Africa’s food insecurity from Ukraine war: Focus of spring IMF, WB meetings

By Julian Pecquet
Posted on Thursday, 21 April 2022 17:35

IMF Global Economy
A person stands outside of the International Monetary Fund (IMF) building, during the first day of the World Bank/IMF Spring meetings in Washington, Tuesday, April 19, 2022. (AP Photo/Jose Luis Magana)

The Ukraine war’s impact on food insecurity in Africa is high on the agenda this week as finance officials from around the world gather in Washington for the spring meetings of the International Monetary Fund (IMF) and the World Bank.

Global food prices rose 12.6% last month to record levels as the Russian invasion ravaged a major breadbasket of the world, exacerbating African countries’ pre-existing economic and debt troubles.

The impact is particularly dire for East Africa, where 13 million people across Kenya, Ethiopia and Somalia face severe hunger, and West Africa, where the worst food crisis in a decade could leave 38 million suffering from hunger by June.

International institutions and national leaders are scrambling to find answers, with the 2011 Arab Spring protests that rocked the Middle East and North Africa high on everyone’s mind.

“The most troubling impact is of high food prices and food insecurity,” IMF Managing Director Kristalina Georgieva told reporters at a press briefing on Wednesday. “To put it very simply, a war in Europe, in Ukraine, translates into hunger in Africa.”

Concerted action

The debate began in earnest on Tuesday when US Treasury Secretary Janet Yellen convened a call to action on tackling food insecurity with fellow finance officials. The US is notably working with international financial institutions including multilateral development banks, the International Fund for Agricultural Development (IFAD) and the IMF, Yellen said, “to develop “an action plan for an effective and coordinated response.”

“The war further exacerbates pre-existing price and food supply pressures,” she said. “Some countries and regions, which were already food insecure and facing emergencies, are now confronting additional price increases and supply disruptions for imported food, fuel, and fertilisers. Early estimates suggest that at least 10 million more people could be pushed into poverty in Sub-Saharan Africa due to higher food prices alone.”

Proposed solutions include reducing export restrictions, relieving price controls and subsidizing small farmers. The Treasury Department also clarified its exemptions for agricultural transactions to US sanctions on Russia.

Meanwhile the World Bank on Tuesday announced plans for a 15-month crisis response financing package of around $170bn to help countries address multiple overlapping crises, including food supply shortages. And the IMF is considering emergency funding as well as additional funding under existing lending programmes for vulnerable programmes, IMF Fiscal Affairs Department Director Vitor Gaspar told reporters on Wednesday.

“If a country already has a programme with the fund, additional financing associated with food security priorities can be considered,” Gaspar said. “And in case such a programme does not exist, or for whatever reason the country does not want to use that channel, the possibility of emergency financing is also open to this type of situation.”

Georgieva said a key goal is to help build up agricultural productivity in Africa. That’s also a priority for the African Development Bank, which last month announced a $1bn plan to boost wheat production in Africa by helping 40 million African farmers adopt climate-resilient technologies and increase their output of heat-tolerant wheat varieties and other crops.

“We are going to be really ramping up our efforts to mobilize that money,” AfDB President Akinwumi Adesina told Bloomberg in an interview. “If there was ever a time that we needed to really drastically raise food production in Africa, for Africa’s food security and to mitigate the impact of this food crisis arising from this war, it is now.”

Imports of wheat make up about 90% of Africa’s $4bn annual trade with Russia, Adesina pointed out, and almost half of its $4.5bn trade with Ukraine.

Focus on fertiliser

The war has also impacted fertiliser prices in Africa and around the world. Russia accounts for an estimated 18% of global exports of potash, a key ingredient in fertiliser, but banned exports shortly before its attack on Ukraine.

“Fertilisers and energy are critical for the crop cycle, so they’re building on each other and creating a food insecurity crisis that will last at least months and probably into next year,” World Bank President David Malpass said at a press conference Wednesday. “Food prices are up already 37% year-over-year.”

Vera Songwe, the executive secretary of the UN Economic Commission for Africa, said Africa should pool its resources to acquire fertiliser at cheaper rates. She cited the example of the African Vaccine Acquisition Trust (AVAT), an initiative by African Union member states to pool their purchasing power for covid 19 vaccines.

“One of the initiatives that we’re doing, a bit replicating that idea, is we’re coming together, hopefully in the next week or two, announcing a platform that will pool procurement of fertiliser,” Songwe said Wednesday at a Carnegie Endowment for International Peace event alongside the finance ministers of Nigeria and Ghana.

“Interestingly enough, Africa produces more fertiliser than it needs. But there is now a scarcity of fertiliser on the continent. So if we can pool all the producers of fertiliser, put them on a platform, so at least countries have some transparency (around) pricing, it will bring down the need for additional fertiliser at high prices.”

Songwe pointed out that the African Export-Import Bank (Afreximbank) last month approved $4bn in credit facilities – the Ukraine Crisis Adjustment Trade Financing Programme for Africa  – to help farmers procure fertiliser and seeds, for example. She said that’s one reason her agency is advocating for the Afreximbank to be recognized as a prescribed holder of Special Drawing Rights (SDRs), the IMF’s international reserve assets. The IMF allocated an extra $650bn in SDRs last year to deal with the covid-induced economic crash, of which only $33bn – 5% – were allocated to Africa.

In addition, Songwe said there’s also a scarcity of wheat seeds on the market and an effort is underway to procure more of them, notably from Brazil.

Liquidity crisis

With rising prices, countries are quickly running out of money, compounding the crisis.

“The response to Ukraine has been impressive. You can see the war, you can see the devastation,” Ghanaian Finance Minister Ken Ofori-Atta said at an event at the Center for Global Development on Tuesday. “But in the quiet depths of Africa, there’s an immediate need for injection as you see finance ministers flailing in all sorts of ways. So what do we want to see at the end of the spring meetings? Really an immediate response to the liquidity crisis.”

Ofori-Atta pointed out that countries such as Egypt are under extreme social pressures, while the dividens of democracy aren’t being produced quickly enough to stop radicalization in the Sahel just north of Ghana. Even in oil producing Nigeria, Finance Minister Zainab Shamsuna Ahmed said rising energy prices tied to the war in Ukraine have hurt the country because of the high price of its imports of refined petroleum.

“People were telling me, you must be smiling all the way to the bank with these higher prices,” Ahmed said at the Carnegie event. “No. It widened our deficit.”

Without international financial instruments that can quickly be disbursed, Ofori-Atta said, “catastrophe” is “really imminent.”

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