Reuters. FILE PHOTO: A participant stands near a logo of IMF at the International Monetary Fund – World Bank Annual Meeting 2018 in Nusa Dua, Bali, Indonesia, October 12, 2018. REUTERS/Johannes P. Christo/File Photo
By Jorgelina do Rosario and Andrea Shalal
LONDON/WASHINGTON (Reuters) -The International Monetary Fund’s executive board, under great pressure to supply emergency funding to countries facing war-induced food price shocks, reviewed an idea on Monday that could help Ukraine along with other countries hit hard by Russia’s war, sources acquainted with the problem told Reuters.
Board members engaged with the program, first reported by Reuters, at a casual board session.
Produced by IMF staff lately, it would permit the IMF to aid countries fighting budget problems due to the war, without imposing conditions required in a normal fund program, said the sources, who asked never to be named because the plan is not formally approved.
Board members were generally supportive heading in to the meeting, and a formal vote backing the measure is probable prior to the Fund’s annual meetings in October, two of the sources said.
If approved, it could temporarily increase existing access limits and invite all member countries to borrow around yet another 50% of these IMF quota beneath the IMF’s Rapid Financing Instrument, while low-income countries could tap the Rapid Credit Facility, the sources said.
“The idea is simple, nonetheless it may help many countries,” said among the sources.
Masood Ahmed, a former IMF official who now heads the non-profit Center for Global Development think tank, welcomed the move and said the IMF existed precisely to greatly help countries cope with the type of balance of payments shock unleashed by the war.
“It’s very good news, and I’m glad they’re carrying it out, but I wouldn’t visit that,” Ahmed told Reuters.
SURGING FOOD PRICES
Food prices surged worldwide following the start of war given blocked supply routes, sanctions along with other trade restrictions, although a UN-brokered deal that allowed resumed exports of grain from Ukrainian ports last month has begun to greatly help improve trade flows and lower prices in recent weeks.
The Washington-based lender projected in July that inflation posed a “clear risk” to current and future macroeconomic stability.
Many African countries along with other poor nations suffering food shortages and acute hunger have clamored for increased funds, nonetheless it had not been immediately clear just how many countries would seek the excess financing aid.
“I don’t believe this is likely to be a lot of money here,” Ahmed said, noting that countries that already had or were negotiating for an IMF program wouldn’t normally have the ability to apply.
That could eliminate Egypt, for example, that is in negotiations with the IMF for a more substantial program.
The brand new plan can offer some limited help Ukraine, which includes grown frustrated with delays in its push for a “full-fledged” financing package to help keep the federal government running while fighting the initial major war in Europe since World War Two. But Ukrainian officials say they want far more compared to the $1.4 billion than they might complete the RFI.
The IMF will not touch upon informal board sessions.
An IMF spokesperson the other day told Reuters the global lender “continues to closely build relationships the Ukrainian authorities and happens to be exploring all feasible options to supply further support to Ukraine in these challenging circumstances.”
Ukraine’s overseas creditors have backed a two-year freeze in payments on almost $20 billion in international bonds, however the country must make $635 million in principal payments on prior IMF loans from mid-September.
The IMF in March approved $1.4 billion in emergency funding for Ukraine beneath the RFI instrument to greatly help meet urgent spending needs and mitigate the impact of the war. Its economy is likely to contract by 35% this season.
Russia’s war against Ukraine has altered global patterns of trade, production, and usage of commodities with techniques which will keep prices at historically high levels through the finish of 2024, the planet Bank reported in August. https://www.worldbank.org/en/topic/agriculture/brief/food-security-update
Food may be the single largest category in inflation baskets – selecting goods used to calculate the price of living – in lots of developing nations, accounting for about half in countries like India or Pakistan and typically for a few 40% in low-income countries, IMF data shows.