IMF extends food shock window despite low demand

The International Monetary Fund approved an extension of its “food shock window” programme for another six months, to the end of March 2024. The fund’s board approved the extension despite making few loans from the facility.

The IMF board also decided to maintain increased ceilings for its two emergency lending channels, the Rapid Credit Facility (RCF) and the Rapid Financing Instrument (RFI).

The IMF approved the food shock window in September 2022, initially for a year. The facility aims to address “acute food insecurity, increased costs of cereal and fertiliser imports, or cereal exports shortfalls”.

The Russian invasion of Ukraine has snarled or impeded global agricultural trade, and the export of oils and fertilisers from the two countries. Fund officials noted that food prices remain elevated.

According to an accompanying report, the IMF provided aid to 27 countries facing food insecurity between February 2022, when Russia invaded Ukraine, and March 2023. However, 21 of these countries received funding through the IMF’s ordinary multi-year lending frameworks, or “upper credit tranche” (UCT) loans.

The fund has granted only six loans under the food shock window, totalling $1.8 billion. The bulk of this funding – more than $1.3 billion – went to Ukraine, which has also received longer-term loans. The other recipients are Burkina Faso, Guinea, Haiti, Malawi and South Sudan.

In the report, fund staff note “the strong reliance on UCT-quality programmes to deliver fund financial support to countries affected by the food shock reflects the fund’s preferred approach”. However, the board concluded “it would be prudent” to extend the food shock programme.

The fund also extended expanded access to the RCF and RFI. For both facilities, the “cumulative access limits” will remain 150% of a member state’s quota, rising to 183.33% for a special “large natural disaster window”. Countries getting food shock aid can access funds equal to an extra 25% of quota.

The IMF decided not to restore the lower caps because doing so would leave many member states unable to borrow in case of a balance of payments crisis. “This proposal would ensure that most countries have at least 50% of quota in borrowing space under the [emergency financing] instruments over the coming years,” the fund said.

The rapid funding programmes provide immediate access to hard currency for countries with pressing balance of payments problems, or which have suffered natural disasters. Both were widely used during the pandemic.