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Video April 5, 2022

The Impact of the War in Ukraine on Food Security | World Bank Expert Answers

Even before the war in Ukraine, food insecurity around the world was rising. Ukraine and Russia account for 29% of global wheat experts and 62% of sunflower oil. This invasion is likely to exacerbate food price inflation in emerging markets and developing economies and impact some of the poorest and most vulnerable countries. Juergen Voegele, the World Bank’s Vice President for Sustainable Development, joins Expert Answers to discuss the impact on a global food system that is already fragile from two years of COVID-19 disruptions, climate extremes, currency devaluations, and worsening fiscal constraints.


Timestamps

00:00 Introducing Juergen Voegele, WB's VP for Sustainable Development
01:00 Pre-existing drivers to the rising food insecurity
02:11 Products and foods particularly affected by the war in Ukraine
04:50 Importing countries most affected by the war in Ukraine
06:06 Exports restrictions: Is that an effective strategy?
07:10 Supporting those that are most at risk of food insecurity
08:41 How countries can improve their resilience to external shocks
11:02 The support being offered by the World Bank in food security
12:11 Thanks Juergen for sharing your expertise!
 

Transcript

[00:00] WB Expert - Hunger has been rising for a number of years, well before the Ukraine crisis and even well before COVID. The number of hungry people in 2020 was already about 800 million and rising, unfortunately. A hundred million more than we had the year before.

[01:00] Host - On this episode of "Expert Answers," we're looking at the impact of the war in Ukraine on global food security. While the most immediate and obvious effects are taking place in and around Ukraine, disruptions from the war could have far reaching effects beyond the region, especially on food prices. What does this mean for the poorest and most vulnerable and what should be done to promote food security? For answers to these questions and more let's talk now to the World Bank's Vice President for Sustainable Development, Juergen Voegele. So Juergen, thank you so much for being here and taking the time to chat with us today. One thing that I found interesting was that even before the war in Ukraine, food insecurity was rising. Can you explain the pre-existing drivers to the rising food insecurity and how this invasion is likely to make those worse?

WB Expert - Yeah, it's good to be here, Paul. Great to see you. And thanks for having me. As you said, hunger's been rising for a number of years, well before the Ukraine crisis and even well before COVID. The number of hungry people in 2020 was already about 800 million and rising, unfortunately. A hundred million more than we had the year before. And this is probably because of the impacts of the COVID pandemic, but it's also because of the long standing drivers of food insecurities, such as conflicts, extreme weather events, and pests and diseases. Conflicts are a big issue and we need to look at two elements of what it does, right? It's the number of hungry people, but it's also the acute food insecurity and acute food insecurity is horrible because it really puts people at immediate risk. Defined as when a person's life or livelihood is in immediate danger because of lack of food and a staggering 388 million people across 42 countries experienced acute huge food insecurity which is more than 5% higher than in 2020. So, this is an issue that we really need to focus on right away.

[02:11] Host - The conflict in Ukraine is obviously dominating the headlines right now. Can we sort of zoom in onto that? And is it possible to say which products are particularly affected? Are there certain foods that are particularly affected by the conflict in Ukraine?

