Leading food systems experts have warned that the food price crisis is entering a dangerous new phase, as the world teeters on the brink of a debt crisis that could plunge millions more into hunger.
The recently published IPES-Food special report comes as global leaders meet in Qatar to address challenges faced by the world’s Least Developed Countries – with “debt sustainability and debt cancellation” finally on the agenda, read a press release on Monday.
Though record-high food prices may have receded one year on from Russia’s invasion of Ukraine, growing numbers of countries are now facing rising hunger and soaring debt repayments.
Sixty per cent of low-income countries are now considered at high risk of, or already in, debt distress, while some 21 countries are nearing catastrophic levels of both debt distress and food insecurity. Zambia, Sri Lanka, and Suriname already defaulted on their debts; Ghana and Pakistan are currently in urgent talks to avoid default.
Jennifer Clapp, IPES-Food expert and economist, said: “Last year’s record high food prices may have receded, but the food crisis is still biting and its entering a dangerous new phase – of skyrocketing debt distress and spiraling hunger in dozens of low and middle-income countries.
“Rising debt bills are becoming unaffordable for many governments, just as they struggle to pay for food and fertilizer imports – and they’re running out of road. Decades of progress in reducing hunger risks being undone.”
Policymakers are ignoring the critical role of unsustainable, import-heavy food systems in driving rising debt and hunger, say the experts. Skyrocketing costs for imports of food, fertilizer, and energy are straining the public finances of many low-income (and also some middle-income) countries.
Rising interest rates and plunging currencies are sending debt bills higher, constraining the ability of governments to ensure the food security of their citizens. Those same countries are locked into exporting cash crops to pay off dollar-denominated debts and import basic necessities – at the expense of feeding local populations.
Moreover, record high debt burdens are preventing urgently-needed investments in sustainable, climate-resilient food production and food security, creating a vicious cycle, says the report. Debt repayments dwarf spending on climate resilience and social protection in the world’s poorest countries.
The IPES-Food report highlighted four ways in which food systems are deepening today's debt crisis. Firstly, import dependencies and dollar dependencies generate high debts and prevent countries investing in diversifying their food systems and economies. Countries are increasingly locked into generating dollars, often through cash crops, to pay off debts and import basic necessities.
Secondly, extractive financial flows: over decades, governments have cut social spending and outsourced food system investment to corporate actors and creditors – resulting in uneven development, persistent hunger, and the depletion of state capacity – and ultimately funneling resources out of the Global South.
Thirdly, boom-bust cycles: when food prices rise, powerful and highly concentrated agribusinesses benefit while farmers get squeezed. But when prices crash, many farms and food businesses fail, leading to further corporate consolidation, undermining investment in resilience.
Finally, climate breakdown is fast becoming the biggest driver of economic collapse and debt distress in the Global South, decimating harvests and destroying livelihoods in countries least responsible for the crisis. With climate finance failing to materialize, it is becoming harder for low-income countries to repay debts and invest in climate-resilient food systems.
Failure to break this vicious cycle of unsustainable debt and unsustainable food systems will mean the reversal of decades of progress in addressing poverty and hunger, and abject failure to meet the Sustainable Development Goals, say the experts.
They call for urgent action to provide debt relief and development finance on a scale sufficient to meet the needs of Covid-19 recovery, climate-resilient food systems, and the Sustainable Development Goals; repair historical injustices that have led countries funneling wealth to the global North - through windfall taxes on food profiteers and steps to achieve tax justice, and repay 'ecological' and historical debts; and democratize financial and food systems governance: reform decision-making over food systems and in the World Bank and IMF to put the interests of the world’s poorest countries and marginalized populations first.
Lim Li Ching, co-chair of IPES-Food, said: “Yes, the debts of poorer nations should be canceled to allow them to feed their people – but this is not enough.
“To get off the debt treadmill, its vital to break the vicious cycle of unsustainable food systems, hunger, and debt – by also investing in building resilient food and farming, repairing the historical injustices that have led poor countries funneling resources to the rich, and reforming international decision-making on food and debt to put poor countries first.”
