The International Monetary Fund is exploring ways to provide emergency funding to countries facing war-induced food price shocks and will discuss the measures at an executive board meeting on Monday, sources familiar with the matter told Reuters. .
The plan, which has not been previously reported, will be presented at an informal board session.
This would allow the IMF to help Ukraine and other countries hard-hit by Russia’s war in Ukraine without imposing the necessary conditions in a regular fund program, said the sources, who did not wish to be named because the matter. Still under review. The size and scope of the measures were not yet clear.
Sources said a formal vote in support of the measure – which has been developed in recent months by IMF staff – is expected before the fund’s annual meeting in October.
If approved, it would temporarily increase the existing access limits and allow all member countries to borrow up to an additional 50% of their IMF quotas under the IMF’s Rapid Financing Instrument, and the Rapid Credit Instrument (RAC). Serves low income countries, the sources said.
“The concept is simple, but it can help many countries,” said a source.
Blocked supply routes, sanctions and other trade sanctions have led to an increase in food prices around the world since the start of the war, although the UN-broker that allowed the resumption of grain exports from Ukrainian ports last month has recently helped to improve trade flows and lower prices in the U.S. Week.
The Washington-based lender projected in July that inflation would reach 6.6% in advanced economies and 9.5% in emerging market and developing economies this year, posing a “clear risk” to current and future macroeconomic stability.
Many African countries and other poor countries suffering from food shortages and acute hunger have called for increased funding, but it was not immediately clear how many countries would seek additional financial aid.
The IMF proposal would offer Ukraine some limited help, but its officials say they need a “full” financing package as they scramble to keep the government running while fighting the first major war in Europe since World War II. .
An IMF spokesman told Reuters last week that the global lender “continues to engage closely with the Ukrainian authorities and is currently exploring all possible options to provide further assistance to Ukraine in these challenging circumstances.”
Ukraine’s foreign creditors have backed a two-year moratorium in payments of about $20 billion in international bonds, but the country will have to pay $635 million in principal payments on former IMF loans starting mid-September.
The IMF approved $1.4 billion in emergency funding under the RFI instrument for Ukraine in March to help meet urgent spending needs and mitigate the impact of the war. Its economy is expected to shrink by 35% this year.
The World Bank reported in August that Russia’s war against Ukraine has changed global patterns of trade, production and consumption of commodities in such a way that prices will remain at historically high levels until the end of 2024.
Food is the largest category in the inflation basket – the selection of goods used to calculate cost of living – in many developing countries, accounting for about half in countries such as India or Pakistan, and on average about 40% in low-income countries. . Shows IMF data.
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