Ukraine conflict.

“We risk going from having a gap to achieve the SDGs to having an abyss,” UNCTAD Secretary-General Rebeca Grynspan said on 21 March as she opened a meeting on financing for development convened by the organization.

Calling for emergency measures and efforts to support sustainable growth, she said climate change and other non-stop crises are hitting developing countries hardest and making it harder for them to achieve the SDGs.

“Shock after shock, their debt burdens rise, their poor become more numerous, their fiscal space shrinks and their sustainable development goals fall increasingly out of reach,” Ms. Grynspan said.

Tightening global liquidity

The $17.9 trillion figure is likely an underestimate, Ms. Grynspan said, because the calculations were done before the start of the war in Ukraine in late February.

The conflict is tightening global liquidity, especially for developing countries, as investors flock to assets perceived as less risky. The cost of credit has already increased since the start of the conflict, with bond yields rising an average of 36 basis points.

The war’s impact on government spending around the globe will put further pressure on aid budgets, which were already low.

“External financial resources for development continue to decrease, which has been especially detrimental to low-income and middle-income countries,” said Abdulla Shahid, president of the 76th session of the UN General Assembly.

In 2020, official development assistance from advanced economies was on average just 0.32% of their gross national income – less than half of the 0.7% commitment.

Cascading effects on debt

Capital flight and less development assistance would create acute stress for many developing countries already struggling with high debt levels. Cascading credit downgrades and debt defaults could be on the horizon.

More than half of African countries were already downgraded by at least one credit rating agency in 2020, said Vera Songwe, executive secretary of the UN Economic Commission for Africa.

“The Ukraine crisis will likely lead to more downgrades as possible contagion spreads across emerging markets,” Ms. Songwe said.

In 2020, debt-to-GDP ratios in developing countries rose to 69% from 57%. For these nations, about 16% of export earnings are spent on debt payments. The share reaches 34% in small island developing states.

The debt burden undermines their abilities to provide essential services. In 62 developing countries, for example, the share of government spending on debt service was higher than health spending in 2020.

Emergency financial measures needed

To keep the gap from becoming an abyss, Ms. Grynspan called for emergency financial measures to help developing countries cope with the impacts of the war in Ukraine – including soaring prices of food, fuel and fertilizer.

According to an UNCTAD assessment, more than 5% of the poorest countries’ import baskets is made up of products that are likely to face a price hike due to the war. The share is below 1% for richer countries.

Such emergency measures would be similar to those provided by the global financial system when the COVID-19 crisis started.

One suggestion was to reconvene the Group of 20 major economies’ debt service suspension initiative (DSSI), which froze debt repayments for low-income countries until December 2021.

“But we also need to restart the DSSI in way that doesn’t just keep kicking the can down the road,” Ms. Grynspan said. “A permanent and comprehensive debt restructuring mechanism is needed.”

Strengthen productive capacities

In addition to emergency measures to reduce costs, Ms. Grynspan called for collective efforts to promote sustainable growth in developing countries.

The efforts should be underpinned by a sustained and structural push to help the countries strengthen productive capacities so they can make more goods and services and add more value to them.

Ms. Grynspan also called for more long-term strategic investments involving the private sector and local, regional and multilateral development banks.

“We urgently need to capitalize our development banks, something that didn’t happen with the pandemic,” she said.

effects in vulnerable economies such as small island developing states, landlocked developing states and least developed countries”.

Ukraine War’s Impact on Trade and Development

UNCTAD’s Rapid Assessment of the War’s Impact beyond the humanitarian crisis in Ukraine shows a rapidly worsening outlook for the world economy, with the situation especially alarming for least developed countries.

A UNCTAD rapid assessment of the war in Ukraine’s impact on trade and development confirms a rapidly worsening outlook for the world economy, underpinned by rising food, fuel and fertilizer prices.

The report published on 16 March also shows heightened financial volatility, sustainable development divestment, complex global supply chain reconfigurations and mounting trade costs.

“The war in Ukraine has a huge cost in human suffering and is sending shocks through the world economy,” UNCTAD Secretary-General Rebeca Grynspan said in a statement.

“All these shocks threaten the gains made towards recovery from the COVID-19 pandemic and block the path towards sustainable development.”

The two fundamental ‘Fs’

Concern abounds over the two fundamental “Fs” of commodity markets – food and fuels.

Ukraine and Russia are global players in agri-food markets, representing 53% of global trade of sunflower oil and seeds and 27% of global trade of wheat.

This rapidly evolving situation is especially alarming for developing nations. As many as 26 African countries, including some least developed countries, import more than one third of their wheat from the two countries at war. For 17, the share is over half.

“Soaring food and fuel prices will affect the most vulnerable in developing countries, putting pressure on the poorest households which spend the highest share of their income on food, resulting in hardship and hunger,” Ms. Grynspan said.

According to UNCTAD calculations, on average, more than 5% of the poorest countries’ import basket is composed of the products that are likely to face a price hike due to the war. The share is below 1% for richer countries.

Risk of civil unrest

The risk of civil unrest, food shortages and inflation-induced recessions cannot be discounted, the report says, particularly given the fragile state of the global economy and the developing world due to the COVID-19 pandemic.

“Long-standing effects of rising food prices are hard to predict,” the report says, “but an UNCTAD analysis of historical data sheds light on some troubling possible trends.”

Agri-food commodity cycles, for example, have coincided with major political events, such as the 2007-2008 food riots and the 2011 Arab Spring.

Freight rate hikes

Restrictive measures on airspace, contractor uncertainty and security concerns are complicating all trade routes going through Russia and Ukraine. The two countries are a key geographical component of the Eurasian Land Bridge.

In 2021, 1.5 million containers of cargo were shipped by rail west from China to Europe. If the volumes currently going by container rail were added to the Asia-Europe ocean freight demand, this would mean a 5% to 8% increase in an already congested trade route.