WB Expert - Sure, I mean, the commodities most affected by the conflict are wheat predominantly, to some extent maize, edible oils, and very importantly fertilizers. Actually wheat is the primary commodity affected by the war. Russia is the world's largest exporter of wheat, accounting for about 18%, nearly 20% of global exports in 2021. And Ukraine accounts for another 10%. Now they're both not the largest producers of wheat, that's India and China, but they are the largest exporters. And so, around 35% of the world's population relies on wheat as the primary staple in their diet. So, it's a very significant shock. As of March, about a week ago, the price of wheat on global markets was about 50% higher than in February and almost 80% higher than a year ago. Maize prices also increased following the invasion, little rising about 25 to 30%, above February levels and about 37% year on year. So, those two commodities really have gone up. Now, other commodities such as rice are not affected for the moment which is quite different from the situation we had 14, 15 years ago during the last food price crisis. Globally price is still about 17% lower than it was in January, 2021. So, that there is a little bit of good news there. Now, when you look at shipping through the Black Sea it's at a standstill, and high global wheat prices, we can expect other countries to sell more wheat. Fortunately, again, the stock levels are not bad so we should not get a sense that we have a global wheat shortage overall. There is enough wheat on the planet and planting more wheat this spring and summer will make up of shortfall to a significant extent if the exports remain blocked out of Ukraine and Russia. So it's not really a total supply issue, but the problem is that those countries that are used to importing from those countries now have to adjust and that will not be painless and it will be very costly. Then you have the impact of the war on fertilizer cost and that's significant because it could really translate into production problems for the next season across crops. If yields crash because the farmers cannot afford or even access enough fertilizer. We need to understand that Russia and Belarus account for 20% of global fertilizer exports, and again, fertilizer prices were already very high before the war because of high oil prices and the price of urea, for instance, actually tripled last year already. These are the sort of the two main buckets. It's the wheat export and it's the fertilizer export.

[04:50] Host - And you're talking about the exports there. Let's look at the other side of the equation there. Countries that are importing, maybe it's wheat, maybe it's other crops, but which countries are most likely to be affected by the conflict in Ukraine?

WB Expert - So, as I was saying, right, countries with a high share of wheat imports from Ukraine and Russia are the highest immediate risk, especially those who are still awaiting shipments for the second half of the year, such as Egypt, they're still waiting for 6.6 million tons. Turkey is a major wheat importer, 4 million tons. Bangladesh is close to 4 million tons. And Iran is 1.7 million tons. But also Lebanon, Tunisia, Yemen, Libya, and Pakistan. You can see it's the countries in the region. I mean, the main are the Middle East and North African countries depend on wheat from the Black Sea region for geographic regions, right? The ships only have to cross the Mediterranean. And wheat is a staple in that region's diet. Egypt is the world's largest wheat importer, by the way. Now, this also threats humanitarian operations since the World Food Programme depends on this wheat. So the compounding shock if you want, of the war in Ukraine, may cause severe outcomes for vulnerable people in several Middle East, North African countries if the humanitarian and development decisions are not scaled up. So again and again, whenever we have these crisis it is the poor that suffer the most.

[06:06] Host - And one of the ways we've seen countries respond to this is with export restrictions. Is that an effective strategy? If a government official from a country were to phone you up and say, "What should we do? Should we stop the export of some of these crops?" What would you tell them?

WB Expert - Well, this is exactly the wrong thing to do. So, really thanks for asking this question because right now this is probably the most important thing that we all can do. Having a conversation around how to keep the trade of food commodities open and how to keep the goodies flowing. So when they call us, we will say, "Absolutely not a good idea. If you want to support your own population, do it in a different way, but do not block the flow of food." It's tempting, you know? It's tempting to restrict export to avoid local shortages, but it has very, very detrimental implications. As we saw when we went through the 2007, 2008 food price crisis. The trick is really to move food from places of surplus to places of need and that's what needs to happen.

[07:10] Host - So, that's what government shouldn't do. What should they do? What should governments, the national community do, to support those that are most at risk of food insecurity?

WB Expert - Right, so of course they need to act. They need to react and they need to put measures in place. In general it's much better to protect the purchasing power of the poorest households to well-targeted, nutrition-sensitive, social protection programs, rather than maintaining prices artificially low for everyone. So for instance, subsidizing bread across all income levels it's only very expensive for governments. It's regressive. It encourages food waste and poor diets and it can be very hard to politically correct once a crisis is over, right? So, really supporting these social safety nets at a time of crisis is the right way to go. The same caution applies to helping farmers access fertilizers, right? The knee jerk reaction is often, well let's subsidize it, okay? It's gotten more expensive to help the farmers, but if you apply these subsidies indiscriminately it risks increasing demand and fertilizer prices worldwide and it doesn't help in the end. Removing input trade barriers, focusing on more efficient user fertilizers, investing in bio fertilizers, repurposing these public policies and expenditures to better support farmers. A much better way of doing this. Again, this is in addition to the export restriction conversation. What you do domestically is actually very, very important as well. And we know now from many, a couple of decades of experience what works and what has a beneficial effect overall and what doesn't work and what should be avoided in a situation like this.

