Ukraine’s economy is sinking, jeopardizing world food security, warns IMF

The Ukrainian government remains functional, the banking system stable and the debt viable in the short term, but the war provoked by Russia plunges Ukraine into an unprecedented recession. The conflict also endangers global food security, warned the International Monetary Fund (IMF).

“At a minimum”, the Ukrainian Gross Domestic Product (GDP) will contract by around 10% in 2022 assuming a “rapid resolution” of the conflict and thanks to “substantial” international aid, according to a first estimate by the IMF.

The uncertainty surrounding these projections is “enormous”, underlines the institution. And, if the conflict were to stall, based on the history of past wars in Lebanon, Iraq, Syria or Yemen, Ukraine’s GDP could fall between 25% and 35%, much more than the 10% contraction recorded in 2015. in the context of the Crimean War.

Last year, Ukraine’s growth was however 3.2%, driven by domestic demand and exports.

But since the invasion of the country by the Russian army on February 24, “the Ukrainian economy has radically changed,” stressed Vladyslav Rashkovan, the IMF’s executive director for Ukraine in a statement to the IMF dated March 9 and published today. Monday.

“As of March 6, 202 schools, 34 hospitals, more than 1,500 homes, including buildings, tens of kilometers of roads and countless critical infrastructures in various Ukrainian cities have been totally or partially destroyed by Russian troops,” it describes on the basis of information provided by the Ukrainian government.

Airports and seaports have been closed due to “mass destruction.”

And since March 6, there was more destruction of infrastructure. On March 10, Oleg Ustenko, economic adviser to the Ukrainian president, gave a first estimate of the damage: US$100 billion.

“The war in the Ukraine, the famine in Africa”

Despite the extensive damage, the government and the country have continued to function until now. “The banks are open, they even work on weekends,” Rashkovan told the IMF on March 9.

The IMF estimates that, in the short term, the sustainability of the Ukrainian debt “does not seem to be threatened”.

“Preliminary data showed that as of March 1, 2022, Ukraine’s international reserves amounted to $27.5 billion, an amount sufficient for Ukraine to meet its commitments,” Rashkovan detailed.

Beyond the human and economic losses, the IMF is concerned about the consequences throughout the world.

In less than three weeks of conflict, the prices of energy and raw materials, including agricultural ones, have skyrocketed. For an agricultural commodity like wheat, the effects could be even more dramatic, warns the Washington-based multilateral institution.

“Disruptions in the spring agricultural season (boreal) could hamper exports as well as growth and jeopardize global food security,” the report’s authors note.

This is because Ukraine, the “breadbasket of Europe”, and Russia are among the world’s largest wheat exporters. Between them they account for around a third of world cereal trade. Most of the Ukrainian wheat is exported in the summer and autumn from the northern hemisphere.

The longer the war lasts, the more exports will be compromised, with an impact on current and future reserves.

“Export disruptions in the Black Sea have immediate effects for countries like Egypt, which are heavily dependent on grain imports from Russia and Ukraine,” the World Food Program (WFP) said in a report published on Friday.

And beyond the countries that receive cereals from the Black Sea, “those that depend heavily on cereal imports are in the front line” of risk, since the internal prices of food rise, as a consequence of the increase in prices. on world markets, adds the United Nations food aid agency.

The impact will be strong in countries like Afghanistan, Ethiopia, Syria and Yemen “because of their dependence on wheat,” he warns.

“War in Ukraine means famine in Africa,” Kristalina Georgieva, managing director of the IMF, lamented on CBS News on Sunday.