The world faces a food crisis as major price shocks exacerbate food insecurity. A multitude of factors have contributed to growing food insecurity since 2018, including conflict, climate shocks, and the impact of the COVID-19 pandemic. These combined in impact to drive up food prices and negatively affect food production and distribution. The situation has taken a sharp turn for the worse in 2022, as Russia’s war in Ukraine exacerbated pressures on international prices for food staples and fertilizers. Many food-importing countries are now facing severe challenges; those that had been relying on Ukraine for an elevated share of their food imports are among the most affected. As pressures on food markets intensified, a number of food exporting countries have resorted to protectionist measures that have had a further negative effect on international prices and market volatility. While international prices have recently eased, they remain significantly above their 2020–21 averages. Moreover, high prices for fertilizers and energy as well as substantial downside risks weigh on the outlook. As a result of all these developments, the world is now facing a food crisis of a proportion that is at least equal to the 2007–08 crisis that left many countries with severe undersupply of food and caused large suffering and a high number of deaths.

The food crisis is a global phenomenon but affects low-income countries (LICs) the most. The analysis in the note identifies 48 countries that are most affected by the crisis, either because (i) they are facing significant balance-of-payments (BOP) pressures due to higher food and fertilizer prices or (ii) are designated by the World Food Programme (WFP) as experiencing acute food insecurity amid parts of their populations. These countries reflect diverse circumstances: the list encompasses middle-income countries (MICs) and LICs and spans several continents. The Sahel region and other parts of Sub-Saharan Africa are most affected: together, these regions account for a large share of the 20–30 countries with the most elevated vulnerability to the food crisis and include many countries that are Fragile and Conflict-Affected States (FCS): for them, the exposure to the food shock combines with other challenges such as weak macroeconomic conditions, poor institutional governance and capacity, and socio-political instability. All of these factors make it especially difficult to respond to the crisis with well-targeted measures, adequate resources, and speed.

In addition to creating human suffering, the food crisis has large economic costs. While recognizing methodological and data issues as an important constraint, this note estimates the economic effects of the food crisis from three different angles that all suggest a major impact on many countries and world regions:

• the impact of higher prices for food staples and fertilizers on countries’ BOP; The BOP approach suggests an additional cost to the import bills of the 48 countries most affected by the food shock of almost US$9 billion in 2022 and 2023, stemming from the sudden change in global food and fertilizer prices.

• the cost to countries’ budgets of fiscal measures aimed at mitigating the impact of higher food prices on their populations; The second approach approximates the cost from a fiscal perspective and estimates a need of US$5–7 billion in additional budget outlays for the 48 countries to protect vulnerable households from the higher food prices.

• and the cost of providing sufficient nutritious food to those people that are currently in acute food insecurity. the third approach suggests a cost of about US$50 billion to eradicate acute food insecurity in 2022. Taking a longer-term lens that adds the challenge of chronic food insecurity to that of acute incidences of malnutrition can be expected to increase this cost significantly.

Strong and timely action across four policy areas is needed to mitigate the food crisis. It is urgent and important to

• adequately and rapidly support households vulnerable to food insecurity through international humanitarian assistance, backed by the full funding of the WFP, and effective fiscal policy measures at the domestic level;

• maintain open trade, including at the intra-regional level, to allow food to flow from surplus areas to countries in need, which urgently requires the phasing out of export bans by major food producers;

• increase food production and improve distribution, including through ensuring adequate access to fertilizers and other inputs; and

• invest in climate-resilient agriculture for longer-run sustainability.

The international community has been stepping up its engagement, but further action is needed. Engagement of development partners including International Financial Institutions is expanding on policy advice, capacity building assistance and financing. Policy advice and capacity building assistance are urgent across all four policy areas identified above. Financing should aim to support the most vulnerable segments of the affected countries’ populations and mostly take the form of grants, humanitarian assistance and long-term concessional financing. Debt relief, including through the G20 Common Framework, could contribute to helping the poorest countries affected by the food crisis by freeing-up additional financial resources for food-related spending. Coordination among development partners, facilitated by a number of new coordination mechanisms, is critical for a targeted and timely response to the challenge.

The Fund is contributing strongly to this agenda, consistent with its mandate and expertise. Policy advice, capacity building, and addressing BOP needs related to the food shock are core elements of the Fund’s mandate to support its member countries. All have been deployed to address the current crisis. Through its policy advice and capacity building assistance, the IMF seeks to pro-actively identify food-related BOP pressures and supports policies to better assist vulnerable households, the phasing out of protectionist trade measures, and more efficient public investment to foster climate-resilient agriculture. These actions will help governments to avoid resorting to export restrictions, which can destabilize international markets and exacerbate global price pressures. The Fund is also providing financing to assist its member countries during the current food shock by augmenting existing Upper Credit Tranche (UCT)-quality arrangements, approving new ones, and standing ready to provide emergency financing where a UCT-program is either not feasible or nor needed to address an urgent food shock-related BOP need. A new food shock window under the Rapid Financing Instrument (RFI) and the Rapid Credit Facility (RCF) is currently under consideration to further strengthen the Fund’s lending response to the evolving food crisis.