The International Monetary Fund (IMF) has issued a warning, highlighting that the fragmentation of commodity markets, primarily triggered by Russia’s invasion of Ukraine, poses significant risks to global food security and could lead to higher prices for cleaner energy sources.
The Fund expressed concern over the susceptibility of crucial minerals for the green transition, such as cobalt, lithium, and copper, as well as widely traded agricultural commodities like wheat, to economic fragmentation driven by geopolitical tensions. This highlights the setbacks faced in attempts to foster integration amid increasing geopolitical challenges.
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The IMF’s highly anticipated report on the global economy will be released in its entirety next week during the annual IMF and World Bank meetings held in Marrakech, Morocco.
The conflict between Russia and Ukraine in 2022, coupled with the Western sanctions imposed on Russia, has had a disruptive impact on global food, fuel, and fertilizer markets. As a result, prices have increased, exacerbating inflationary pressures.
Meanwhile, the United States (U.S.) is actively seeking new business partnerships centered around biominerals, which play a crucial role in green technology. This comes amid a mounting concern regarding China’s dominant position in this field.
In its upcoming global economic forecast, the IMF has stated that the fragmentation of the commodity market can generate an unstable global environment. This instability poses threats to food security, economic growth, and the affordability of climate change mitigation efforts. The findings emphasize the need for multilateral cooperation on trade policies to avert such consequences.
Long-term slowdown
The global growth outlook will experience a moderate decline. However, low-income and other vulnerable nations may face a sustained deceleration in growth. This deceleration is expected to average at 1.2 percent. The slowdown primarily stems from the impact on agricultural imports. Meanwhile, certain countries may potentially experience an average slowdown of up to 2 percent.
The IMF has advocated for the creation of ‘green corridor’ agreements. This is to ensure uninterrupted access to essential minerals for decarbonization efforts. Also, these agreements aim to promote equitable global access.
Additionally, the IMF has proposed the establishment of food corridor deals. These deals aim to guarantee equal access to food resources for all countries. They are designed to be inclusive, regardless of national income patterns.
These measures are suggested in the absence of multilateral protection barriers.
The primary objective of these initiatives is to stabilize the global commodity market, thereby mitigating potential disruptions to food security and impeding the transition to clean energy.
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