2023-06-29-IMF-Review_of_Experience_with_The_Food_Shock_Window_Under_The_Rapid_Financing_Instrument_and_The_Rapid_Credit_Facility_29页_919kb

IMF Policy Paper Summary: Review of Experience with the Food Shock Window

Core Content

This IMF policy paper reviews the experience with the Food Shock Window (FSW), a temporary financing mechanism introduced in September 2022 to address the global food shock. The paper outlines the Fund's response to the crisis, including the use of emergency financing instruments like the Rapid Financing Instrument (RFI) and Rapid Credit Facility (RCF), and highlights the ongoing challenges posed by the global food shock. The paper also discusses the extension of the FSW and the temporarily higher Cumulative Access Limits (CALs) under RFI and RCF.

Main Views and Key Information

1. Extension of the Food Shock Window

• The IMF Executive Board approved a 6-month extension of the FSW until end-March 2024.
• This extension is intended to provide a contingency tool for member countries facing urgent balance of payment (BOP) needs due to the food shock, especially when UCT-quality programs are not feasible or necessary.
• The FSW was initially approved for 12 months and has supported six countries with a total disbursement of US$1.8 billion (SDR 1.4 billion).
• Most Directors supported the extension, with some suggesting that the FSW should automatically expire at the end of the period unless demand warrants further discussion.

2. Extension of Temporary CALs

• The temporarily higher CALs under RFI and RCF were extended to ensure continued borrowing capacity for countries affected by the food shock.
• For RFI users of the FSW, the additional 25% quota will remain in place until end-2026.
• For RCF users of the FSW, the additional 25% quota will remain in place until the completion of the 2024/25 PRGT review.
• This extension aims to prevent a sudden reduction in borrowing space and to maintain the principle of additional resources for FSW users.

3. Fund's Role in Addressing the Food Shock

• The Fund has been actively involved in a globally coordinated policy response, working with partners such as the World Bank, WFP, FAO, and WTO.
• The Fund’s response includes policy advice, technical assistance, and financing support.
• It has supported 32 countries through its instruments, with 21 countries receiving support via UCT-quality programs and seven countries under discussion.
• The FSW has been used in six countries, with some transitioning to UCT-quality programs.

4. Global Food Shock Overview

• Global food prices have eased slightly but remain at historic highs, with continued uncertainty about the outlook for food staples and agricultural inputs.
• Domestic food inflation has continued to rise, especially in low-income countries, due to international price pass-through and local currency depreciation.
• Acute food insecurity has not subsided since 2022, and the number of people in need of food assistance is expected to be more than double that of 2020.
• The food shock has exacerbated BOP pressures, with low-income countries bearing the brunt due to high food import dependency and limited macroeconomic buffers.

5. Experience with the FSW

• The FSW has been used as a complement to UCT-quality programs and has been effective in addressing urgent BOP needs.
• The FSW is supported by ex-ante governance commitments, and it is often combined with Staff Monitored Programs (SMP) or Program Monitoring with Board Involvement (PMB) to build policy implementation track records.
• Some Directors raised concerns about the limited uptake of the FSW and potential inequities in its design.
• A few Directors suggested an ex-post evaluation of the FSW experience after its expiration.

6. Staff Recommendations

• The staff recommends extending the FSW by six months until end-March 2024 to allow for a longer observation period.
• This extension is seen as prudent, given the ongoing food shock and the uncertainty about global food supplies.
• The staff also proposes to maintain the additional 25% quota in CALs for FSW users, to ensure that the FSW remains a distinct financing mechanism.

Key Figures and Tables

• Figure 1: International Energy, Fertilizer and Food Prices (Indices, 2016=100)
• Figure 2: Domestic Food Inflation minus Core Inflation (Indices, 2019=100, median by region)
• Figure 3: Fund Engagement in 50 Countries Identified as Most Affected by the Food Shock, as of September 2022
• Table 1: IMF Financing to Countries Identified as Most Affected by the Food Shock, as of September 2022
• Table 2: Key Objectives of the FSW in Countries Accessing Financing Through the FSW
• Table 3: Governance Commitments of Countries Accessing the FSW

Conclusion

The paper concludes that the FSW and extended CALs are essential tools to support member countries facing urgent BOP needs due to the global food shock. It emphasizes the importance of coordinated international efforts and the continuation of the FSW as a contingency mechanism. The staff also calls for effective communication of the Fund's role and governance safeguards to ensure transparency and accountability in the use of FSW resources.