World

Soaring food and fuel prices are destabilizing countries on the brink

April 10, 2022
Zeph Kim
Now, more than a decade after the Arab Spring, International food prices rise again. It had already reached an all-time high earlier this year as a pandemic, bad weather and climate crisis upended agriculture and threatened the food security of millions of people. Then came the Russian war in Ukraine, which made the situation worse – and also led to a significant rise in the cost of other daily basic fuel.

This combination could generate a wave of political instability, as people who were already frustrated with government leaders are pushed to the brink by rising costs.

“It’s very concerning,” said Rabah Arezki, senior fellow at Harvard’s Kennedy School of Government and former chief economist at the African Development Bank.

“I don’t think people have felt the full impact of the price hike just yet,” said Hamish Kinnear, Middle East and North Africa analyst at global risk advisory firm Verisk Maplecroft.

Lessons from the Arab Spring

In the run-up to the anti-government protests that It became known as the Arab Spring – which began in Tunisia in late 2010 and spread across the Middle East and North Africa in 2011 – food prices have been skyrocketing. The Food Price Index from the Food and Agriculture Organization of the United Nations was 106.7 in 2010 and Jumped to 131.9 in 2011then record.
Emirati commentator “Mohamed Bouazizi did not set himself on fire because he cannot blog or vote” Written in January 2011, in reference to the street vendor whose protest work helped launch the revolution in Tunisia, and eventually in the Arab world. “People set themselves on fire because they couldn’t stand to see their families slowly fade away, not out of grief, but out of cold, intense hunger.”
The war has pushed the world to the brink of a food crisis

Circumstances differed in each individual country, but the bigger picture was clear. A major part of the problem was the skyrocketing wheat prices.

The situation is now worse than it was at the time. Global food prices have reached a new record. The FAO Food Price Index published on Friday came to 159.3 in March, up nearly 13% from February. The war in Ukraine, a major exporter of wheat, corn and vegetable oils, as well as harsh sanctions against Russia – the main producer of wheat and fertilizer – are expected to drive up prices in the coming months.

“40 percent of wheat and maize exports from Ukraine go to the Middle East and Africa, which already has problems of hunger, and where food shortages or price increases can fuel social unrest,” said Gilbert Hongbo, president of the International Fund for Agriculture. Development, He said last month.

The pain is compounded by high energy prices. Global oil prices are nearly 60% higher than they were a year ago. The cost of coal and natural gas has also gone up.

Many governments are struggling to protect their citizens, but the fragile economies that borrowed heavily to weather the 2008 financial crisis and pandemic are most at risk. With growth slowing, their currencies hurting and debt payments becoming increasingly difficult to keep up, maintaining food and fuel subsidies will be difficult, especially if prices continue to rise.

“We are now in a situation where countries are heavily indebted,” Arezki said. As a result, they don’t have any buffers to try to contain the tensions that would arise from such high prices.

According to the World Bank, Nearly 60% of the poorest countries They were “already in debt distress or at great risk” on the eve of the invasion of Ukraine.

Where tensions run high

Asia: In Sri Lanka, the island nation of 22 million people, an economic and political crisis is already deepening, with protesters taking to the streets in defiance of a curfew and government ministers stepping down en masse.

Faced with high debt levels and a weak economy dependent on tourism, Sri Lanka has had to drain its foreign exchange reserves. This prevented the government from making payments for major imports such as Energy, leading to devastating shortages and forcing people to spend hours queuing for fuel.

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Its leaders also devalued their currency, the Sri Lankan rupee, while trying to secure a bailout from the International Monetary Fund. But this made inflation worse at home. In January, it reached 14%, nearly twice the rate of price increases in the United States.

Pakistan Parliament passed Vote of no-confidence At Khan Sunday, he removed him from power and overthrew his government. While his political woes date back years, allegations of economic mismanagement with the rising cost of food and fuel, as well as the depletion of foreign exchange reserves, have made matters worse.

“Economic chaos has united the opposition to Imran Khan,” said Kinnear of Verisk Maplecroft.

Middle East and Africa: Experts are also watching for signs of political distress in other countries in the Middle East that rely heavily on food imports from the Black Sea region, and often provide generous subsidies to the public.

In Lebanon, where nearly three quarters of the population were Living in poverty last year As a result of the political and economic collapse between 70% and 80% of imported wheat It comes from Russia and Ukraine. The main granaries were too Destroyed during the explosion of 2020 In the port of Beirut.
And Egypt, the world’s largest buyer of wheat, is already seeing huge pressures on its massive bread subsidy programme. country recently Fixed price for unsubsidized bread After rising prices and trying to secure wheat imports From countries like India and Argentina instead.

With an estimated 70% of the world’s poor living in Africa, Arezki said, the continent would be “extremely vulnerable” to rising food and energy prices.

The International Committee of the Red Cross said this week that droughts and conflict in countries such as Ethiopia, Somalia, South Sudan and Burkina Faso have caused a food security crisis for more than a quarter of the continent’s population. The situation could worsen in the coming months, she said.

Political instability is already emerging in parts of the continent. A series of coups has occurred in West and Central Africa since the beginning of 2021.

Europe: Even countries with more advanced economies, which have greater barriers to protect citizens from painful price increases, will not have the tools to cushion the blow completely.

Thousands of protesters have gathered in cities across Greece this week to demand higher wages to counter inflation, while the French presidential election narrows with far-right candidate Marine Le Pen. Play their plans to reduce the cost of living. The government of President Emmanuel Macron said last month that it was fleetingConsider issuing food vouchers So middle and low income families can afford to eat.

Jesse Young, Rhea Mogul, and Sophia Sevi contributed to the report.

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