November 29, 2022

Donalds Hobby

World Finance Reviews

World’s poorest nations to receive aid amid soaring food prices

The US government and international financial institutions including the IMF and World Bank have pledged tens of billions of dollars in food and fertiliser aid to poorer countries under a joint action plan to alleviate a growing global food crisis caused by soaring prices.

US Treasury secretary Janet Yellen, speaking in Bonn at the G7 finance ministers’ meeting on Wednesday, said she was deeply concerned about the crisis that was unfolding.

“Russia’s war against Ukraine has exacerbated the issue of food security for people around the world, particularly in emerging and developing countries,” she said. Yellen added that there was a “very real risk” that rising global market prices of food and fertiliser will “result in more people going hungry, further exacerbate price pressures and harm government fiscal and external positions”.

Food inflation has surged around the world since Russian troops invaded Ukraine in late February. The impact of rising food prices and governments imposing food export bans following the start of the war have revived memories of the 2007-08 food crisis which hit poor countries disproportionately. The rise in hunger and social discontent during that crisis led to riots in more than 40 countries around the world.

The US Treasury last month convened a meeting with multilateral institutions to discuss measures to tackle rising food insecurity. Among its own initiatives, the US has allocated new global emergency food assistance bringing the total since February to nearly $2.6bn. It is also looking to mitigate the global fertiliser shortage by boosting domestic production of crop nutrients through a $500mn US Department of Agriculture programme.

Among the multilateral organisations, the Asian Development Bank will support efforts to feed Afghanistan and Sri Lanka alongside the Food and Agricultural Organization and World Food Programme (WFP). It said it is also exploring different options of trade finance and private sector loans to support food imports.

Afghans receive food rations distributed by a South Korea humanitarian aid group in Kabul on Tuesday © Ebrahim Noroozi/AP

The African Development Bank will use $1.5bn to help 20mn African farmers to gain access to fertiliser and seed through wholesalers and agricultural suppliers, while the World Bank will make $30bn available for the next 15 months. The Washington lender’s package will comprise $12bn towards new projects and about $18bn in the existing portfolio of projects linked to food and nutrition security.

The IMF said it would provide policy advice, capacity development assistance and financial support either through programmes or emergency financing. It said one area of focus was to assist countries in their efforts to rapidly improve social safety nets to protect vulnerable households from the imminent threat of hunger.

“With inflation reaching the highest levels seen in decades, vulnerable households in low and middle-income countries are most at risk of acute food insecurity,” said IMF managing director Kristalina Georgieva. “History has shown that hunger often triggers social unrest and violence,” she said.

Arif Husain, chief economist at the WFP, said: “These resources will go a long way towards addressing the near-term consequences of this triple food, fuel and fertiliser crises for the world’s poorest people and economies.”

One international food policy expert warned that the time lag between implementation and the policies bearing fruit could cause volatility in commodity markets. The measures could come into effect when the private sector has already reacted and production of crops has expanded, he warned, adding: “If so, these measures would exacerbate a possible leg down in prices as was the case in 1974 and in 2008.”