Raising fiscal revenue in times of crisis

The confluence of multiple crises that currently beset developing nations constitutes a profound setback to the trajectory of their development. In the wake of the conflict in Ukraine and the far-reaching reverberations of the COVID-19 pandemic, a stark escalation in the costs of essentials like food, fertilizers, and energy has manifested. This disturbing phenomenon has cascading effects, culminating in an upsurge in inflation rates and a subsequent surge in interest rates, thereby engendering a disconcerting risk of stagflation.

The global ramifications are discernibly grave, as escalating food and energy costs compound the risks of food insecurity, malnutrition, and famine, exacting the heaviest toll on the world’s most impoverished populations. It is an unfortunate reality that the impoverished segments have already borne the brunt of the COVID-19 crisis. The annus horribilis of 2020 witnessed a staggering increase of over 70 million people languishing below the extremities of the extreme poverty line — subsisting on less than $2.15 per day. This disheartening surge represents the most colossal surge since 1990.

The repercussions were most acutely felt among individuals entrenched in the direst straits of extreme poverty, amplifying their destitution. Furthermore, families vulnerable to socioeconomic fluctuations experienced a disproportionate setback in terms of health and education. A disconcerting statistical revelation unfolds in the form of nearly 70% of children in low- and middle-income nations trapped in the quagmire of “learning poverty,” indicative of their inability to comprehend or read basic texts by the age of ten.

The landscape is further compounded by enduring, long-term challenges, particularly those stemming from climate variability and demographic shifts. These issues have been brought into sharper focus and have assumed economic and fiscal significance as a result. The recent spate of devastating floods in Pakistan, resulting in a lamentable loss of over 1,500 lives, serves as a grim testament to the growing threat posed by climate-related disasters. In parallel, droughts continue to cast their shadows over the Horn of Africa and South America, exerting a deleterious impact on food production and hydroelectric power generation. The upshot of these environmental disruptions has been the thrusting of millions of individuals into the abyss of severe food insecurity.