Major food crisis threatens 35 countries amid rising inflation, says IIF

About 35 countries around the world are experiencing a major food crisis, 16 of which are also facing serious debt problems as inflation remains high and fertilizer costs rise to their highest level in more than a decade, according to the Institute of International Finance.

Twenty-one countries are facing “chronic food insecurity crises” that reflect structural challenges dating back to long before the start of the Russia-Ukraine conflict, which have severely disrupted supply chains and aggravated the global food crisis, said the IIR in its latest report.

Rising food prices are one of the major downside risks to growth and development in many developing countries, with negative implications for political and social stability.

The repercussions could be even more pronounced in low-income and lower-middle-income countries that have “limited fiscal space to deal with rising food prices” and are already facing high debt.

“Most of these fragile countries have accumulated a significant amount of domestic and external debt over the past decade and are consistently running large twin deficits,” said IIF Director Emre Tiftik and Economist Paul Della Guardia. at the Institute.

The total external debt of these 16 countries has more than doubled since 2010. Public and publicly guaranteed debt accounts for more than 80% of long-term external liabilities, with multilateral lenders, including the International Monetary Fund, accounting for 43% of the total.

China stands out as the largest official external creditor, accounting for more than 18% of outstanding public debt – a significant increase from the level of 8% in 2010, according to the IIF.

Global food prices have been on the rise since 2020 as Covid-19 severely affected agricultural sectors and disrupted global supply chains, with fertilizer costs steadily rising. Russia’s war in Ukraine, which began on February 24, has exacerbated the commodity super cycle.

Prior to the Russian military offensive, the two countries collectively supplied about 30% of the wheat traded globally and 15% of corn exports.

Prices for grains, oil and other food items have risen sharply since, severely affecting lower- and lower-middle-income countries that were already struggling to revive their pandemic-stricken economies.

Countries dependent on food imports, particularly in the Middle East and Africa, face inflation driven by food and energy prices, which threatens growth momentum.

Lebanon is the country most affected by the food inflation crisis, caused by the war in Ukraine, the World Bank said in August

Nominal food inflation in Lebanon reached over 330%, while actual food inflation – which refers to food inflation minus headline inflation – reached 122%, the World Bank said in a report on last month.

Most of these fragile countries have accumulated a significant amount of domestic and external debt over the past decade and are continuously running large twin deficits.

IIR Economists

Headline inflation in Lebanon reached 168% in July compared to the same month a year earlier, according to the consumer price index from Lebanon’s Central Administration of Statistics. The index rose 7.4% from June 2022.

The country has the fourth highest debt-to-GDP ratio in the world, and the World Bank says its economic crisis is one of the three worst since the mid-19th century.

Lebanon is followed by Zimbabwe, Venezuela, Turkey and Iran in terms of countries with the worst food inflation.

Although growing fears of a global recession and the partial resumption of vital grain exports from Ukrainian ports have somewhat reduced food price pressures, global food prices remain high, the IIF said.

“This has fueled lingering concerns about food security, especially in low-income countries,” the Washington-based institute said.

“The number of people facing acute food insecurity could increase by more than 15% to almost 325 million in 2022 due to the war in Ukraine,” the IIF said, citing data from the World Food Programme.

The agricultural sector’s dependence on energy-intensive inputs such as fertilizers is also a contributing factor to rising food prices. Since mid-2010, fertilizer prices have more than tripled, alongside a rise in hydrocarbon prices.

“Fertilizers and energy are essential for the crop cycle, so they build on each other and create a food crisis that will last at least for months and probably into next year,” said the World Bank President David Malpass in April.

Updated: September 04, 2022, 06:00

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