According to a new IMF research paper, the 48 countries most vulnerable to food shortages will face a combined increase in import bills of $9 billion in 2022 and 2023 as a result of the sudden increase in food and fertilizer prices caused by Russia’s invasion.
According to the IMF, this will erode reserves in many fragile and conflict-affected states that are already dealing with balance-of-payments issues as a result of a grinding pandemic and rising energy costs.
“For this year alone, we estimate that highly exposed countries need as much as $7 billion to help the poorest households cope,” IMF Managing Director Kristalina Georgieva and other IMF officials said.
According to them, the war has exacerbated a food crisis that has been growing since 2018, owing in part to the increasing frequency and severity of climate shocks and regional conflicts.
The Fund called for an immediate increase in humanitarian assistance through the World Food Program and other organizations, as well as targeted fiscal measures to assist the poor in affected countries. However, it stated that governments must prioritize fighting inflation.
“Near-term social assistance should focus on providing emergency food relief or cash transfers to the poor, such as those recently announced by Djibouti, Honduras and Sierra Leone,” Georgieva said.
The Fund also called for the abolition of food export bans and other protectionist measures, citing World Bank research that shows these can account for up to 9% of global wheat price increases.
Improved crop production and distribution, including increased trade finance, are also critical to addressing the current food price shock, according to the Fund.
It went on to say that investments in climate-resilient agriculture, water management, and crop insurance are also required to deal with drought and other unpredictability in the weather.
The new research and recommendations were released as the IMF’s Executive Board approved increased year-long emergency financing access for the most vulnerable countries through a new food shock window.
The new emergency facility could provide Ukraine with up to $1.3 billion in additional IMF funding.
Before the war, Ukraine was one of the top five grain exporters, accounting for about 15% of global corn exports and 12% of global wheat exports, and resumption of shipments from Black Sea ports under a deal with Russia has only partially alleviated shortages. However, the conflict is reducing Ukraine’s crop production in the future.
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