Global Food Crisis and Food Shock Window FAQs

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Global Food Crisis and Food Shock Window FAQs

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Overview

• The International Monetary Fund (IMF) provides policy advice, capacity development, and financial support to help member countries tackle the global food crisis.
• Nearly 50 countries are severely affected by the global food crisis; those experiencing severe macroeconomic challenges, weak institutions, and a fragile socio-political environment are most vulnerable.
• The IMF is working closely with partners including the World Bank, the World Food Program, the World Trade Organization, and the Food and Agriculture Organization.

IMF response: Policy advice and capacity development

• Identifying pressures and helping countries formulate effective policies:
  • The IMF combines information on the balance of payments impact of higher food and fertilizer prices with insights on vulnerabilities and risks—including debt sustainability—to identify countries likely to encounter acute financing pressures.
  • Policy advice includes measures to address food insecurity by strengthening social safety nets and to avoid export restrictions.
• Capacity development is provided alongside policy advice to help countries implement recommended measures.

IMF response: Financing and program support

• Financing to support country responses:
  • New Fund-supported economic programs since Russia’s invasion of Ukraine in Benin, Cabo Verde, Georgia, Mozambique, Tanzania, and Zambia included policies to address the impact of the food crisis.
  • Additional financing for existing programs in Jordan, Moldova, Pakistan, and Senegal provided support to strengthen social safety nets and help countries address balance of payments problems associated with food insecurity.
• For the most impacted countries, grants and concessional financing from partners are the first lines of defense; the IMF’s Food Shock Window (FSW) offers an additional line of defense.

Food Shock Window (FSW) — design and key terms

• Approval and timing:
  • The Food Shock Window under the Rapid Credit Facility (RCF) and Rapid Financing Instrument (RFI) was approved by the Executive Board on September 30, 2022.
  • The window is open for 12 months and is available through September 29, 2023.
• Objective:
  • Provide additional access under emergency financing instruments to countries with urgent balance of payments needs associated with the global food shock, for which a UCT-quality program is either not currently feasible or not necessary.
• Eligibility:
  • Available to IMF member countries that have an urgent balance of payments need related to the global food shock.
  • Specifically available to countries suffering from acute food insecurity, a sharp food imports shock, or from a cereals export shock.
  • Qualification involves country-by-country assessment and judgment.
• Financing terms:
  • Financing terms are the same as for the other emergency financing.
  • Access under the FSW of the RCF for low-income countries would be at concessional (PRGT) terms.
  • Financial assistance through the FSW under the RFI and RCF should be repaid within 3¼ to 5 years, and 5½ to 10 years, respectively.
• Access limits and availability:
  • Access will be consistent with actual balance of payments needs, and capped at 50 percent of quota, and will be additional to the current annual access limits under the RCF/RFI.
  • The cumulative access limits under the RFI regular window and the RCF exogenous shock window, previously at 150 percent of quota, will be increased to 175 percent of quota for members that will borrow through the FSW.
  • The window is available for 12 months through September 29, 2023.

Impact, vulnerability, and policy implications

• Scope of impact:
  • The impact of the food shock is felt everywhere. About 50 countries are particularly vulnerable to the food and fertilizer price shock, most of which also suffer from acute food insecurity, according to IMF staff estimates.
  • About half of those are especially vulnerable due to severe economic challenges, weak institutions, and fragility.
• Policy implications:
  • Strengthen social safety nets to protect vulnerable populations.
  • Coordinate with partners to mobilize grants and concessional financing as first lines of defense.
  • Use the Food Shock Window to address urgent balance of payments needs where appropriate and consistent with eligibility and access rules.

References

• IMF Staff Note: Tackling the Global Food Crisis: Impact, Policy Response, and the Role of the IMF
• Blog: Global Food Crisis Demands Support for People, Open Trade, Bigger Local Harvests
• Press Statement by the MD
• Factsheet: Rapid Credit Facility (RCF)
• Factsheet: Rapid Financing Instrument (RFI)
• Factsheet: IMF Staff Monitored Program (SMP)
• Proposal for a Food Shock Window Under the Rapid Financing Instrument and Rapid Credit Facility
• Proposal for a Staff-Monitored Program with Executive Board Involvement
• IMF Executive Board Approves a new Food Shock Window and an Enhanced Staff-Monitored Program with Board Involvement
• IMF Managing Director Welcomes the Creation of A New Food Shock Window to Help Countries Address Food Insecurity
• Benin,
• Cabo Verde,
• Georgia,
• Mozambique,
• Tanzania
• Zambia
• Jordan,
• Moldova,
• Pakistan
• Senegal