NDAMU SANDU
Zimbabwe is set to get over US$450m under an International Monetary Fund (IMF) facility which cushions countries with urgent balance of payments needs and suffering from acute food insecurity and a sharp food imports shock.
The facility, dubbed Food Shock Window, was approved by the IMF Executive board last week and is under the global lender’s emergency financing instruments—the Rapid Credit Facility and the Rapid Financing Instrument.
An IMF spokesperson told the Business Times that Zimbabwe would get equivalent to half of its special drawing rights (SDR) quota. Zimbabwe’s quota is SDR706.8m. This means that Zimbabwe will get SDR353.4m (equivalent to US$455m).
The Food Shock Window under the emergency financing instruments, the Rapid Credit Facility (RCF) and Rapid Financing Instrument (RFI) approved by the Executive Board on September 30, 2022 and will be open for 12 months.
The Food Shock Window is available to IMF member countries that have an urgent balance of payments need related to the global food shock. Specifically, the window will be available to countries that are suffering from acute food insecurity, a sharp food imports shock, or from a cereals export shock, IMF said.
The global lender said the financing terms are the same as for the other emergency financing. Access under the food shock window of the RCF for low-income countries would be at concessional (PRGT) terms. Financial assistance through the food shock window under the RFI and RCF should be repaid within 3¼ to 5 years, and 5½ to 10 years, respectively, as is the case for other windows under the RFI and RCF, IMF said.
The new financing window will be open for one year.
IMF managing director Kristalina Georgieva said last week that Russia’s war in Ukraine has pushed the price of food and fertilisers even higher—hurting food importers and some exporters.
“As a result, a food crisis is spreading around the globe with a record 345m people whose lives and livelihoods are in immediate danger from acute food insecurity,” Georgieva said in a statement.
“The IMF, working with partner institutions, is actively contributing to the international response to food insecurity, notably by providing policy advice and financial assistance. The newly established Food Shock Window will provide an additional line of defence after grants and concessional financing.”
She said the IMF has worked “extensively and expeditiously” with its members and staff to finalise the proposal for the new Food Shock Window.
“At a time of such need and suffering, I am grateful to our membership and proud that the Fund has come together and responded so swiftly. We have worked with our members to secure additional channelling of SDRs, which can help provide support to low income countries through this new food shock window,” Georgieva said.
According to an IMF paper, Tackling the Global Food Crisis: Impact, Policy Response, and the Role of the IMF, food crisis is a global phenomenon but affects low-income countries and an analysis identified 48 countries that are most affected by the crisis, either facing significant balance-of-payments (BOP) pressures due to higher food and fertiliser prices or are designated by the World Food Programme as experiencing acute food insecurity amid parts of their populations.
The IMF said the food crisis has economic costs and estimates that additional costs of the import bill of 48 countries most affected by food shocks would be US$9bn this year and 2023.
It is estimated that the cost from a fiscal perspective is between US$5bn and US$7bn in additional budget outlays for the 48 countries to protect vulnerable households from the higher food prices.
The IMF estimates that US$50bn would be required to eradicate acute food-insecurity in 2022.
The twin evils of Covid-19 and the Russia-Ukraine and climate shocks have left a number of countries including Zimbabwe facing food shortages jolting international financial institutions into action.
The African Development Bank has come up with a US$1.5bn facility to help African countries boost food output to mitigate the impact of the Russia-Ukraine war.
In March, Afreximbank launched the US$4bn Ukraine Crisis Adjustment Trade Financing Programme for Africa to cushion the bank’s members against economic headwinds following Russia’s invasion of Ukraine on February 24 under a “special operation”.
This comes from the background of food shortages and the spike in fuel prices triggering a rise in annual inflation. Zimbabwe’s annual inflation rose to 285% in August before tapering off to 280.4% last month.
