Launch of the second report by the Global Crisis Response Group on Food, Energy and Finance

Statement by Rebeca Grynspan, Secretary-General of UNCTAD

Launch of the second report by the Global Crisis Response Group on Food, Energy and Finance

New York
08 June 2022

Thank you, Stephane Good morning everybody.

Thank you very much for joining us for the launch of the second brief of the Global Crisis Response Group. This is the document that we have made available to all of you, that is the second brief that we bring to your attention.

The Secretary-General has pointed to the main messages of the report and highlighted the suffering and destruction the war in Ukraine in all its dimensions is causing which now extends far beyond its borders.

Our main message in this second brief is this:

We are on the brink of the most severe global cost-of-living crisis in a generation.

The report demonstrates the interconnected nature of the three dimensions of the crisis: food, energy, and finance.

And that tackling just one aspect, will not solve the global crisis we are in.

This is creating a cost-of-living vicious cycle increasing the impact on families and countries.

Incomes are being squeezed, and families are being forced to decide how to allocate shrinking household finances.

Perhaps choosing whether to skip a meal, keep children in school, buy less nutritious food, keep a family business open or closed or pay medical bills.

And so, with this in mind, another cycle, another vicious cycle starts; the cycle of social unrest leading to political instability as a result of the weakened ability of countries and families to cope with yet another global crisis, on top of covid 19 and the climate crisis.

Our second message is this: the current food crisis may rapidly turn into a food catastrophe of global proportions in 2023.

Higher energy costs and trade restrictions on the fertilizer supply from the Black Sea region have resulted in fertilizer prices rising even faster than food prices.

If the war continues and grain and fertilizer high prices persist into the next planting season, the present crisis could extend – as the Secretary-General just mentioned - to other basic foods such as rice, that will affect, as we all know, billions more people.

And finally let me underline that this is a global crisis which nobody can escape.

But let me also emphasize that the vulnerable are already suffering the most.

Just an example to understand how this impacts households. In the report we show data that a 10 per cent increase in food prices will represent a 5 per cent decrease in the incomes of the poorest families. But what does it mean, a 5 per cent decrease in a family’s income? 5 per cent is all that the poorest families spend on health, so let’s take that into account. It’s not a minor thing; 5 per cent decrease in income is all the expenditure they have for health for their families.

According to ILO data, 60 per cent of workers worldwide have already lower real incomes than before the pandemic. That is what we say. This comes on top of the covid 19 pandemic and on top of the climate change crisis. So, the pandemic already left 60 percent of workers worldwide with lower real income.

Now, a second part of the report analyzes the effects of the crises at the regional levels, a view all have seen.

With the United Nations Regional Economic Commissions, we have assessed the capacity of countries to cope, not only the exposure of countries but their capacity to cope with the crisis, and we analyzed in Sub Saharan Africa, Middle East and North Africa, Eastern Europe and Central Asia, South and East Asia and Latin America and the Caribbean.

We confirm a widespread picture of vulnerability in all regions. Again, as we did in the first brief, around 1.6 billion people are severely exposed and unable to cope with the crisis.

Let’s remember that 60 per cent of the poorest countries are in debt distress or at high risk of it.

So, allow me now turn to the recommendations of the brief.

Firstly, on food.

We must stabilize global markets, reduce volatility, and tackle the uncertainty of commodity prices.

We remain convinced – like the Secretary-General of the UN said - that there can be no effective solution to the global food crisis without reintegrating Ukraine’s food production, as well as the food and fertilizer produced by Russia into world markets – despite the war.

Restoring fertilizer availability, ensuring small farmers access, and monitoring supplies everywhere for the next 18 months will be critical.

It is important to support FAO’s proposal of a Food Import Financing Facility. A Food Import Financing Facility.

While a humanitarian approach remains important, it is not enough.

We must not forget hundreds of millions of vulnerable people around the poverty line and wider groups crushed by the crisis: informal workers, women, small holder farmers, families on the poverty line. So we need to have a preventive approach.

Government must put in place social protection safety nets to offer targeted support to these groups and strengthen their ability to cope. But again, there is no solution to the cost-of-living crisis without a solution to the finance crisis

Developing countries urgently need financial support from international financial institutions so they can help their poor and vulnerable population through social protection and safety nets schemes.

Unless there is a strong effort from international financial institutions to increase countries financial resources and fiscal space, countries will continue to struggle to pay their food and energy import bills, service their debt and increase spending in social protection.

All at the same time.

International financial institutions must reactivate all their rapid disbursement mechanisms.

Multilateral development banks must be capitalized and apply more flexible lending ratios.

And we need a new emission of Special Drawing Rights from the International Monetary Fund, as well as more pledges to recycle the already issued Special Drawing Rights from countries with strong foreign reserve positions towards the resilient and sustainability trust in the IMF.

The funds exist and they must be made available.

With respect to the debt architecture. You know that the of a major debt crisis, with a possible domino effect is greater today than during the COVID-19 pandemic.

The G20’s must reinstate the Debt Service Suspension Initiative and debt maturities should be pushed back by two to five years.

The Common Framework for Debt Treatment created by the G20 must be improved to really deliver solutions for debt distressed countries. For the moment, no country has been able

to receive support so far all continue to have to service their debt with no relief in sight.

Thirdly, on energy.

The use of strategic stockpiles and additional reserves could help to ease the energy crisis in the short term. But we must continue to push for transformational change, accelerating the deployment of renewable energy.

Today, the world faces a crisis of access.

There is enough of everything but at the wrong price, in the wrong place, and at the wrong time.