IMF to advance low-cost food emergency loans to poor nations

Targets countries that have urgent balance of payments needs, and are suffering from acute food insecurity.

In Summary
  • The funds will provide additional access to emergency financing to countries.
  • The funding window is set to be open for a period of one year.
IMF headquarters
IMF headquarters

The International Monetary Fund has launched a new Food Shock Window programme, a funding mechanism that seeks to help vulnerable countries address the prevailing food insecurity.

Targeting countries that have an urgent balance of payments needs, and are suffering from acute food insecurity, the funds will provide additional access to emergency financing to the countries.

The new window is set to be open for a period of one year.

For some time now, the lender attributes the prevailing food crisis to the combination of climate shocks, covid-19 and regional conflicts which have disrupted food production and distribution.

“Russia’s war in Ukraine for example has pushed the price of cereals and fertilisers even higher, hurting food importers and some exporters. As a result, spreading the food crisis globally,” IMF says.

The lender further notes that the crisis would likely occasion a record of about 345 million people whose lives and livelihoods will be in immediate danger from acute food insecurity.

Although, the lender did not specifically mention the target countries for the funding programme.

However, among the eligibility criteria for the fund are that a country would have to show that the food import price shocks are creating a negative balance of payments impact of 0.3 per cent of GDP.

An IMF research identifies at least 48 countries in this category, including many of the world's poorest, most vulnerable and conflict-affected states.

Another criteria is that a country has to have negative cereals export shocks which would reach 0.8 per cent of GDP.

Borrowers with unsustainable debt would be denied. The lender says in the statement.

In Kenya, data by Reliefweb shows that, following the failure of a third consecutive rainfall season, most Arid and Semi-Arid Lands (ASAL) are experiencing critical drought conditions causing about 3.1 million people to be food insecure.

The situation has also been greatly supported by the disruptions that were earlier occasioned by covid-19 pandemic health measures such as lockdowns and curfews.

Although demand for goods soon rebounded, production and distribution took time to get going leading to shortages and price increases.

These disruptions also increased the costs of imports into the country, which is a net importer of cereal food commodities such as wheat and rice.

With the recent Russian invasion of Ukraine, much pressure was added to the food prices, Russia being accountable for almost 32 per cent of Kenya’s wheat imports making it the country’s lead supplier.

Ukraine, on the other hand, accounted for 94 per cent of soya imports and also contributed two per cent to wheat and three per cent to maize.

The country is in further need of more strategies and efforts to beat the food shortage crisis that is being witnessed in the country even today.

The IMF funding initiative would serve as a potential remedy to the situation in support of calls to both local and international bodies and leaders to respond to the crisis.

This is mirrored by Caritas Internationalis (CI) who recently called for support from international agencies in taming the unending crisis.

As a result, the lender notes that policymakers have tried in many countries to introduce fiscal measures to protect people from the current food crisis.

“For this year alone, we estimate that highly exposed countries need as much as $7 billion (Sh845.9 billion) to help the poorest households cope with the crisis," IMF says.

"This explains why we have to come up with more funding initiatives to try and pace up the fight against the crisis."

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