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Preventing Developing-Economy Debt Disasters

Skyrocketing food and energy prices, together with widening sovereign bond spreads, have placed balance sheets in emerging-market and developing economies under severe strain. To avoid disaster, the international community must urgently support bold debt restructuring.

ABIDJAN/CAIRO – The world’s breadbasket is being wrecked by war. Ukraine and Russia together account for 30% of global wheat and barley exports, and they are leading exporters of other grains. The two countries also are the source of nearly 70% of the world’s sunflower oil exports, while Russia accounts for 13% of all crude petroleum exports. As the conflict in Ukraine rages and sanctions on Russia escalate, food and energy prices – which were rising even before Russia invaded Ukraine – are spiking in countries far away from the front lines, with devastating implications for the world’s poor.

The Ukraine war is having two distinct effects on food markets. First, it has caused prices to soar. Last month alone, world wheat prices surged by nearly 20%. This trend will be exacerbated by the second effect: likely shortages of food supplies and agricultural inputs from Russia and Ukraine.

Since the conflict began, Ukrainian farmers have lacked access to crucial resources – from fertilizer to fuel – not to mention facing insecurity and violence. With the wheat planting season fast approaching, there is good reason to expect significantly reduced crop yields. And, given that Russia is a leading fertilizer exporter, other producers’ yields might suffer as well.

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