BONN, Germany (AP) — Treasury Secretary Janet Yellen warned Wednesday that the Russian invasion of Ukraine in February led to a sharp rise in food and energy prices, contributing to a slower growth and creates an increased risk of global stagflation.
“It’s a risk-filled environment, both in terms of inflation and potential downturns,” Yellen told a news conference ahead of the Group of Seven finance ministers’ meeting this week in Good.
“The global economic outlook is challenging and uncertain,” Yellen said. “And rising food and energy prices have stagflationary effects, namely lower production and spending and higher inflation all over the world.”
Stagflation occurs when inflation and unemployment are high and economic output is low.
Yellen added that the United States is “best positioned” to meet this economic challenge because of its strong job market, but she said food shortages are a global threat that must be addressed. .
His comments came as the United States and other officials rolled out a multibillion-dollar plan to address food security, a major danger facing an increasingly fragile global economy. The United States, several global development banks and other groups have collaborated in this effort.
The Treasury announced that several development banks are “working rapidly to leverage their funding, political commitment, technical assistance” to prevent war-induced famine, rising food prices and weather damage to crops.
Tens of billions will be spent to support farmers, address the fertilizer supply crisis and develop land for food production, among other issues. The Asian Development Bank will provide funds to feed Afghanistan and Sri Lanka and the African Development Bank will use $1.5 billion to help 20 million African farmers, according to the Treasury.
The European Bank for Reconstruction and Development, the Inter-American Development Bank, the International Fund for Agricultural Development and the World Bank will also contribute tens of billions in the months and years to come to support food producers and address food issues. supply shortage.
The plan stems from a meeting Yellen convened in April during the International Monetary Fund and World Bank Spring Meetings, where she called on powerful nations to seek specific ways to tackle a looming food insecurity crisis. in the world that Russia’s war in Ukraine has made it even worse.
Russia and Ukraine produce a third of the world’s wheat supply, and the loss of raw materials due to war has led to soaring food prices and uncertainty about the future of food security in the world. world, especially in poor countries.
As part of the fight against the crisis, Secretary of State Antony Blinken will also convene meetings in New York on the sidelines of the UN over the next two days on food insecurity. The State Department says that in 2021, more than 193 million people worldwide experienced acute food insecurity, an increase of 40 million people from the previous year. According to projections, as many as 40 million people will be pushed into poverty and food insecurity by the end of the year.
Fuel and fertilizer shortages in many countries and accelerating food price spikes threaten to destabilize fragile societies, increase hunger and malnutrition, spur migration and cause severe economic dislocation . Conflicts have greatly exacerbated food security problems around the world.
Yellen said the US Congress was moving forward with a $40 billion package of security, economic and humanitarian assistance for Ukraine and that she would urge her G-7 counterparts “to join us in increase their financial support to Ukraine. Ukraine has done a remarkable job of repelling the Russian invasion, but it needs our help and it needs it now.
She added that the Treasury was unlikely to renew a provision, due to expire next week, that has eased Russia’s ability to pay bondholders, increasing financial pressures on Russia’s Vladimir Putin.
Yellen said liquidating Russian Central Bank reserves in other countries so the money can be used to fund Ukraine’s defense “is not something that is legally allowed in the United States.” , but left the option open.
German Finance Minister Christian Lindner, for his part, said that using the Russian Central Bank’s frozen assets to cover operating costs is a possible option for longer-term reconstruction efforts.
“In the current situation, such a procedure could take too long. Now we need to secure Ukraine’s solvency within days, weeks,” Lindner said. “Regarding the reconstruction of Ukraine, for me it is politically conceivable to confiscate Russian state assets and use them for the reconstruction of Ukraine.”
As European nations plan to phase out Russian oil and gas, the United States is urging European leaders to consider possible oil tariffs and other methods to prevent Russia from benefiting from rising oil prices. energy.
Yellen said “tariffs, price caps, other possibilities” were under consideration but no decision has been made.
“It’s important for Europe to decide what they think is best, but we keep having these discussions and there are a lot of options,” she said.
AP Writer Geir Moulson in Berlin contributed to this report.
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