The International Monetary Fund (IMF) highlighted this Saturday, 5th, that in addition to the human losses caused by the conflict in Eastern Europe, the rise in raw material prices are among the main negative effects of the war in Ukraine, which has caused a additional inflationary pressure in several countries.
“Price shocks will impact across the world, especially on poor households for whom food and fuel account for a larger proportion of expenditures,” the IMF said in a statement. “If the conflict escalates, the economic damage would be even more devastating.”
Also according to the IMF, the central banks of the countries need to be aware of the price pressures that have been worsening. The body urges monetary authorities to “carefully monitor” the pass-through of rising international prices to domestic inflation to “calibrate appropriate responses”. “Fiscal policy will need to support the most vulnerable households to help offset the rising cost of living,” the fund suggests.
The assessment was released this Saturday after a meeting of the Executive Council of the body, to discuss the economic impacts caused by the war in Ukraine. The meeting was chaired by the entity’s managing director, Kristalina Georgieva.
At the meeting, representatives of the monetary fund also discussed issues surrounding the sanctions imposed on Russia’s banking system, which was excluded from the global payments system, Swift, after initiating attacks on the neighboring country.
“While it is too early to predict the full impact of these sanctions, we have already seen a sharp drop in asset prices as well as the ruble exchange rate,” the body says. In addition to the measures imposed on the Putin government, the IMF stressed that countries that maintain “very close economic ties” with Ukraine and Russia run the risk of facing problems of interruption in the supply of raw materials.
According to the monetary entity, Ukraine has already requested emergency financing of US$ 1.4 billion through the IMF’s Rapid Finance Facility. As disclosed, the Executive Board of the body is expected to take the Ukrainian request for discussion next week.
In the press release, the IMF informed that its staff will continue to monitor the collateral effects of the war around the globe, and especially in countries directly supported by the monetary entity and those with vulnerabilities or high exposures to the crisis.
“The Fund will advise our member countries on how to calibrate their macroeconomic policies to manage the range of spillovers, including through disruptions to trade, food prices and other commodity and financial markets.”
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