The post-pandemic recovery has brought about a dramatic rise in prices around the world. The IMF now predicts that consumer prices will jump 8.7 percent this year in emerging and developing economies and 5.7 percent in advanced economies, the highest since 1984.
The leaders of the International Monetary Fund (IMF) and the World Bank (WB) have warned that rRising interest rates put pressure on the world’s poorest countries, struggling with the covid-19 pandemic and rising food prices. SB President David Malpass told the press that “especially in the poorest countries, there is a huge increase in debt.” In addition to the debt crisis, the debates at the spring meetings of the IMF and World Bank, according to Malapasse, are focused on the Russian invasion of Ukraine, the pandemic and the slowing world economy.
Bread can cost a hundred and a croissant ten crowns, now it depends on the government, says the head of Penam
Only the rocketing food prices, mainly due to more expensive energy, fuel and the effects of the war in Ukraine, is a fundamental problem that must be solved by the government in particular, says Jaroslav Kurčík, head of the domestic bakery company Penam from the Agrofert group. “The Czech Republic must ask itself if it wants to say: I will be a free, open economy, but there will be expensive food here. Or he intervenes and says: No, I have to secure the inhabitants. It’s about social peace, “he says.
IMF chief Kristalina Georgieva said that 60 percent of low-income countries are in or close to debt. In this situation the repayments of their debts are equal to half the size of their national economies. Countries that have difficulty repaying their creditors will also have difficulty helping their poorest citizens at a time when the war in Ukraine is disrupting food supplies and raising food prices, the AP said.
The countries became indebted during the pandemic
Countries around the world have been in debt during a pandemic to protect their economies. The IMF predicts that government debt in low-income countries will exceed half of their gross domestic product (GDP) this year. In 2019, before the pandemic, it was less than 44 percent. Globally, economic aid has worked and supported an unexpectedly rapid recovery from the pandemic recession.
However, the recovery surprised companies. They tried to meet the rapidly growing demand from customers, which flooded factories and transport hubs. Deliveries slowed and prices rose. The IMF now predicts that consumer prices will jump 8.7 percent this year in emerging and developing economies and 5.7 percent in advanced economies, the highest since 1984.
This will hurt. Food prices are rising fastest in history due to the war
Global food prices were rising before the war in Ukraine. In March, however, their growth picked up a dramatic pace and food rose by an average of 13 percent. In the last two years alone, however, the increase is 75 percent.
In response, the world’s central banks are raising interest rates. The increased debt burden will be felt most painfully in the world’s poorest countries, the AP wrote.
Central banks must not act excessively
Georgiev advised central banks to proceed cautiously when tightening monetary policy and to explain their approach in order to avoid excessive reactions in financial markets. She also called with Malpass to coordinated global efforts to help countries facing their debts.
The problems are already beginning to show. Sri Lanka announced last week that it was suspending its foreign debtuntil the IMF loan restructuring program is completed to address the worst economic crisis in the island country in decades.
Marcello Estevão of the World Bank said that up to a dozen developing countries will not be able to repay the debts next year.
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