Ordinary people are hit hard as food prices see a massive surge
KATHMANDU, Jan 26: Nepal Rastra Bank (NRB) in its Current Macroeconomic report of the first five months of the current fiscal year has stated that the consumer price inflation remained 2.93 percent during the period.
MAY 19: The world faces a "human catastrophe" from a food crisis arising from Russia's invasion of Ukraine, World Bank president David Malpass has said.
He told the BBC that record rises in food prices would push hundreds of millions people into poverty and lower nutrition, if the crisis continues.
The World Bank calculates there could be a "huge" 37% jump in food prices.
This would hit the poor hardest, who will "eat less and have less money for anything else such as schooling".
In an interview with BBC economics editor Faisal Islam, Mr Malpass, who leads the institution charged with global alleviation of poverty, said the impact on the poor made it "an unfair kind of crisis... that was true also of Covid".
"It's a human catastrophe, meaning nutrition goes down. But then it also becomes a political challenge for governments who can't do anything about it, they didn't cause it and they see the prices going up," he said on the sidelines of the IMF-World Bank meetings in Washington.
The price rises are broad and deep, he said: "It's affecting food of all different kinds oils, grains, and then it gets into other crops, corn crops, because they go up when wheat goes up".
There was enough food in the world to feed everybody, he said, and global stockpiles are large by historical standards, but there will have to be a sharing or sales process to get the food to where it is needed.
Mr Malpass also discouraged countries from subsidising production or capping prices.
Instead, he said, the focus needed to be on increasing supplies across the world of fertilisers and food, alongside targeted assistance for the very poorest people.
The World Bank chief also warned of a knock on "crisis within a crisis" arising from the inability of developing countries to service their large pandemic debts, amid rising food and energy prices.
"This is a very real prospect. It's happening for some countries, we don't know how far it'll go. As many as 60% of the poorest countries right now are either in debt distress or at high risk of being in debt distress," he said.
"We have to be worried about a debt crisis, the best thing to do is to start early to act early on finding ways to reduce the debt burden for countries that are on have unsustainable debt, the longer you put it off, the worse it is," he added.
The acknowledgement by the World Bank president that we have to be worried about a developing country debt crisis, is very significant.
The combination of massive pandemic debts with rising interest rates, and rising prices is truly toxic.
The talk on the sidelines here at the IMF and World Bank meetings is that the rich countries told emerging economies not to worry about borrowing in order to spend to help suppress the pandemic.
Now those countries are wondering if these record debts will be written off.
Campaigning groups are preparing mobilisations over a pandemic debt jubilee. But there is silence from the rich country lenders, so far.
And there is a very new dynamic these days. The bankers to whom these sums are owed are no longer just in the West.
China is now, very broadly, owed as much as the entire collection of Western creditors known as the Paris Club.
How will it respond to calls for leniency on the repayment of loans?
Mr Malpass says of China: "They have different rules, for example, contracts that have non-disclosure clauses, meaning you can't share the terms with other people that makes it very hard to restructure those debts".
China has also secured its lending against ports and natural resources. Sri Lanka is a case in point right now.
The unwinding of all of this might not be orderly, and could have significant geopolitical consequences.
Earlier this month, the United Nations said that the Ukraine war had led to a "giant leap" in food prices, as they hit a new record high in March.
It came as the war cut off supplies from the world's biggest exporter of sunflower oil and the cost of alternatives climbed.
Ukraine is also a major producer of cereals such as maize and wheat which have risen sharply in price too.
The UN said "war in the Black Sea region spread shocks through markets for staple grains and vegetable oils".
The UN Food Prices Index tracks the world's most-traded food commodities - measuring the average prices of cereal, vegetable oil, dairy, meat, and sugar.
Food prices are at their highest since records began 60 years ago, according to the index, after they jumped nearly 13% in March, following February's record high.
Food commodity prices were already at 10-year highs before the war in Ukraine, according to the index, because of global harvest issues.
APRIL 28: In a new forecast, it said disruption caused by the conflict would contribute to huge price rises for goods ranging from natural gas to wheat and cotton.
