Eradicating acute food insecurity will cost $50bn over next 12 months, IMF says

Low-income countries are worst hit by global food crisis, particularly those in sub-Saharan Africa

A farmer harvests barley stalks by hand at a field in Sanaa, Yemen. The country imports almost 90 per cent of its food supply. EPA

Eradicating acute food insecurity globally will cost $50 billion over the next 12 months, as the Russia-Ukraine war has triggered a sharp increase in food prices that exacerbated existing food and hunger problems, the International Monetary Fund has said.

The investment is needed to lift 345 million people worldwide out of conditions of food insecurity and to ensure better nutrition levels for them for a year, the fund said in a report that identifies the cost and recommendations to tackle the problem.

The analysis identifies 48 middle-income countries and low-income countries (LICs) that are most affected by the food crisis. The Sahel region in North Africa and other parts of sub-Saharan Africa are the worst hit, together accounting for a large share of the 20 to 30 countries with the most elevated vulnerability to the food crisis, and include many fragile states, often affected by conflict.

These nations on average imported about 80 per cent of their wheat consumption during 2017–2019.

"The stronger impact of rising food prices on LICs reflects that relatively poor households tend to spend a larger share of their incomes on food ... LICs have also been particularly exposed to extreme weather events and conflicts on top of the Covid-19 pandemic, which contributed to growing food insecurity through their negative impact on domestic food production," the IMF said.

Higher oil prices have driven domestic food inflation due to increased transport and food distribution costs, while the recent appreciation of the dollar has affected local currency purchasing power in countries that rely heavily on food imports.

"The combined effects of increased food and energy price and supply constraints not only lower living standards but are also likely to increase poverty and lower long-term growth, potentially fuelling social unrest and large-scale migration."

The 48 countries most affected by the food shock will suffer an additional cost of almost $9bn in their import bills in 2022 and 2023, due to the increase in global food and fertiliser prices, the report said.

These countries need an estimated $5bn to $7bn in additional spending to protect the most vulnerable households.

"In addition to creating human suffering, the food crisis has large economic costs," the IMF said.

The Russia-Ukraine war has exacerbated global food insecurity, which had already begun to rise in 2018 due to wars and has continued to do so, also due to climate shocks and the economic fallout from the pandemic.

Ukraine and Russia together supply 30 per cent of globally traded wheat, 20 per cent of maize and 75 per cent of sunflower oil. As a result of the war, agriculture production in Ukraine is expected to decline by 25 to 40 per cent in 2022.

The reduced current and anticipated supply of food and fertilisers triggered a sharp rise in global food prices and created shortages in countries that could not shift supply quickly, putting additional pressure on prices that had already reached record highs.

Countries that are highly dependent on food and fertiliser imports from Ukraine and Russia — mostly LICs, especially in sub-Saharan Africa — have been suffering the most.

Food insecurity 'likely to worsen'

While global food prices dropped in June and July from record levels in April and May, they remain significantly above the 2020–2021 average and are still historically high, with food insecurity continuing to rise, the fund said.

"While international food prices have eased recently, food insecurity is likely to worsen," the report said.

The outlook "remains highly uncertain" due to existing supply bottlenecks, declining stocks of food staples, the challenges involved in marketing Ukraine’s current and future harvests, the still-high prices of fertilisers and energy that affect agricultural output globally and the negative outlook for rice.

These factors "all weigh on food markets or can be expected to do so in the future".

Addressing the challenge of food insecurity is particularly critical now because of increased inflation, an uncertain outlook for food markets and weaker post-pandemic global environment with "substantial risks" for LICs, the IMF said.

The fund recommends "strong and timely" action through four main policy measures.

First, international humanitarian assistance, backed by funding from the World Food Programme and domestic fiscal measures, is needed to quickly and adequately support households vulnerable to food insecurity.

Second, maintaining open trade, including at the intraregional level, to allow food to flow from surplus areas to countries in need, which urgently requires the phasing out of export bans by major food producers.

Third, increasing food production and improving distribution, by ensuring adequate access to fertilisers and other inputs.

Finally, investing in "climate-resilient" agriculture for more sustainability in the long run.

To strengthen its own response to the evolving food crisis, the IMF is considering a new "food shock window" under its Rapid Financing Instrument and the Rapid Credit Facility, it said.