Food insecurity and economic misery in low-income countries
The deterioration of the global economic landscape has exacerbated the suffering of the world’s poorest countries. Still recovering from the deep recession caused by the pandemic, low-income countries (LICs) are being hit hard by soaring inflation at home and rising global interest rates. Disruptions in global commodity markets due to the pandemic, amplified by the war in Ukraine, have led to food and fuel shortages and soaring prices of basic consumer goods. This erodes real incomes, exacerbates food insecurity and aggravates extreme poverty in LICs. Soaring global food priceswho have reached their highest levels ever recorded this yearare contributing to the rapid rise in LIC inflation (Chart 1).
Figure 1. Inflation in low-income countries
Sources: Food and Agriculture Organization of the United Nations (FAO); Haver Analytics; World Bank.
Note: The “median” line shows the median percentage increase in consumer prices compared to 12 months earlier for a sample of eight low-income countries. Last observation April 2022. FAO Food Price Index base period prices are averages for the years 2014-2016.
Food insecurity exacerbates misery
Food consumption accounts for 45% of total household expenditure in low-income economies, and diets are heavily based on staple foods, including wheat. All LICs are food-deficit countries that depend on imported food. Wheat imports from Russia and Ukraine alone make up about 14% of total calorie intake in a median LIC, compared to just 3% in the median emerging market and developing economy. Disruptions in wheat imports from Russia and Ukraine and soaring global food prices are slowing LIC growth and deepening extreme poverty, especially in countries where large segments of the population were already experiencing food insecurity acute (Figure 2).
Figure 2. Wheat imports and food insecurity in LICs
Sources: Global Network Against Food Crises; Comtrade (database); World Bank.
Note: DRC = Democratic Republic of Congo. Wheat import shares are averages for 2019-20; wheat import data for Sudan is only available for 2018. “People in food crisis” indicates the estimated percentage of the population in phase 3 or above of the integrated food security phase classification ( CPI) for 2022; estimates are not available for Madagascar and Togo.
Moderate growth and tight public finances have hampered governments’ ability to protect vulnerable populations from soaring food and fuel prices. Even in LICs that do not depend on wheat imports from Russia and Ukraine, millions of people are having trouble getting enough food to stave off hunger. Worsening hunger and malnutrition will inevitably have long-term adverse consequences, compounding the pernicious effects of more than two years of the pandemic on human capital.
War-related disruptions and sharp global growth deceleration intensify other ongoing challenges facing LICs, including widespread poverty, deteriorating security and political uncertainty. As a result, the growth forecasts for 2022 presented in the latest World Bank report Global Economic Outlook report were downgraded in more than 80% of LICs (Figure 3). Per capita income growth in LICs is expected to be weak at 1.3% this year, well below that of middle-income countries (2.3%) and high-income countries (2.4%).
Picture 3. Forecast revisions to 2022 growth
Source: World Bank.
Note: EMDE = emerging and developing countries; LIC = low income country. The sample includes 145 EMDEs and 22 LICs. Forecast revisions show the share of countries whose 2022 growth forecasts were revised down/unchanged/upgraded between the January 2022 and June 2022 editions of the Global Economic Outlook. Data for 2022 are forecasts.
In commodity-exporting LICs, high commodity prices will only partially mitigate the deleterious effects of higher food and fuel prices. In these countries, the soaring cost of living tempers the gains resulting from increased export earnings. High oil prices are also unlikely to significantly boost the growth of LIC energy exporters, as aging oil fields as well as pandemic-induced maintenance delays and weak extraction limit prospects for increased oil production.
Agricultural production in most LICs is also expected to remain weak, further tightening food supply. Several LICs have had to deal with worsening drought conditions and delays in sowing due to erratic and insufficient rainfall. In some LICs, rising grain prices are expected to limit the ability of farmers, especially those dependent on subsistence farming, to buy enough seed for the new planting season and to feed livestock. The war in Ukraine has also disrupted global fertilizer supply. IInsufficient access to agricultural inputs could lead to a situation of widespread subsistence farming and low productivity, making food systems in LICs more vulnerable to shocks.
More pain to come
This sobering outlook could be even weaker if supply shortages, conflict and division persist. With almost all LICs dependent on wheat imports, a longer-lasting disruption of world grain trade would worsen the accessibility and availability of staple foods. Further increases in the prices of agricultural inputs, such as seeds, fuels and fertilizers, could lead to further pressures on food prices. These pressures would be particularly painful in LICs where climate change has already reduced agricultural productivity and in those where the incidence of extreme poverty is high. In this environment of high inflation, a more pronounced deterioration in living standards would aggravate social unrest, especially in countries suffering from high levels of insecurity and violence. As financial conditions tighten, greater risk aversion would lead to higher borrowing costs in LICs. High levels of public debt and increasing non-concessional borrowing could further hamper progress on debt relief. About a quarter of all LIC external debt bears variable interest rates, up from just 11% in 2010.
Quick responses and contact details needed
Already weakened by the adverse shocks of the past two years, LICs are facing headwinds. The room for maneuver of national budgetary and monetary policies is, in most cases, limited. A concerted global effort is needed:
- A rapid global response improving access to safe and nutritious food and enhancing food security is essential for health and human development in LICs. The international community must significantly increase funding for LIC food systems, including measures targeting agriculture, nutrition, social protection, water and irrigation.
- LICs also face huge debt challenges. Even before the invasion of Ukraine, around 60% of LICs were over-indebted or close to over-indebted. To mitigate the risks that the debt burden will lead to financial crises, globally coordinated debt relief efforts are essential.
- The global community must also help foster vaccination rates for LICs, which continue to lag far behind other EMDEs due to a combination of insufficient supply, logistical challenges and vaccine hesitancy. Sustained collective action is needed to strengthen pandemic preparedness and rapidly expand vaccination campaigns in LICs.
- Finally, the increasing frequency and severity of climate-related disasters highlights the growing costs of climate change, especially among poorest countries. Green investment projects must be accompanied by policies to reduce the economic, health and social costs of climate change, many of which are borne disproportionately by vulnerable populations in poor economies, and to make these countries more resilient to climate shocks.
In the world’s poorest countries, a rapid return to economic growth and prosperity is the surest antidote to all these problems, including climate change.