IMF warns of sharp increase in grain prices

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The termination of the Black Sea grain deal could send prices up by 15%, the agency’s chief economist reportedly said

Global grain prices could jump by as much as 15% after Russia declined to renew the Black Sea Grain Initiative last week, Bloomberg reports, citing the IMF’s chief economist.

Pierre-Olivier Gourinchas told reporters on Tuesday that the Black Sea Grain Initiative was “very instrumental” in ensuring ample grain supply in the last year, and the termination of the agreement is “likely to put upward pressure on food prices.”

While the IMF is still assessing its forecasts on the potential effects of Russia’s move, a 10% to 15% increase in grain prices is “a reasonable estimate,” Gourinchas said.

The agreement, mediated by the UN and Türkiye, was signed in July 2022, then repeatedly extended and was due to expire on July 17. It guaranteed a safe trade corridor for vessels to export Ukrainian grain out of Black Sea ports. Accompanying the deal was a Russia-UN memorandum aimed at facilitating Russian agricultural exports, which, although not directly targeted by Western sanctions, have faced problems due to Western sanctions.

Russia refused to extend the agreement last week, claiming that the West failed to fulfil its obligations under the deal, such as the relief of Western economic restrictions that have hampered the export of Russian food and fertilizers.

Moscow has also criticized the grain deal for not living up to its humanitarian justifications. Most of the Ukrainian products were sent to wealthy nations rather than poor countries most threatened by food insecurity.

Moscow said on Tuesday that the grain deal could still be revived if Moscow receives the sanctions relief that it was promised by the UN.

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