The increase in prices "is starting to have very large economic and humanitarian effects", Peter Nagle, a co-author of the report, told the BBC.
He said "households across the world are feeling the cost of living crisis".
"We're particularly worried about the poorest households since they spend a larger share of income on food and energy, so they're particularly vulnerable to this price spike," the senior economist at the World Bank added.
Energy prices are set to increase more than 50%, pushing up bills for households and businesses, the World Bank says.
The biggest rise will be in the price of natural gas in Europe, which is set to more than double in cost. Prices are forecast to fall next year and in 2024, but even then will remain 15% higher than they were last year.
The World Bank said this means that from the lows of April 2020 until the highs of March this year we have seen "the largest 23-month increase in energy prices since the 1973 oil price hike", when tensions in the Middle East sent prices soaring.
Similarly oil prices are expected to remain elevated into 2024 with a barrel of the benchmark measure, Brent Crude, projected to average $100 this year, something which will lead to widespread inflation.
Russia produces about 11% of the world's oil, the third biggest share, but the report said "disruptions resulting from the war are expected to having a lasting negative effect" as sanctions mean that foreign companies leave and access to technology is reduced.
Russia currently provides 40% of the EU's gas and 27% of its oil, but European governments are moving to wean their countries off of supplies from Russia. That has helped push up global prices by creating more demand for supplies from elsewhere.
Wheat set for record highs
The World Bank commodity outlook also warned many foods are set to see steep rises in their costs. The UN food prices index already shows they are at their highest since records began 60 years ago.
Wheat is forecast to increase 42.7% and reach new record highs in dollar terms. Other notable increases will be 33.3% for barley, 20% for soybeans and 29.8% for oils and 41.8% for chicken. These increases reflect the fact that exports from Ukraine and Russia have fallen drastically.
Before the war the two countries accounted for 28.9% of global wheat exports according to JP Morgan, and 60% of global sunflower supplies - a key ingredient in many processed foods - according to S&P Global.
Prices for other raw materials including fertilisers, metals and minerals are also predicted to go up. The costs of timber, tea and rice are amongst the few expected to fall.
"Wheat is one of the hardest agriculture exports to replace," according to a research note from the Bank of America. It points out that poor weather conditions in North America and China are likely to exacerbate the impact of Ukrainian supplies being reduced, something which will continue because the war has disrupted the spring planting season.
The note also suggests grain and oilseed shipments from Ukraine have fallen more than 80% because of the fighting and these lost exports, over the course of a year, "equate to about 10 days of world food supply".
The chief executive of Archer Daniels Midland, one of the world's four big food commodity traders, said he does not expect prices to come down soon.
As the US firm announced a 53% increase in net earnings for the first three month of this year, to $1.05bn, Juan Luciano said: "We expect reduced crop supplies - caused by the weak Canadian canola crop, the short South American crops, and now the disruptions in the Black Sea region - to drive continued tightness in global grain markets for the next few years".
Mr Nagle, from the World Bank, said other countries can help solve the supply shortage caused by Ukraine's war in the medium term. However a forecast 69% increase in fertiliser prices this year means "there's a real risk that as farmers start to use fewer fertilisers, agricultural yields will decline".
For commodities overall, the World Bank report said: "While prices generally are expected to peak in 2022, they are to remain much higher than previously forecast."
It added that "the outlook for commodity markets depends heavily on the duration of the war in Ukraine" and the disruption it causes to supply chains.
WASHINGTON, April 20: The International Monetary Fund (IMF) on Tuesday slashed global growth forecast for 2022 to 3.6 percent amid the Russia-Ukraine conflict, 0.8 percentage points lower than the January projection, according to its newly released World Economic Outlook report.
The Ukraine crisis unfolds while the global economy is "on a mending path" but has not yet fully recovered from the COVID-19 pandemic, the report said, noting that global economic prospects have worsened "significantly" since the forecast in January.
A severe double-digit drop in gross domestic product (GDP) for Ukraine and a large contraction in Russia are "more than likely," along with worldwide spillovers through commodity markets, trade and financial channels, the report showed.
This year's growth outlook for the European Union has been revised downward by 1.1 percentage points to 2.8 percent due to the indirect effects of the conflict, making it a large contributor to the overall downward revision, according to the report.
