Ripples of Russia’s war on Ukraine ravage global economies
36 countries rely on Russia and Ukraine for more than half their wheat imports
Around 1.2 billion people are significantly exposed to the food, fuel, and financial crisis
The Russia-Ukraine war has threatened to wreak havoc across the economies of many developing countries.
Last week UN Secretary-General Antonio Guterres released a report stating the war has accelerated a crisis in food, energy, and finance in poorer countries. These countries were already struggling to deal with the COVID-19 pandemic, climate change, and a lack of access to adequate funding for economic recovery.
Thirty-six nations rely on Russia and Ukraine for more than half their wheat imports, including some of the world's poorest countries, he said, and wheat and corn prices have risen 30% just since the start of the year.
According to the report, 69 countries, with a population of 1.2 billion people are significantly exposed to all three crises. These include 25 African nations, 25 countries in Asia and the Pacific, and 19 in Latin America and the Caribbean.
Sri Lanka
Sri Lanka is facing the worst economic and energy crisis in the wake of the Russia-Ukraine war with a $7 billion debt. The war comes at a time when the country is recovering from the pandemic and 30-year-long ethnic strife that ended in 2009. The country is a net importer of fuel and medicines.
The war in Europe has sent fuel prices off the charts making it extremely difficult to buy fuel. Its foreign reserves had already dropped by 24.8% to $2.36 billion in January 2022.
Afghanistan
The war in Ukraine has shaken commodities markets, pushing up prices of cereals, fuel, and fertilizer. Russia in turn has placed a ban on exports of fertilizers and food to stabilize supply and prices at home while it wages war on Ukraine.
Russia’s blockage of the Black Sea has cut Ukraine from maritime trade, cutting off Ukraine’s grain exports.
All these factors make it impossible for Afghanistan with a population of 38 million to feed its hungry mouths.
The South Asian nation’s economy had fallen off the deep end when the Taliban took control of the country’s reins. People are being forced to sell off their organs to buy food, ever since the West placed sanctions on the Taliban-led government.
Other Central Asian nations such as Turkmenistan, Uzbekistan, Tajikistan, Kyrgyzstan, and Kazakhstan are also suffering from the ban on Russian fertilizer and grain exports.
Africa and the Middle-East
The International Monetary Fund (IMF) issued a report that showed 23 African countries are now either bankrupt or at a high risk of debt distress. Some Middle Eastern and North African countries are heavily dependent on food and energy imports making them vulnerable to economic shocks due to the Ukraine crisis.
Several countries buy large amounts of wheat from Ukraine and Russia. While some, like the Gulf Arab states, have ample reserves, others, such as Lebanon, have none, making the prospect of shortages very real.
Lebanon’s Central Bank has spent nearly $500 million per month from the country’s dwindling foreign reserves to stabilize the lira, a highly unsustainable practice.
Egypt is the world’s largest wheat importer and imports about 80% of its wheat from Russia and Ukraine. Unsubsidized bread prices rose by as much as 50% since the start of the invasion. The high cost of corn (used for fodder) has fueled inflation in the prices of meat and farmed fish.
Libya is facing both foods as well as furl shortages. The country imports 90% of its wheat, half of which is from the two war-torn nations. Despite producing its oil, Libya buys most of its additional needs abroad at market prices, then sells fuel locally at heavily subsidized rates. Political complications in the state coupled with inflation have dented the import-dependent economy.
At the launch of the report on “Global Impact of War in Ukraine on Food, Energy and Finance Systems”, Rebeca Grynspan, Secretary-General of the United Nations Conference on Trade and Development (UNCTAD) said the war caused inflation to rise, eroded purchasing power, shrunk growth prospects, stalled development, and receded gains.
“Many developing economies are drowning in debt, with bond yields already on the rise since last September, leading now to increased risk premiums and exchange rate pressures. This is set in motion a potentially vicious circle of inflation and stagnation — the so-called stagflation,” she elucidated.
The ongoing spring meetings of the IMF and the World Bank from April 18-24 are crucial moments for decisions on many of these issues, as world leaders gather to decide how to use the available resources to alleviate people's suffering in the world.
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