International Monetary Fund is looking for ways to provide emergency funding to countries facing war-induced food price shocks and will discuss measures at an executive board meeting on Monday. An informal board meeting will be held to present the plan, which has not previously been reported.
According to the sources, who asked not to be identified because the matter is still being reviewed, it would allow the IMF to assist Ukraine and other countries hard hit by Russia's war in Ukraine without imposing the conditions required in a regular fund programme. The size and scope of the measures had not yet been determined.
According to the sources, a formal vote in support of the measure, which has been developed by IMF staff in recent months, is expected before the Fund's annual meetings in October. According to the sources, if approved, it would temporarily increase existing access limits and allow all member countries to borrow up to an additional 50% of their IMF quota through the IMF's Rapid Financing Instrument and the Rapid Credit Instrument, which serve low-income countries.
"The concept is simple, but it has the potential to help many countries," one of the sources said. Food prices rose worldwide after the war began due to blocked supply routes, sanctions, and other trade restrictions, though an UN-brokered deal last month that allowed grain exports from Ukrainian ports to resume has begun to help improve trade flows and lower prices in recent weeks.
In July, the Washington-based lender predicted that inflation in advanced economies would reach 6.6% this year, and 9.5% in emerging market and developing economies, posing a "clear risk" to current and future macroeconomic stability. Many African countries and other poor nations suffering from food shortages and acute hunger have pleaded for more funds, but it was unclear how many countries would seek additional financing assistance.
The IMF proposal would provide some limited assistance to Ukraine, but officials say they need a "full-fledged" financing package to keep the government running while fighting Europe's first major war since World War II. Last week, an IMF spokesperson told Reuters that the global lender "continues to closely engage with Ukrainian authorities and is currently exploring all feasible options to provide additional support to Ukraine in these difficult circumstances."
Ukraine's international creditors have agreed to a two-year moratorium on payments on nearly $20 billion in international bonds, but the country must make $635 million in principal payments on previous IMF loans beginning in mid-September. In March, the IMF approved $1.4 billion in emergency funding for Ukraine through the RFI instrument to help meet urgent spending needs and mitigate the effects of the war. This year, its economy is expected to contract by 35%. The World Bank reported in August that Russia's war in Ukraine has altered global patterns of commodity trade, production, and consumption in ways that will keep prices at historically high levels until the end of 2024.
According to IMF data, food is the single largest category in inflation baskets – the selection of goods used to calculate the cost of living – in many developing countries, accounting for around half in countries such as India or Pakistan and on average for around 40% in low-income countries.
