Policy Responses to High Energy and Food Prices

IMF Working Papers, March 24, 2023

Source details

Authors: David Amaglobeli, Mengfei Gu, Emine Hanedar, Gee Hee Hong, Celine Thevenot
Published: March 24, 2023
Series: IMF Working Papers
DOI: https://doi.org/10.5089/9798400237768.001

The surge in energy and food prices, which was amplified by Russia’s invasion of Ukraine, prompted a flurry of policy responses by countries during 2022.
The aim of these policy responses was to mitigate social and economic impact of higher prices.
The paper documents announcements of policy measures based on the Database of Energy and Food Price Actions (DEFPA), developed from two rounds of survey responses of IMF country teams conducted in March/April and June/July of 2022.
The paper discusses policy trade-offs when considering appropriate policy responses for countries with strong and weak social safety nets.
Key policy message: "providing targeted support to households in the form of cash transfers is the most cost-effective way of alleviating the burden on vulnerable households and have to be preferred over broad-based mechanisms that prevent international prices to pass through to domestic consumers."

Database used: Database of Energy and Food Price Actions (DEFPA).
DEFPA development: based on two rounds of survey responses of IMF country teams conducted in March/April and June/July of 2022.

Policy actions in 2022 were widespread and aimed at mitigating social and economic impacts of higher energy and food prices.
The paper provides discussion on policy trade-offs relevant to different country contexts, including distinctions between countries with strong and weak social safety nets.

Provide targeted support to households in the form of cash transfers as the preferred, most cost-effective mechanism to alleviate burdens on vulnerable households.
Prefer targeted cash transfers over broad-based mechanisms that prevent international prices from passing through to domestic consumers.