The International Monetary Fund (IMF) warns that global grain prices could increase by up to 15% due to Russia's withdrawal from a crucial agreement permitting the transportation of Ukraine's grains through the Black Sea ports.


Pierre Olivier Gourinchas

International Monetary Fund's (IMF) Chief Economist and Research Director, Pierre-Olivier Gourinchas, stated that global grain prices could rise by up to 15% following Russia's withdrawal from the agreement allowing the transportation of Ukraine's grains through the ports in the Black Sea.

Gourinchas, during a press conference for the July 2023 issue of the IMF's World Economic Outlook Report, highlighted that "It's clear that last year's Black Sea grain initiative was very effective in providing an ample supply of grains to the world".

He emphasized that the same mechanism was working in reverse now, and this could likely put upward pressure on food prices. Gourinchas stated that while the IMF was still evaluating the predictions about Russia's withdrawal from the agreement, a 10-15% increase in grain prices was a "reasonable estimate".

In the IMF report, it was noted that the recent suspension of the Black Sea Grain Initiative was worrying. This kind of negative supply shock could asymmetrically affect countries, leading to different dynamics for inflation expectations, policy responses, and more currency movement.

BLACK SEA GRAIN INITIATIVE

To mitigate the impact of the Russia-Ukraine War on global food prices, the United Nations, Russia, Turkey, and Ukraine had signed the Black Sea Grain Corridor Agreement at a ceremony held in Istanbul on July 22, 2022.

Kremlin Spokesperson Dmitry Peskov stated on July 17 regarding the expired Black Sea Grain Corridor Agreement, "The grain corridor agreement has effectively ended, it has been halted. Russia will immediately return to the grain agreement as soon as the relevant conditions are applied. The part of the agreement related to Russia has not been fulfilled."