The International Monetary Fund (IMF) has warned that the war in Ukraine will undermine the global economy as it leads to record prices of food and energy and surging inflation.
In statements seen by Worthy News, the IMF said the costs of the Russian invasion of Ukraine could fundamentally reshape the global economic order in the longer term.
Already, “Food commodity prices rose 23.1 percent last year, the fastest pace in more than a decade, according to inflation-adjusted figures from the United Nations Food and Agriculture Organization. February’s reading was the highest since 1961 for the gauge tracking prices for meat, dairy, cereals, oils, and sugar,” the IMF explained.
“Now, the war in Ukraine and [related] sanctions on Russia are upending shipments and possibly production for two of the world’s largest agricultural producers. The two countries account for nearly 30 percent of world wheat exports and 18 percent of corn, most of which is shipped through Black Sea ports that are now closed. Wheat futures traded in Chicago, the global benchmark, recently rose to a record,” the IMF added.
The IMF expressed concerns about the worldwide impact of these developments, especially on poor households for whom food is a higher share of expenses. “Food costs account for 17 percent of consumer spending in advanced economies, but 40 percent in sub-Saharan Africa. Though this region is highly import-dependent for wheat, the grain constitutes only a minor share of the total caloric needs,” it said.
The IMF fears that the disruption may be even more significant for countries where bread is part of the daily menu and nations with close trade links to Russia and Ukraine, including Eastern Europe, the Caucasus, and Central Asia. “High wheat prices will weigh even more on economies in the Middle East and North Africa, such as Egypt, which is especially reliant on Russian exports.”
FERTILIZER SUPPLIES
Reduced fertilizer supplies and higher oil prices will increase costs for harvesting, transporting, and processing food, further impacting the global economy, the IMF said. “Policymakers must prevent those pressures from fueling food insecurity by avoiding protectionism and increasing social assistance for the poorest.”
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