Ukraine war to cause biggest price shock in 50 years - World Bank

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.

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Bangladesh seeking $2 Billion from World Bank, ADB

Bangladesh’s $416 billion economy has been one of the fastest-growing in the world for years, but rising energy and food prices because of the Russia-Ukraine war have inflated its import bill and the current account deficit.

The Kathmandu Post आषाढ २०७९

Brics summit: Members push for global clout amid Ukraine war

JUNE 23: The group, which owes its name to the initials of its five member states - Brazil, Russia, India, China and South Africa - is holding its annual summit on Thursday, but without much fanfare or huge expectations. Talks will also be held in a virtual format, for the third consecutive year. The last two were held during the Covid pandemic, but it's not clear why the leaders chose to skip face-to-face meetings this year. It's in stark contrast to the Quad - which groups India with Australia, Japan and the US - whose leaders met in person in Japan last month amid the global media glare. Some analysts say that this is also partly due to the fact that the Brics hasn't really lived up to expectations over the years. When it was formed in 2009, the group was expected to reshape the global economy and create a new financial order to help the developing world. Its success can be described at best as moderate, but its importance can't be overstated. Brics nations have a combined population of 3.23 billion and their combined GDP is more than $23tn. "The Brics may seem irrelevant because it hasn't really moved the needle forward on its long-standing efforts to usher in viable global economic alternatives to the US-led existing system," says Michael Kugelman, deputy director at the Wilson Center think-tank in Washington. But he adds that writing the Brics off will be a mistake because of its collective economic might, "even though it often tends to punch below its weight". The economy has always been at the heart of the Brics but the Ukraine war is likely to loom large over the summit on Thursday. The nations may not overtly mention the war, but it will definitely be discussed when Indian PM Narendra Modi, Russian President Vladimir Putin, Chinese President Xi Jinping, South African President Cyril Ramaphosa and Brazilian President Jair Bolsonaro talk to each other. Pratyush Rao, director for South Asia at the Control Risks consultancy, says Ukraine, without a doubt, will be the elephant in the room. "A lot of people will be keeping an eye on the summit, especially on the dynamics between Russia and China over Ukraine," he says. While China has been more open about its support for Russia, India, South Africa and Brazil have tried to walk the diplomatic tightrope over the war. They haven't openly criticised Russia but have advocated talks to end the war. But a lot has changed since the war started. The economic impact of the war and the West-led sanctions is showing across the world - inflation is up in many countries, global supply chains have been disrupted and there are fears of food shortages. Russian commentators have been talking about the importance of the Brics nations in blunting the impact of the sanctions. Mr Rao says some pushback against Western sanctions can be expected at the summit, and that will be comforting for Russia. "But it should not be interpreted as an endorsement of Russia's actions," he adds. However, Brics members would want to be seen as taking an initiative to help developing nations overcome the economic impact of the war. "I expect the summit to underscore the group's global importance because of its collective demographic and economic clout. I also expect it to help poorer and middle-income countries build resilience to deal with the economic impacts of the Ukraine crisis," says Mr Kugelman. But then there will be challenges within the group. Beijing and Moscow might agree on taking tougher lines against the West, but Delhi would not like the summit to be used to openly criticise the US and more broadly the West. Delhi takes pride in its "strategic autonomy" and the policy of non-alignment and has proven that it can be a significant member of even competing multilateral forums. "India has an independent strategic policy and an independent autonomous voice on the global stage and it wouldn't want to compromise on that," says Mr Rao. Both Russia and China have criticised the Quad as "Asia's Nato" but this hasn't deterred Delhi from pledging its support to the group's initiatives in the Indo-Pacific, which Beijing considers as its area of influence. Analysts say that Russia and China will mostly likely overlook these irritants for the larger goal of establishing the Brics as a viable financial institution to help the developing world, and also stay relevant in the fast-changing geopolitical order. Meanwhile, there are reported differences between Delhi and other members over the expansion of the Brics. Bloomberg news agency recently reported that Delhi would push back against Beijing's plan to include new members into the group. "India wouldn't want to see more members in a group where China plays a dominant role. India will fear more Chinese influence," says Mr Kugelman. The success of the summit will also depend on how the two countries manage their differences over this and other issues, which includes their ongoing border disputes. Both Mr Kugelman and Mr Rao believe that the two nations have the ability to overlook their differences when it suits their mutual interests. They are partners in the Shanghai Cooperation Organisation, which is an alliance of eight nations, and have also co-operated at the COP26 summit to push back against accepting hard targets to cut emissions. Against this backdrop, Ukraine can be a point of convergence for the Brics. It can serve as an opportunity for the group to convince the world that it can be a viable financial option against Western-led institutions like the World Bank and the International Monetary Fund. So, some concrete announcements on financial aid and more investment into the Brics-led New Development Bank can be expected. And analysts say that this would be a step in the right direction for the Brics to get more clout as a serious global player. With inputs from BBC

