Governments should subsidise food and energy, says IMF boss

The head of the International Monetary Fund has said that governments need to subsidise the cost of food and energy for the poor.

The cost of living is increasing around the world.

Kristalina Georgieva said that support needs to be provided in a targeted way.

Many governments are giving some help, but critics argue it isn't enough.

There are two priorities when it comes to the cost of living crisis, one is for the very poor and the other is for the rich.

She said that the second is to support businesses that have been most damaged by the war in Ukraine.

The role of the International Monetary Fund is to work with governments to improve the global economy.

Food prices have hit record highs this year, and oil and gas prices have also gone up.

Image source, Getty Images

The war in Ukraine and the coronaviruses caused this. Russia and Ukraine are major exporters of crops.

In the UK, the annualised inflation rate is 9%, 8.3% in the US and 7.4% in the Eurozone.

Some influential figures such as Goldman Sachs have warned of the risk of a recession due to the rise in prices, which is why central banks are raising interest rates.

The impact of higher borrowing costs on governments who took on huge debts to get through the Pandemic is something Ms. Georgieva is concerned about.

She said governments need to be very careful about how much money they spend and what they spend it on.

Image source, AFP

The G7 finance ministers discussed falling living standards at their meeting in Germany.

The meeting of seven wealthy countries ended with a pledge to continue to work together to minimize the impact of the war globally as well as on our own economies and population.

Governments have made a number of interventions to try and lower the cost of living.

In the US President Biden has released oil from reserves to try and bring prices down, Spain and Portugal have capped gas bills, and it is a leading issue in Australia's election.

The Chancellor of the UK is considering a windfall tax on the profits of energy companies.

Image source, EPA

Without the correct government support, the protests in Sri Lanka could be repeated in other countries.

The economic crisis has led to riots, a new prime minister and a first ever default on its debts.

The head of the International Monetary Fund said that similar unrest before the Pandemic was caused by a sense of inequality growing and decisions being made without the support of the people.

She said that if we are to learn any lessons from this year, we should be more humble about policy decisions and engage in multiple ways with people.

A group of international development bodies, including the World Bank and the International Monetary Fund, launched a plan this week 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 was a risk that people would go hungry.

There is a lot of food, but it is not evenly distributed.

She said that the solutions are growing more crops where possible but also a greater focus on agricultural productivity because of climate change.

She said that trade needs to be retained open and that there should be no situation in which countries hold on to food more than they need.

India is the second biggest wheat producer but has banned exports, just as other countries were looking for it to make up some of the shortfall from Ukraine. The ban could be revised at some point.

I would really ask them to reconsider, that is a difficult moment for the world, Ms Georgieva said.

They need to feed their people. They have over a billion of them, but they need to act in a collaborative manner if we are to overcome the crisis.

Kristalina Georgieva will be on Talking Business with Aaron Heslehurst this weekend.

The show can be watched on the internet in the UK.

In other countries, it will be on the World News on Saturday, Sunday, and Monday.