The Russian invasion of Ukraine is causing a widespread crisis around the world. If the number of refugees in Europe has exploded in two months, Africa, for its part, is heading straight for an exacerbated economic crisis. Inflation is already high, due to the breakdown of supply chains for various foodstuffs. What measures have the International Monetary Fund and African banking institutions taken to deal with this situation?
Ukrainian invasion: the IMF and the World Bank stand up for africa
As surprising as it may seem, Africa is one of the continents hardest hit by the Ukrainian crisis. The bilateral relations that some African countries have with Ukraine and Russia have broken a strong economic chain. Several powers could find themselves in a situation of over-indebtedness under enormous budgetary pressure. According to the IMF, the consumer price index has deteriorated significantly due to rising food prices. In Africa, the increase is 40% in April 2022. It should be noted that these indicators were already affected by the health crisis in Coronavirus†
Faced with a situation that is approaching chaos for certain powers, it is important to take measures to optimize its revenues. Having an additional source of income would be a good option. This is the case with online trading, which remains constant despite these many changes. There is also a note about the growth of stock market activity since the onset of the health crisis, so it may be less restrictive as a trader to manage risk related to economic indicators.
To mitigate the impact of the crisis on the African continent, the IMF and the World Bank advocate the provision of economic support. The price aspects taken into account in this measure include food insecurity, external debt sustainability and political stability. The program set up by the World Bank will span 15 months — from June 2022 to 2023 — valued at approximately $170 billion.
It is thus intended to mitigate the effects of Russia’s invasion of Ukraine on the continent and also to support operations related to the fight against Coronavirus† This reduces the risk of food insecurity and over-indebtedness.
What impact does the crisis have on Africa?
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The Russian invasion had a major impact on the African economy. Ukraine and Russia are major agricultural producers, having previously supplied many foodstuffs to Africa. Products such as vegetable oils, wheat, barley and many more were exported from Ukraine to some African countries. Russia, for its part, is a major producer of potash, an essential ingredient in the manufacture of nitrogen fertilizers. That is why the agricultural sector is suffering the horrors of this crisis on an international scale.
It is therefore not surprising that everyone is currently observing an increase in the prices of these products in the market. According to the UN, the price index is said to have reached 12.6% in just one month (March). A very alarming indicator that could, however, rise significantly in the coming months. The prices of the foodstuffs in question are said to have increased by 33.6% compared to the previous year. Some leaders have decided to suspend exports to narrow the gap between supply and demand.
Besides foodstuffs and agricultural inputs, another aspect that challenges leaders is that of hydrocarbons. The oil price is subject to high volatility in the world market, forcing various powers to draw on their reserves.
It is clear that the situation in Africa in light of the Ukrainian crisis is worrying. Many powers are already facing a situation of economic crisis due to rising food prices. On the other hand, the IMF and the World Bank fears of over-indebtedness, hence the implementation of an emergency aid program that will last more than a year.