The U.S. economy is on track to grow 3.7 percent in 2022, 0.3 percentage points lower than the January projection, before growth moderating to 2.3 percent in 2023. The Chinese economy is expected to grow 4.4 percent this year, 0.4 percentage points lower than the previous projection, followed by a 5.1-percent growth in 2023, the report showed.
China's National Bureau of Statistics said on Monday the country's GDP grew 4.8 percent year on year in the first quarter, marking a steady start in 2022 in the face of global challenges and a resurgence of COVID-19 cases.
Analysts said the full-year growth target of 5.5 percent set by China's policymakers is still attainable but requires greater efforts, given increasing economic headwinds.
Global growth is projected to decline from an estimated 6.1 percent in 2021 to 3.6 percent in both 2022 and 2023, 0.8 and 0.2 percentage points lower for 2022 and 2023, respectively, than in the January projection, the report noted.
The report laid out five principal forces shaping the near-term global outlook: the Russia-Ukraine conflict, monetary tightening and financial market volatility, fiscal withdrawal, slowing growth in China, and pandemic and vaccine access.
Inflation has become "a clear and present danger" for many countries, IMF chief economist Pierre-Olivier Gourinchas said at a virtual press conference during the 2022 spring meetings of the IMF and the World Bank.
He said even prior to the Russia-Ukraine conflict, inflation surged on the back of soaring commodity prices and supply-demand imbalances, and many central banks, such as the U.S. Federal Reserve, had already moved toward tightening monetary policy.
Conflict-related disruptions "amplify those pressures," said Gourinchas. "We now project inflation will remain elevated for much longer."
For 2022, inflation is projected at 5.7 percent in advanced economies and 8.7 percent in emerging markets and developing economies, 1.8 and 2.8 percentage points higher than the January projection, the report showed.
Financial conditions tightened for emerging markets and developing countries immediately after the conflict, Gourinchas noted. "Several financial fragility risks remain, raising the prospect of a sharp tightening of global financial conditions as well as capital outflows," he said.
On the fiscal side, policy space was already eroded in many countries by the pandemic, said the IMF chief economist. "The surge in commodity prices and the increase in global interest rates will further reduce fiscal space, especially for oil- and food-importing emerging markets and developing economies."
The report also warned that the conflict increases the risk of a more "permanent fragmentation" of the world economy into geopolitical blocks with distinct technology standards, cross-border payment systems and reserve currencies.
"Such a 'tectonic shift' would cause long-run efficiency losses, increase volatility and represent a major challenge to the rules-based framework that has governed international and economic relations for the last 75 years," Gourinchas said.
In response to a question from Xinhua, the IMF chief economist said at the press conference that the multilateral organization thinks fragmentation "is more of a longer run risk than a short run risk."
"We are not anticipating that there will be immediately severe dislocation, but you could see countries sort of de-globalizing or reverting and undoing some of the gains from trade integration," Gourinchas said. "And that's certainly a source of worry for us."
The IMF urged central banks to adjust their policies decisively to ensure that medium- and long-term inflation expectations remain anchored, noting that clear communication and forward guidance on the outlook for monetary policy will be "essential" to minimize the risk of disruptive adjustments.
Several economies will need to consolidate their fiscal balances, the report noted, adding that this should not impede governments from providing well-targeted support for vulnerable populations, especially in light of high energy and food prices.
"Embedding such efforts in a medium-term framework with a clear, credible path for stabilizing public debt can help create room to deliver the needed support," according to the report.
Gourinchas also argued that even as policymakers focus on cushioning the impact of the war and the pandemic, other goals will require their attention, noting that the most immediate priority is to end the war.
He also urged countries to close the gap between stated ambitions and policy actions on fighting climate change, secure equitable worldwide access to the full complement of COVID-19 tools to contain the virus, as well as ensure that the global financial safety net operates effectively.
"The many challenges we face call for commensurate and concerted policy actions at the national and multilateral levels to prevent even worse outcomes and improve economic prospects for all," he added.
