The Board of Executive Directors of the Islamic Development Bank (IsDB), the Islamic Solidarity Fund for Development (ISFD), and the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), approved an US$10.54 billion comprehensive Food Security Response Programme (FSRP) package that will support member countries in addressing the ongoing food crisis and scale up the Group’s continued efforts to contribute to strengthening its members’ resilience to food security shocks in the future.
The approval came at an extraordinary meeting chaired by Dr Muhammad Al Jasser, President of the IsDB, held in Jeddah on 28 July 2022. The IsDB will contribute up to US$5.7 billion in total financing to member countries, comprising new approvals worth US$4.0 billion and fast-tracking of disbursements for existing projects worth US$1.7 billion.
The Group’s sister entities under its “One Group-One Goal” approach, will also make significant and direct contributions to the funding programme. These include:
(i) US$4.5 billion in trade financing by the International Islamic Trade Finance Corporation (ITFC), the trade fund of the Group,
(ii) US$269 million in private sector development operations by the International Islamic Corporation for the Development of the Private Sector (ICD), the private sector funding arm of the Group,
(iii) US$75 million in loans, grants, and capital resources by ISFD, the social finance arm of the Group, and
(iv) US$500 million in political and credit insurance coverage by ICIEC, the export credit agency of the Group.
To complement the financial package of the IsDB Group, the Islamic Development Bank Institute (IsDBi) will provide critical data, analytics, and evidence-based support for effective and impactful decision-making.
To jump-start the programme, says the IsDB, the financing package will provide immediate financing (over the coming 18-month period) of up to US$3.2 billion for short-term interventions by providing (i) emergency food and agricultural supply inputs and (ii) social protection and livelihood support to the most vulnerable populations.
“The primary focus of the programme and the bulk of the financing envelope of the remaining US$7.3 billion, which will span over the next three years,” according to the IsDB, “will be on developing innovative medium-and long-term interventions to address structural weaknesses and root causes of food insecurity in the member states.”
These include low productivity, rural poverty, climate change, and weak resilience of regional and national agricultural and food systems through six key initiatives: (i) building agricultural resilience to climate change; (ii) food and input value-chains; (iii) smallholders’ productivity and market access; (iv) rural livelihood support; (v) livestock and fisheries development; and (vi) building resilient food supply systems.
The total IsDB Group’s financing support for agriculture and food security currently stands at US$20.6 billion, comprising 1,538 operations. The Ukraine War highlighted the issue of food security, which keeps resurfacing thanks to the effects of climate change, natural disasters, insect plagues, deforestation and soil erosion, opposition to genetically-modified seeds, battery farming of livestock, disease outbreaks and supply-chain disruption as in the COVID-19 pandemic. Food systems inequality is as impactful as food import dependency, vaccine inequality and poverty and a host of other metrics, which affect the lives of millions on a daily basis.
OECD Secretary-General Mathias Cormann, warns “the commodity supply squeeze resulting from this war, is exacerbating supply chain disruptions brought on by the pandemic, which will likely weigh on consumers and business for some time to come. We need both sensible near-term and longer-term action.”
In emerging market economies, says the OECD, “steeper declines are projected for those major commodity importers. Higher food and energy prices are expected to push up inflation more than in advanced economies. The threat of cereal shortages in particular underlines the need to ensure that trade keeps flowing.”
Flour shortages have already impacted in several IsDB member states including Egypt, Lebanon and Somalia. Egypt imports 86% of its wheat from Russia and Ukraine and 73% of its sunflower oil from Ukraine. Prices have escalated and the spectre of food protests looms if the government fails to intervene to bring sanity to supplies and prices.
The statistics of dependency on Russo-Ukranian food supplies are revealing. According to the OECD, Russia and Ukraine account for 30% of world wheat exports and 14% of world maize exports. Ukraine accounts for 16% of global corn exports and 12% of wheat. Ukrainian corn output has grown 140% in the last decade to reach 42m tonnes in 2021, during which Ukraine produced 33m tonnes of wheat and 10m tonnes of barley. Ukraine was also the top exporter of sunflower oil in 2021 at 23m tonnes.
Forty percent of wheat and corn from Ukraine go to the Middle East and Africa, which are already grappling with hunger issues, and where further food shortages or price increases risk pushing millions more people into poverty. Russia is also the world’s largest fertilizer producer. Even before the conflict, spikes in fertilizer prices last year contributed to a 30% rise in food prices.
The average percentage hike in prices in Q1 2022 has been staggering – 88% for wheat, 79% for fertilizers, 42% for maize, and 11% for gold says the OECD. This in addition to huge rises in the price of crude oil, gas and coal.