Ratopati English जेष्ठ २०७९

World Bank warns of recession risk due to Ukraine war

JUNE 8: Less developed countries in Europe and east Asia face a "major recession", it said. The risk of high inflation and low growth - so-called "stagflation" - is also higher, World Bank President David Malpass said. Energy and food bills have been rising around the world. "The war in Ukraine, lockdowns in China, supply-chain disruptions, and the risk of stagflation are hammering growth. For many countries, recession will be hard to avoid," Mr Malpass said. He also warned in the World Bank's Global Economic Prospects report for June that the danger of stagflation was "considerable". "Subdued growth will likely persist throughout the decade because of weak investment in most of the world. With inflation now running at multi-decade highs in many countries and supply expected to grow slowly, there is a risk that inflation will remain higher for longer." Also on Tuesday, the World Bank approved $1.49bn (£1.2bn) of additional funding for Ukraine, which it said "will be used to pay for wages for government and social workers." The new financing is part of a more than $4bn support package for the country, which covers areas including healthcare, education and sanitation. More than a hundred days have passed since Russia's invasion of Ukraine, but only now is the sobering size of the shock waves hitting nations and households thousands of miles away from that epicentre becoming clear. Developing nations were already struggling to get back on their feet. For every $20 households there typically earned pre-pandemic, they now only get $19. But soaring food and energy costs threaten to throw livelihoods further into reverse, spelling misery and hardship for the most vulnerable. And that's not just true for poorer countries. One survey shows one in six British households have turned to a food bank. That global struggle could be compounded by the higher interest rates being used to ease inflation, just as government support to ease the impact of the pandemic is evaporating. The World Bank is urging immediate action, from debt relief, to urging nations not to put restrictions on food exports. Instead they want policymakers to show they are acting together to safeguard food and energy supplies, reassure volatile markets, and ease price spikes,. Policymakers have already had to tackle an extraordinary battle. But if we down tools now the World Bank suggests we could face an even more prolonged and painful crisis. Hardship today doesn't just mean misery and social unrest, it can blight lives for years. The countries in Europe that are most likely to suffer a sharp drop in economic output in 2022 are Ukraine and Russia, the World Bank forecast. But it warned that the fallout from the war and the Covid pandemic would be wider. "Even if a global recession is averted, the pain of stagflation could persist for several years - unless major supply increases are set in motion," Mr Malpass said. Between 2021 and 2024, global growth is projected to slow by 2.7 percentage points, Mr Malpass said, more than twice the slow down seen between 1976 and 1979, when the world last saw stagflation. The report warned that interest rate increases needed to control inflation at the end of the 1970s were so steep that they touched off a global recession in 1982, and a string of financial crises in emerging market and developing economies. However, in the 1970s the dollar was weaker and oil was relatively more expensive. Speaking to the BBC, Ayhan Kose, director of the World Bank's Prospects Group said "There is not much governments can easily do" to tackle rising energy prices. "They shouldn't introduce export bans, they shouldn't introduce subsidies, they shouldn't introduce price controls," Mr Kose said. "Those type of interventions distort prices and they translate into even higher prices," he added.

