The combined aftershocks of the most dangerous European conflict since 1945, climate change, and a global pandemic now in its third year could prove catastrophic for the world’s most vulnerable countries.
Escalating food and fuel prices and increasingly fragile supply chains present a real and present danger to the lives of millions. And it could usher in a devastating new era of debt and dependency.
All of this risks pushing millions of people into extreme poverty, destabilizing parts of the African continent, and leading to new geo-political alliances.
As of 15 February, 6,004,047 refugees have fled Ukraine.
Russia’s invasion of Ukraine will impact other humanitarian crises as well. The World Food Programme gets half of the wheat it distributes in humanitarian crises from Ukraine. It now may need to find other suppliers, as well as help feed the 3 million Ukrainians in need of food assistance because of the war.
Even before the war put the supply of key food at risk, 44 million people around the world were on the brink of famine, and an additional 232 million are just one step behind.
Countries will face much higher costs for food, specifically wheat and other grains.
Russia has more agricultural land than all other European countries combined. Ukraine has the most arable land in Europe. It has 25% of the world’s total volume of black soil, which is particularly fertile and has helped make the country a global agricultural powerhouse.
Together Russia and Ukraine supply 30% of the world’s wheat and 24% of barley.
Ukraine accounts for 13% of global corn exports. Ukraine also accounts for 46% of sunflower oil
exports — making it the world’s top exporter.
While most wheat and barley crops are harvested in the summer and exported during the fall, maize exports tend to continue through spring. Large areas of Ukraine’s production border Russia. The conflict is likely to disrupt future planting.
Russia is the third largest exporter of potash (18% of world exports), a key ingredient in fertiliser, after Canada and Belarus, with reduced supply increasing prices on international markets.
The domino effects are even more complex. In January, the UN’s Vegetable Oil Index was at its highest level ever recorded.
Because food prices are determined on international markets, these shifts will have indirect effects on every African country. Some African countries are net exporters of food and may see their exports increase, including South Africa’s maize exports. But the net impacts will be negative.
For countries that export crude oil, rising oil prices are clearly paying a dividend.
If export volumes stay steady, large crude oil exporters like Nigeria, Angola or Libya would see additional revenues. This isn’t 100% upside. In Nigeria for example, fuel subsidy payments rose to over half a billion dollars in February alone, that’s almost a third of the total health budget in 2022.
But for other countries the picture is much more concerning.
Rises on basic goods like wheat, maize or vegetable oil will hit the poor the hardest as they represent a bigger part of their spending.
So as always, poorer countries will bear the brunt of this: the impact of higher wheat prices will be 0.5% of GDP in low-income countries and 0.6% in lower-middle-income countries. And if that doesn’t seem like a big number, think about what GDP represents: most rich countries don’t spend that much of their GDP on aid.
In the wake of the invasion, vegetable oil costs doubled, compared to their price before the war which had significant consequences for countries like Egypt, Kenya or South Africa. Together, we estimate they could have paid an additional $US 2.7 billion per year to import palm and sunflower oil.
Relative to the size of the population, countries like Benin, Mauritania, Togo and Kenya will be among the most impacted. For example, Benin’s vegetable oil imports’ bill per person was as much as 9 times what it spent on health in 2019.
Some major commodities have subsided to pre-war prices but they are still higher than they were during previous food crises in 2008 and 2010-11. Countries like Egypt, Algeria or Morocco spend billions in wheat and maize imports. Higher prices on food imports will cost billions and have huge economic impacts.
Egypt’s wheat and maize bill could go up by US$ 4.4 billion – assuming prices don’t continue to rise. Egypt
is already seeking a bailout as soaring prices and debt put huge pressure on budgets.
Algeria may have to spend an additional US$2.8 billion – equivalent to 22 times what it will spend in debt service this year. Sudan’s bill will increase by over $630 million, as much as it will pay in debt service.
Countries were already experiencing unprecedented need and constrained finances. Just as countries are focusing on pandemic recovery, debt costs, hunger and poverty are already increasing. Steeper bills for basic commodities will make the situation even worse.