The international financial sector is being urged to “rise to the challenge” of supporting open trade and increased agricultural production, following UN warnings that the war in Ukraine has left the world economy on the verge of crisis. 

A briefing issued last week by the UN’s Global Crisis Response Group – the first to address the impacts of Russia’s invasion of Ukraine – says the war has caused dramatic disruption to the food, energy and finance markets. 

Prices have soared across agricultural commodities, including wheat, barley, maize and sunflower oil, and fuels, notably crude oil and natural gas – in part because of restricted supply from the Russian and Ukrainian markets. 

As well as higher direct costs for importers, the UN says this trend has driven up the cost of other goods, including fertiliser, while shipping and freight costs remain at historically high levels. 

At the same time, many developing markets are forced to spend a significant share of export earnings on servicing debt obligations, constraining the ability of governments and public lenders to support those economies. 

“We are on the brink of a global debt crisis,” the UN warns. Its briefing identifies 107 economies, home to 1.7 billion people, that are “severely exposed” to at least one of those areas of disruption. 

The briefing makes several recommendations to the financial sector, which it says has “the instruments and the capacity to respond accordingly and rise to the challenge of the moment”. 

It calls on international financial institutions to focus on flexibility and speed, providing emergency financing and grants to support countries in distress. 

It also calls on multilateral development banks (MDBs) to support new rounds of capital injections, reallocate undisbursed resources towards emergency spending, and take “a flexible approach to balance sheet risk management to leverage to its full extent their emergency lending capacity”. 

The UN warnings were quickly followed by a joint statement from several influential organisations, including the World Trade Organization (WTO), World Bank and International Monetary Fund (IMF), appealing for coordinated support from the public and private financial sectors. 

“We call on the international community to urgently support vulnerable countries through coordinated actions ranging from provision of emergency food supplies, financial support, increased agricultural production, and open trade,” the statement says. 

Signatories include WTO director-general Ngozi Okonjo-Iweala and IMF managing director Kristalina Georgieva. 

“We also urge the international community to help support urgent financing needs, including through grants,” it adds. “This should include financing of immediate food supplies, safety nets to address the needs of the poor, and for small farmers facing higher input prices.” 

Governments should “keep trade open” by avoiding restrictive measures such as export bans on food or fertiliser, the joint statement says, warning that for each percentage point increase in food prices an estimated 10 million people are pushed into extreme poverty. 

For trade finance lenders, the war has had several negative effects. Sanctions from governments in the US, Europe and Asia – as well as reputational risks – have made doing business linked to Russian commodities highly risky. 

Traders have also warned of a liquidity crunch in the energy market, where rising prices triggered large margin calls and prompted calls for central bank intervention. 

And the costs associated with facilitating trade remain high, driven by imbalances between supply and demand, high transportation costs, limited container availability and ongoing disruption due to Covid-19, particularly in China’s largest port, Shanghai. 

For commercial lenders, regulatory requirements around liquidity have also been identified as a disincentive to support lower-value trade transactions. 

However, the UN briefing warns that the international finance sector has “no time to lose”. 

“Waiting months to put in place the necessary measures to preclude another lost decade for development, a generalised debt crisis, and social and political instability is not acceptable,” it says.