“Due to higher fuel costs, rerouting efforts and zero capacity in maritime logistics, the impact of the war in Ukraine can be expected to lead to even higher freight rates,” the report says. Such increases would have a significant impact on economies and households.

In 2021, UNCTAD simulated that the freight rate increase during the pandemic raised global consumer prices by 1.5%, “with particularly oversized effects in vulnerable economies such as small island developing states, landlocked developing states and least developed countries”.

online shopping


“COVID-19 and E-commerce,” a United Nations Conference on Trade and Development (UNCTAD) report, finds that the novel coronavirus “has changed online shopping forever.”

Netcomm Suisse eCommerce Association partnered with UNCTAD, in collaboration with the Brazilian Network Information Center and Inveon, to create the “COVID-19 and E-commerce” report. Based on a survey of about 3,700 consumers in Brazil, China, Germany, Italy, the Republic of Korea, Russian Federation, South Africa, Switzerland and Turkey, the report concludes that the pandemic has forever changed online shopping behaviors, greatly accelerating the shift to a more digital world

The greatest shift in this regard, the survey shows, is among consumers in emerging economies. 

“The COVID-19 pandemic has accelerated the shift toward a more digital world,” Secretary-General Mukhisa Kituyi says in an UNCTAD statement. “The changes we make now will have lasting effects as the world economy begins to recover.”

Kituyi added that the acceleration of online shopping globally underscores the urgency of ensuring all countries can seize the opportunities offered by digitalization as the world moves from pandemic response to recovery.

Mixed messages 

The survey shows that online purchases have increased by 6 to 10 percentage points across most product categories, with the biggest gainers being the ICT/electronics, gardening/do-it-yourself, pharmaceuticals, education, furniture/household products and cosmetics/personal care categories.

However, average online monthly spending per shopper has dropped markedly. Consumers in both emerging and developed economies have postponed larger expenditures, with those in emerging economies focusing more on essential products.

No surprise: Tourism and travel sectors have suffered the strongest decline, with average spending per online shopper dropping by 75 percent.

“During the pandemic, online consumption habits in Brazil have changed significantly, with a greater proportion of internet users buying essential products, such as food and beverages, cosmetics and medicines,” said Alexandre Barbosa, manager of the Regional Center of Studies on the Development of Information Society at the Brazilian Network Information Center.

Increases in online shopping during COVID-19 differ between countries, with the strongest rise noted in China and Turkey and the weakest in Switzerland and Germany, where more people were already engaging in e-commerce.

The survey found that women and people with tertiary education increased their online purchases more than others. People aged 25 to 44 reported a stronger increase compared with younger ones. In the case of Brazil, the increase was highest among the most vulnerable population and women.

Also, according to survey responses, small merchants in China were most equipped to sell their products online and those in South Africa were least prepared.

“Companies that put e-commerce at the heart of their business strategies are prepared for the post-COVID-19 era,” said Yomi Kastro, founder and CEO of Inveon. “There is an enormous opportunity for industries that are still more used to physical shopping, such as fast-moving consumer goods and pharmaceuticals.”

“In the post-COVID-19 world, the unparalleled growth of e-commerce will disrupt national and international retail frameworks,” said Carlo Terreni, president, NetComm Suisse eCommerce Association.

“This is why policymakers should adopt concrete measures to facilitate e-commerce adoption among small and medium enterprises, create specialized talent pools and attract international e-commerce investors.”

The survey results suggest that changes in online activities are likely to outlast the COVID-19 pandemic. Most respondents, especially those in China and Turkey, said they’d continue shopping online and focusing on essential products in the future.

China’s speedy recovery gets noticed

“Global Trade Update,” a separate UNCTAD report, highlights China’s notable trade recovery. The country’s exports, after falling in the early months of the pandemic, stabilized in Q2 2020 and rebounded strongly in Q3, with year-over-year growth rates of almost 10 percent. Contrary to other major economies, Chinese imports stabilized in July and August and grew by 13 percent in September.

Other key trade trends include the following:

-Exports from developing countries have fared better than those of developed nations. Year-on-year growth of developing economies’ exports improved from -18 percent in Q2 to -6 percent in July, while those from developed nations increased from -22 percent to -14 percent.

-No region was spared from the fall in international trade in the second quarter of 2020, but the sharpest decline was for the West and South Asia regions, where imports dropped by 35 percent and exports by 41 percent. As of July 2020, the fall in trade remains significant in most regions except for East Asia.

-The value of international trade in the energy and automotive sectors remains substantially below its levels of 2019. On the other hand, increases in demand for home office equipment and personal protective gear has resulted in strong growth rates for trade in the sectors of communication equipment, office machinery, and textiles and apparel.

COVID-19 and Medical Supplies

The report gives special attention to COVID-19 medical supplies (personal protective equipment, disinfectants, diagnostic kits, oxygen respirators and other related hospital equipment). Key findings include the following: 

-Trade in COVID-19 medical supplies has grown by an average of more than 50 percent since April 2020, but the increase in such trade has primarily benefited residents of wealthier nations.

-Since the outset of the pandemic, each resident of high-income countries has benefited on average from an additional $10 per month of imports of COVID-19 related products, compared with just $1 for people living in middle-income countries and a mere $0.10 for those in low-income countries.

-Overall, per capita imports of medical goods essential to mitigate the pandemic have been about 100 times higher for high-income countries than for low-income nations.

UNCTAD highlights that the difference in access to a potential COVID-19 vaccine for residents in wealthy and poor countries could be even more drastic than for medical supplies. While some low-income countries have the capacity to locally manufacture some protective equipment, this may not be the case for vaccines, which require stronger manufacturing and logistics capacities.