Ratopati English बैशाख २०७९

Ukraine war: World Bank warns of 'human catastrophe' food crisis

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.

Ratopati English बैशाख २०७९

Bangladesh has a different story to tell than Sri Lanka and Pakistan

According to the World Bank’s latest report, Bangladesh (South Asian country) has a strong track record of development and prosperity. Over the last decade, it has been one of the world's fastest growing economies, owing to a demographic dividend, robust ready-made garment (RMG) exports, remittances, and stable macroeconomic conditions. Even after the COVID-19 pandemic, the country has experienced a rapid economic recovery. Bangladesh tells the world a remarkable story of poverty reduction and development. From being one of the poorest nations at birth in 1971, Bangladesh reached lower-middle income status in 2015. It is on track to graduate from the UN’s Least Developed Countries (LDC) list in 2026. Poverty declined from 43.5 percent in 1991 to 14.3 percent in 2016, based on the international poverty line of $1.90 a day (using 2011 Purchasing Power Parity exchange rate). Moreover, human development outcomes improved along many dimensions. On the other hand, the South Asian Island nation of Sri Lanka is currently going through an extreme economic crisis. Foreign exchange reserves have fallen so low that school examinations have been closed indefinitely due to a lack of imported paper. In addition to cooking gas, there has been a shortage of kerosene or petrol. Blackout has started due to a lack of electricity. The situation is so dire that due to inflation, high unemployment, and shortages of almost all necessities, many Sri Lankans are fleeing their country in the hope of a better life abroad. Countless Sri Lankans are now being forced to do something other than their main occupation as not everyone can afford to leave the country. The suffering of the people of that country is coming up in the world media. The country has never been in such a bad situation since independence in 1947. To cope with the situation, the Sri Lankan government has asked for a new loan of 1.5 billion US dollars from neighboring India. When Sri Lanka faced problems, Bangladesh provided 250 million in currency assistance for the first time. This was the first loan from Bangladesh for any country. They again asked for a loan from Bangladesh. Besides, they have been repaying loans of different countries through the exchange of goods. Sri Lanka was quite capable of human resources and internal prosperity. Then why is there a crisis today? In this regard, economic analysts have brought forward various factors, from which different countries can learn lessons in their current and future plans. Sri Lanka has undertaken several mega projects in their country for more than a century. These include seaports, airports, roads, and other projects that are currently considered unnecessary and redundant. Different governments of Sri Lanka have taken loans from different sources at home and abroad. As a result, their foreign exchange reserves gradually ran out. According to the country's economists, there has been little foreign direct investment in Sri Lanka in the last 15 years. Instead of foreign investment, various governments have focused on borrowing. The country's government has issued sovereign bonds since 2007 to raise money. This type of sovereign bond is sold when the expenditure is more than the income of a country. Such bonds are sold in the international capital market to raise money. That is what Sri Lanka has done. But the country did not give much thought to how the money would be paid. At present, Sri Lanka has a debt of 12.5 billion for that bond alone. Besides, the government has also borrowed from domestic sources. The once self-sufficient country is also in dire straits due to tax cuts, reduced income from tourism remittances, and unplanned decisions in agriculture. Different countries including Bangladesh have to learn from this situation. The world economic situation has begun to change rapidly since the Russia-Ukraine war, at which time any country could fall into a new crisis. On the other hand, the economy of these 220 million countries (Pakistan) is in political and economic turmoil. Pakistan is in debt, amounting to 130 billion USD. At the same time, inflation seems to have picked up speed (12 percent). Over the past three years, Pakistan's progress has stalled. The recent political instability has created a crisis in Pakistan. The recent political unrest has shaken the business and industrial sectors. The country's economy is already fragile due to the depreciation of the rupee, declining reserves, rising commodity prices, and revenue shortfalls. Not only has the currency depreciated, but the wheel of Pakistan's economy has slowed down over the past three years. The recent political unrest has shaken the business and industrial sectors. The instability in Pakistan's politics is showing no signs of abating anytime soon. The Pakistani rupee is depreciating. The rupee depreciated against the dollar on Thursday, hitting a new record. 