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Thank you, Secretary Yellen, Alexia, and Gilbert. It is good to be here with you, Kristalina, and everyone today.
Russia’s invasion of Ukraine has triggered major threats to global food and nutrition security. In the near-term, there has been a pronounced spike in the prices of key food staples, including wheat and wheat substitutes. Second, future harvests may be reduced due to higher energy and fertilizer prices. Crop yields all over the world depend on fertilizer and the price of oil and natural gas.
Global food and fertilizer prices were already on the rise prior to the war. Food and nutrition insecurity were also rising. Gilbert just highlighted this. The reasons are many, including: growing demand, combined with supply chain disruptions, currency devaluations, climate change impacts, and a rise in fragility and conflict.
The deepening of the crisis in the last two months is directly linked to the terrible war being waged by Russia on Ukraine, and the costly financial, shipping, and logistical hurdles now faced by agribusinesses and importers.
We see a deepening of the crisis in the following numbers: The World Bank food price index reached an all-time high, rising 11.5 percent in March, a year-on-year increase of 37 percent. Fertilizer prices also surged in March, up nearly 20 percent since January. The cost of urea has tripled since January 2021. We also see a shift in relative prices, with food prices going up more than CPI. Projections show this trend continuing.
Food crises are particularly devastating for the poorest and most vulnerable people. They have to spend more on food. In the developing world, a typical poor family spends about two-thirds of its income on food. World Bank estimations warn that for each one percentage point increase in food prices, 10 million people are thrown into extreme poverty. If food prices stay this high for a year, global poverty could go up by more than 100 million. Food price increases are creating vast needs in both low-income countries and middle-income countries; in fact, food insecurity right now is rising fastest in middle-income countries. Thus, responding appropriately to rising food prices is mission critical for the World Bank Group.
Let me say a few words about our response. We expect to launch an overall surge in our financial support in coming weeks. Funding for food security will be an important component. Our package of support – including Ukraine, countries hosting refugees, and developing economies suffering collateral economic shocks – is in the range of $50 billion dollars in the current quarter of 2022 and should reach about $170 billion in the 15 months through June 2023.
To be successful, both advanced and developing countries will need to increase market access by reducing export and import restrictions and relieving price controls. Central elements of the WBG response include: encouraging food producers, enabling market access and private sector investment, and protecting the most vulnerable population through well-targeted and cost-effective cash transfers. These are key elements of my recent call to action with Kristalina, Ngozi, and David Beasley.
Let me also mention two mechanisms that can be mobilized alongside IDA and IBRD, to boost food security and resilience, in a well-coordinated manner. They are: the Global Agriculture and Food Security Program (GAFSP), which was set up by the G20 in response to the 2007-2008 food crisis. It already works in the poorest countries through many of the institutions represented here today. The World Bank also hosts a multi-donor Trust Fund, Food Systems 2030, that can help countries strengthen their food systems to meet short and long-term goals.
The tragedy unfolding in Ukraine must not be compounded with another tragedy – a global food crisis. To prevent it requires speed, supply enhancement, market access, and close coordination.
You can count on us to work with all partners to help the people of developing economies to confront these challenges. I look forward to hearing the outcome of today’s technical discussions between our institutions. Thank you.