The world faces a double threat: food insecurity and debt distress

About 35 countries are experiencing a major food crisis
The world faces a double threat: food insecurity and debt distress
The cost of fertilizer is still at its highest level in more than a decade

A double threat is facing the world as a result of the Russian-Ukrainian war, which seems not to be resolved anytime soon. Between food insecurity and serious debt distress, many countries will suffer significant risks that require coordinated and comprehensive international multilateral initiatives to address them.

It is history repeating itself. More than a decade later, food security is once again high on the agenda of governments around the world, bringing to mind the food crisis of 2007-2008.

What raises concerns about food security is that the cost of fertilizer is still at its highest level in more than a decade. Russia and Ukraine together export about 28 percent of fertilizers made from nitrogen and phosphorous, as well as potassium.

At a conference in Brussels on Wednesday to discuss the main problems facing food security due to the war in Ukraine, CEO of global fertilizer producer EuroChem Samir Brikho called on the international community to help ensure the “free flow” of fertilizers.

Explaining how the war in Ukraine had left the world with shortages not only of important grain and wheat but also of fertilizer, he warned that this, in turn, could lead to a shortage of food supplies.

35 countries are experiencing a severe food crisis


The Institute of International Finance warns that about 35 countries are experiencing a major food crisis. They are, in order: Afghanistan, Burundi, Cameroon, Central African Republic, Chad, Ethiopia, Haiti, Kenya, Malawi, Mozambique, Sierra Leone, Somalia, South Sudan, Sudan, Zambia, and Zimbabwe.

Of these 35 countries, 16 are already in severe debt distress. Most of these countries have accumulated large domestic and foreign debts over the past decade and are currently suffering from a double deficit. The public external debt of these countries has more than doubled since 2010, about 80 percent of which comes from official creditors.

Inflation drives up food prices


High inflation rates around the world have pushed food prices on an upward trajectory since 2020 when a strong recovery in demand for commodities post-Covid disrupted supply chains. The Russian-Ukrainian war in 2022 came to exacerbate these pressures on food prices.

Since both Russia and Ukraine play an important role in food supply chains, especially with regard to world grains and vegetable oils, it was natural for an immediate and strong rise in prices soon after the outbreak of the war.

This led to a growing risk of food insecurity, especially in low-income countries. According to recent figures from the World Food Program, the number of people facing acute food insecurity could rise by 15 percent to 325 million in 2022 due to the war in Ukraine.

Energy is essential to food security


Today, the food industry is closely associated with the direct and indirect use of fossil fuels. Thus, reliance on energy-intensive inputs such as fertilizers translates into higher food prices.

The Institute of International Finance notes that fertilizer prices have tripled since mid-2010, along with rising fossil fuel prices.

A growing threat to developing countries


In addition, high food prices pose a growing threat to growth and development in developing countries, with adverse repercussions on political and social stability. High prices may lead to social unrest or exacerbate existing problems, which will lead to increased immigration from countries facing severe food security challenges.

In this context, World Bank President David Malpass wrote in his blog, at the beginning of last August entitled “A new global food crisis that is exacerbating”, saying that food crises are devastating for the poorest and most needy groups. He attributed this to two reasons: First, the poorest countries in the world are usually food importers. Second, foodstuffs account for at least half of total household expenditures in low-income countries.

He added: “Currently, despite the speed with which export and import restrictions have been imposed, they are not as extensive as they were a decade or so ago. For example, export and import restrictions currently cover about 21 percent of the volume of world trade in wheat – well below the 74 percent at the height of the food crisis in 2008-2011. However, conditions are ripe for a retaliatory cycle in which the scale of restrictions could increase rapidly.”

He stressed that the time has come to defuse the danger. A global food crisis is by no means inevitable. Despite the recent extraordinary rise in food prices, global stocks of the three commodities – rice, wheat and maize – are still large by historical standards.

The Group of Seven recently took the important step of pledging not to impose a ban on food exports and to use “all instruments and financing mechanisms” to enhance global food security. This group includes many of the largest commodity exporters – including the United States, Canada, and the European Union.

“Major food exporters – such as Australia, Argentina, and Brazil – should join this commitment,” Malpass says. He urged that sustaining global food flows, especially at a time of increasing economic and geopolitical pressures, should be a minimum requirement of policymakers everywhere.

The World Bank Group announced last July that it would provide about $30 billion to improve food security in developing countries that are already facing a debt crisis.

In conclusion, the world is facing today an unprecedented set of crises that may expose our future to severe risks. Once again, it needs initiatives and lobbying efforts to properly manage it.

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