[08:41] Host - And we spoke a couple months ago about supply chains and what that meant for food prices and food security. A few months ago, most of us couldn't imagine a war like the one that's happening in Ukraine. What can countries do to improve their resilience kind of across the board over the long term to shocks? Whether it's something like a pandemic that was quite hard to predict, a conflict that was hard to predict. How can they strengthen their food security and boost nutrition over the long term and create that resilience that they need?

WB Expert - Right, I think it's a very important point that we don't just focus on the immediate crisis and the short term measures, but every country going forward needs to continue to transform its food systems and make it more resilient in the long term. It's really crucial to stay that course. The food systems, as I said, were already reeling from multiple crisis prior to the Russian's invasion of the Ukraine. Governments, private businesses, and international partners really need to work towards more productive, more resource-efficient, more diverse, and more nutritious production systems to ensure that food and nutrition security is there in the face of rising climate conflict and economic risks. I think this is absolutely clear to everyone. It's just, we forget during times of crisis that we can't take our eyes off the medium to long term. So it's really important to better target the public spending. We talked about the subsidies before. Right now the spending is in the order of three quarters of a trillion dollars a year. And a lot of that money is not doing what we've just discussed and it needs to be repurposed. It needs to be redirected in a way that actually achieves those more resilient, more nutritious, and less climate damaging outcomes. Important to mobilize private funding and investing in innovation and research and development will be key because everybody needs to do more with less, right? We produce more nutritious, more diverse, more high value food for growing population. And to do this with less water and fertilizer while limiting the land use and greenhouse gas emissions, climate smart agriculture, is the word to remember here. Now research suggests that investing in stronger food systems is also an investment in peace. I think this must be clear to everyone. If the food systems are wobbly, as we see in many countries right now, this leads to conflict, it leads to migration, etcetera, etcetera.

[11:02] Host - And I asked you earlier about what would be your advice kind of hypothetically if government officials started reaching out to you or the World Bank. My last question for you is have countries reached out to the World Bank Group for help? And what kind of support is being offered in this area of food security?

WB Expert - Yes, definitely. I mean, we have been in touch with a number of countries in East Africa, West Africa, North Africa, Middle East, several other parts of the world, even before the pandemic. But, now it's really been ramping up. A lot of countries are asking for support and we've responded with a whole set of emergency financing and new projects. And we actually expect to do more with this additional shock and just the World Bank has provided significant support just in the last two years, about 17 billion annually in combined IDA and IBRD lending. This is up from about 12 billion on average in the previous three years, primarily for agriculture and the social protection measures. And in the last couple of years we've allocated about half a billion across 11 countries from the crisis response window. And there will be a lot more coming. And let's be clear, this is not the last crisis we are facing. So whatever we do, we need to immediately help those in acute need, but we should never take our eyes off that there was a much deeper and much more fundamental issue that we need to address with our support in our programs.

[12:11] Host - Juergen, this is brilliant. Thank you so much for taking the time today. I really appreciate it.

WB Expert - It's my pleasure.

Host - A huge thanks to Juergen Voegele for his time. You can find out more about how the World Bank is responding to the war in Ukraine, by heading over to our website. That's worldbank.org. And a quick reminder that the World Bank-IMF spring meetings are just around the corner. We're planning several important events and we want you to take part, find out the full schedule and more details at live.worldbank.org. Until next time, goodbye.
 

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