Global Food Crisis Demands Support for People, Open Trade, Bigger Local Harvests
IMF Blog, September 30, 2022
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- Authors: Kristalina Georgieva, Sebastian Sosa, Bjorn Rother
- Published: September 30, 2022
Overview and scale of the crisis
- Food insecurity has been rising since 2018, driven by more frequent and severe climate shocks, regional conflicts, and the pandemic.
- Russia’s invasion of Ukraine pushed prices of food and fertilizers higher and prompted several countries to impose export restrictions.
- The result is an unprecedented 345 million people whose lives and livelihoods are in immediate danger from acute food insecurity.
- Around the globe more than 828 million people go to bed hungry every night, according to the World Food Programme.
- The suffering is worst in 48 countries, many highly dependent on imports from Ukraine and Russia—mostly low-income countries; about half of those are especially vulnerable due to severe economic challenges, weak institutions, and fragility.
Financial and macroeconomic impacts
- An IMF staff paper estimates the impact of higher import costs for food and fertilizer for highly exposed countries will add $9 billion to their balance of payments pressures in 2022 and 2023.
- High food—and energy—prices have fueled a cost-of-living crisis likely to increase poverty, hurt growth, and potentially fuel political instability.
- For this year alone, highly exposed countries need as much as $7 billion to help the poorest households cope.
- Protectionist measures (export bans) have accounted for as much as 9 percent of the increase in world wheat prices, according to the World Bank.
Rapid response: four priority policy areas
- Support people vulnerable to food insecurity
- Rapidly and adequately support people through humanitarian assistance from the World Food Programme and other organizations, alongside effective domestic fiscal measures.
- Near-term social assistance should focus on emergency food relief or cash transfers to the poor; examples include measures recently announced by Djibouti, Honduras, and Sierra Leone.
- Where direct assistance is not possible, second-best temporary measures include subsidies and tax measures.
- Maintain open trade
- Keep trade open, including within regions, to allow food to flow from surplus areas to those in need.
- Build on progress under the Black Sea Grain Initiative and at the 12th Ministerial Conference of the World Trade Organization.
- Urgently phase out export bans imposed by major food producers to avoid worsening the crisis.
- Increase food production and improve distribution
- Ensure adequate access to fertilizers and promote crop diversification.
- Increase trade financing and reinforce supply chains to address the food price shock.
- The World Bank and other multilateral development banks should increase trade financing for agricultural commodities and support critical logistics and infrastructure upgrades.
- Invest in climate-resilient agriculture
- Scale up investments to increase future harvests and resilience to more intense and unpredictable climatic events.
- Focus on low-cost, high-impact measures tailored to country circumstances, such as new crop varieties, improved water management, and information dissemination.
- Examples: Ethiopia, Kenya, and Rwanda are leveraging mobile technology to provide farmers with rainfall forecasts to optimize planting and the purchase of crop insurance.
Financing and international coordination
- Institutions specialized in food security, such as the World Food Programme and the Food and Agriculture Organization of the United Nations, need to be adequately funded for their local presence and focus on acute food insecurity.
- More grants and concessional financing from donors and international organizations are urgently needed to support cash and in-kind assistance; in some countries, debt relief will also be needed.
- IMF financing supports countries meeting external financing needs associated with the global food shock:
- New Fund-supported programs since Russia’s invasion of Ukraine included Benin, Cabo Verde, Georgia, Mozambique, Tanzania, and Zambia and included policies to address the impact of the food crisis.
- Additional financing for existing programs supported measures in Jordan, Moldova, Pakistan, and Senegal to strengthen social safety nets and address food insecurity.
- A new food shock window under the IMF’s emergency financing is expected to be approved by the Executive Board; it will provide increased access to emergency financing for a year for countries most vulnerable and offer a new channel of IMF support where grants/concessional financing or Fund-supported programs are not possible.
- The global response requires a comprehensive and well-coordinated approach to ensure complementarity and maximum efficiency in resource use; the IMF and the World Bank issued a second joint statement calling for action on global food insecurity.
Key policy takeaway
- Immediate humanitarian assistance combined with policies to maintain open trade, boost local production and distribution, invest in climate-resilient agriculture, and ensure sufficient concessional financing and IMF support are all required to ease suffering now and strengthen food security over the medium-to-long term.
Source: IMF blog post by Kristalina Georgieva, Sebastián Sosa, Björn Rother; September 30, 2022.