MARCH 8: Ukraine and Russia are both major exporters of basic foodstuffs, and the war has already hit crop production, driving up prices
Mr Beasley said it was putting more people at risk of starvation worldwide.
"Just when you think hell on earth can't get any worse, it does," he said.
Russia and Ukraine, once dubbed "the breadbasket of Europe", export about a quarter of the world's wheat and half of its sunflower products, like seeds and oil. Ukraine also sells a lot of corn globally.
Analysts have warned that war could impact the production of grains and even double global wheat prices.
Mr Beasley told BBC World Service's Business Daily programme that the number of people facing potential starvation worldwide had already risen from 80 million to 276 million in four years prior to Russia's invasion, due to what he calls a "perfect storm" of conflict, climate change and coronavirus.
He said certain countries could be particularly affected by the current crisis, due to the high proportion of grains they currently import from the Black Sea region.
"The country of Lebanon, 50%, give or take, of their grains, come from Ukraine. Yemen, Syria, Tunisia - and I could go on and on - depend on the country of Ukraine as a breadbasket," he said.
"So you're going from being a breadbasket to now, literally, having to hand out bread to them. It's just an incredible reverse of reality."
'Defending our land'
Yara International, which operates in more than 60 countries, told the BBC a shortage could badly hit crop yields, leading to "a global food crisis".
Ukrainian lawyer Ivanna Dorichenko, an expert in international trade arbitration, said some farmers in Ukraine have already abandoned their fields in order to take up arms against the Russian invasion.
She told the BBC: "The men who need to work on the land, they're all defending our land right now. Because if they do not defend the land, there'll be nothing to work on at a later stage, and you don't have a single person right now who's not trying to help in any way they can."
Ms Dorichenko said the war had wreaked havoc with supply lines typically used to export agricultural produce. Ukraine's military suspended all commercial shipping at its ports in the aftermath of the Russian invasion.
"The vessels cannot leave the waters, the vessels cannot get loaded. It's effectively a war zone. Sadly, there's nothing which can be potentially shipped right now from Ukraine."
She said it meant "huge losses" for businesses, but also humanitarian efforts, because Ukraine could no longer send goods to regions such as South East Asia, the Middle East and Africa, as well as to NGOs such the World Food Programme.
With food price inflation already at crisis point in some countries prior to the outbreak of hostilities in Ukraine, South African economist Wandile Sihlobo said he was worried about the potential consequences for grain-importing nations in Africa and beyond.
Mr Sihlobo, chief economist at the Agricultural Business Chamber of South Africa, told the BBC that while steep price rises may be a problem in the short-term, shortages of essential crops could follow.
"Over time, depending on the length and the severity of this war, you could begin to see shortages of shipments that come to the African continent, and that could cause shortages. Particularly in the North African countries, and to an extent in East Africa."
He added: "If you were to look at the global food price index, it was at multiple highs at the start of this year. This crisis already adds to that difficult environment for many consumers, particularly in the developing world."
On Monday, one of the world's biggest fertiliser companies, Yara International, warned the conflict could hit its industry, further affecting food prices.
Fertiliser prices had already been rising due to soaring wholesale gas prices. Russia also produces enormous amounts of nutrients, like potash and phosphate - key ingredients in fertilisers, which enable plants and crops to grow.
GENEVA, Jan. 8: Although global food prices decreased slightly in December 2021 month-on-month, they were much higher throughout last year than in 2020, the United Nations (UN) said on Friday.
Abdolreza Abbassian, senior economist of the UN Food and Agriculture Organization (FAO), told a press briefing here that in 2021, the FAO Food Price Index was 28.1 percent higher than in 2020.
Global cereal prices were at their highest level since 2012, on average 27.2 percent above 2020 prices, he said.
According to the UN official, in 2021, vegetable oil prices increased by 65.8 percent over 2020; sugar prices soared to their highest level since 2016; meat prices were 12.7 percent above 2020 prices; and dairy prices were 16.9 percent higher than in 2020.
"The monthly increase in prices since the last quarter of 2020 was a signal for producers to produce more, but whether or not 2022 would see an adjustment depends on several factors, including the repercussions of the pandemic, the cost of fertilizers and climate conditions," he noted.
