wiped out over one-quarter of the world’s pig population last year, causing food prices in China to increase by 15-22% year on year so far in 2020. And more recently, the worst locust blight in 70 years has destroyed crops in East Africa. In Kenya, the price of maize, a staple food, has risen by over 60% since 2019.

COVID-19 is amplifying the risk of a worldwide food-price spike, which would trigger outright crises in many developing countries. In the poorest of these, food accounts for World Bank estimates that protectionism accounted for about 40% of the increase in the global price of wheat and 25% of the rise in maize prices at that time.

One can understand these countries’ nervousness. While the COVID-19 pandemic has led to falling growth, rising unemployment, widening fiscal deficits, and soaring debt in advanced and emerging economies alike, the appearance of new infection hotbeds in developing countries will mean an even starker tradeoff between saving lives and protecting livelihoods. Moreover, developing countries are already facing a sudden stop in capital and remittance inflows and a collapse in tourism, while the terms of trade and currencies of the many oil and primary-commodity exporters among them are crashing. Even before COVID-19, many low-income countries were at serious risk of debt distress. And many of these economies are also highly vulnerable to a spike in food prices.

Nomura’s Food Vulnerability Index ranks 110 countries based on their exposure to large food-price swings, taking into account their nominal GDP per capita, the share of food in household consumption, and net food imports. The latest reading shows that of the 50 countries most vulnerable to a sustained rise in food prices, nearly all are developing economies that account for nearly three-fifths of the world’s population.

In fact, surging food prices would be a global problem, because they are highly regressive everywhere. Even in developed economies, a jump in food prices would drive a bigger wedge between the rich and poor, exacerbating already-severe wealth inequality. No one should ignore the age-old connection between food crises and social unrest.

Multilateral institutions have mobilized quickly during the crisis to provide emergency loans to a record number of developing countries, while G20 creditors have agreed to a temporary suspension of debt-service payments from poor countries that request forbearance. But because the risks posed by surging food prices do not apply only to the most vulnerable economies, temporary debt relief may need to be extended to other countries as well.

With the pandemic threatening to wreak even more economic havoc, governments must work together to address the risk of disruptions to food supply chains. More broadly, some modicum of global policy coordination is essential to prevent food protectionism from becoming the post-pandemic new normal.

Carmen M. Reinhart is Professor of the International Financial System at Harvard University’s Kennedy School of Government. Rob Subbaraman is Head of Global Macro Research at Nomura.

Copyright: Project Syndicate, 2020.
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