Governments should subsidise food and energy, says IMF boss

International Monetary Fund (IMF) Chief Kristalina Georgieva said governments need to subsidise the cost of food and energy for the poorest members of society.

Support should be supplied in a targeted manner, preferably through direct subsidies to individuals, the IMF chief said in an interview with the BBC.

People around the world are struggling with the rising cost of living.

Regarding the cost of living crisis, Georgieva stated, "There are two priorities, the first being the extremely poor, who are currently dealing with high food and energy prices."

She stated that the second objective is to assist those businesses that have been "particularly harmed" by the conflict in Ukraine.

However, that's proving challenging because food prices have hit record highs this year, whilst oil and gas prices have also risen sharply.

This is largely due to the coronavirus pandemic and the war in Ukraine. Russia and Ukraine are both major exporters of crops and hydrocarbons.

Protests seen in Sri Lanka could be repeated in other countries

Georgieva is concerned about the impact those higher borrowing costs will have on governments who have to repay huge debts they took on to get through the pandemic.

She said governments needed to be "very careful" about how much money they spent and what they spent it on.

Georgieva is concerned that without the correct government support the protests seen in Sri Lanka could be repeated in other countries.

Sri Lanka's economic crisis, exacerbated by rising prices, has led to deadly riots, a new prime minister and a first ever default on its debts.

The IMF boss said such similar unrest before the pandemic, from France to Chile, was caused by "a sense of inequality growing" and decisions being made without the support of the people.

"If we are to learn any lessons from 2019 it is to be much more humble about policy decisions, and engage in multiple ways with people, because policies must be for people, not the paper we write them on," she said.

Feeding the world

A group of international development bodies including the IMF and World Bank this week launched a major plan to try and tackle food insecurity around the world.

It was spearheaded by US Treasury Secretary Janet Yellen, who said it was necessary because: "There's a very real risk that soaring global market prices of food and fertiliser will result in more people going hungry."

Georgieva said that while there is plenty of food, it is not evenly distributed.

The solutions, she said, are growing more crops where possible but also a greater focus on agricultural productivity, "not only because of the war, but because of climate change".

She added: "Trade needs to be retained open, we should not have a situation in which countries hold on to food more than they need and create all kinds of barriers for moving it from one place to another."