188 Pakistani rupees are available for one dollar. Never in the history of Pakistan has the rupee depreciated so much. During the outgoing Prime Minister Imran Khan’s tenure, there has been an increase in the amount of debt, ranging from inflation, to a record fall in the value of the Pakistani currency, with the finance minister changing three times. On the other hand, Bangladesh is currently a wonder of development. The implementation of big projects is now just a matter of time. City facilities have also been ensured in the villages. Visible flyovers on most of the roads in the capital. Metrorail will be launched in a few days. The long Padma bridge is not a dream now, it is real. Economists speculate that the GDP growth rate could rise to one percent for the bridge. This bridge has given new hope to the people of the south. The implementation of such a project with the government's own funding was at one time unimaginable. The country is moving forward with a sound plan. The present government in Bangladesh has shown great prudence and foresight in the progress of Bangladesh. 100 economic zones are being formed. Investment is coming from different countries. Foreign exchange reserves are adequate (45 billion USD, January 2022), and remittances are satisfactory. It can be said that every economic foundation of Bangladesh is still in a strong position. During the Sri Lankan corona, the tourism industry was almost destroyed by giving more importance to the health sector. Unnecessary development projects were carried out with loans, the organic agriculture sector has come to a standstill and the tax on public welfare has been greatly reduced but the economy of Bangladesh was active during the pandemic. Emphasis was laid on revenue collection and the agricultural sector of Bangladesh was strong. Experts believe that Bangladesh is in a positive position in terms of foreign exchange reserves, remittances, and export earnings. Bangladesh's foreign exchange reserves now stand at more than 45 billion, despite rising import costs. With which the country can pay imports of goods for six months. Sri Lanka, on the other hand, has less than two billion dollars. It is not possible to meet the cost of one week's import. On the other hand, Bangladesh's growth rate was way above Pakistan, even before the pandemic in 2018-19, it was 7.8% compared to Pakistan's 5.8%. Various international organizations, including the World Bank, the World Economic Forum, and the Economic Intelligence Unit, have identified Bangladesh’s economic development as a “wonderful puzzle.” While the current economy of Bangladesh is 410 billion, the size of Pakistan’s economy is about 260 billion. Bangladesh has improved its quality of life, economic strength, prosperity, education, and research in every field. Due to the global coronavirus pandemic, Bangladesh’s growth has slowed down. But where the growth of all the developed countries of the world was negative in these years, the achievement of Bangladesh was also noticeable. Successful statesman Sheik Hasina has achieved full potential to move from a least developed country to a developing country. It has been possible because of people’s hard-work and strong leadership along with political stability, high flow of FDI, empowerment of women, unique poverty alleviation model, inclusivity of economy, etc. ‘Bangladesh’ tells a ‘miracle story’ while Sri Lanka and Pakistan share disaster tales.

Ratopati English फाल्गुन २०७८

Fallout Of Ukraine War

The world was stunned when war broke out in Ukraine all of a sudden. Russia which has been in confrontation with Ukraine since 2014 launched an offensive in the largest European nation on February 24. Ethnic, geopolitical, and territorial elements came into full play to trigger the Russian-Ukraine war, threatening global peace, order, and economic stability. The consequences of this war will not be confined to the borders of the warring nations. It has spread multiple negative impacts on the world that had just begun to pick up the pieces following the recovery from the COVID-19 pandemic. In addition to the growing human casualties, the war has turned the economic and international relations order upside down. The World Bank has said that the conflict will reduce the estimated global economic growth as it occurred at a time when runaway inflation is taking its toll on the global economy.

The Rising Nepal माघ २०७८

Ukraine war is economic catastrophe, warns World Bank

The war in Ukraine is "a catastrophe" for the world which will cut global economic growth, the president of the World Bank has told the BBC. "The war in Ukraine comes at a bad time for the world because inflation was already rising," said David Malpass.

The Rising Nepal माघ २०७८