Higher global food and fuel prices pose new policy challenges for Sub-Saharan Africa because food represents a larger share of what poorer consumers buy, the International Monetary Fund said on Wednesday.
Food inflation in Africa was currently 2.8 percentage points higher than headline inflation, the IMF said. It suggested that figure could be higher since the latest increases in food prices had not yet been reflected in consumer price index data.
Policy responses would determine whether higher prices would translate into higher sustained inflation, it said, adding that for the moment, monetary policy was responding appropriately in most countries.
The fund also said social implications of rising food costs were evident in food-related unrest in Burkina Faso, Cameroon and Niger.
"But the spike in the prices of fuel and individual food commodities calls for policy responses that must be custom-tailored to each country's unique situation and whether the shock is temporary or permanent," the fund said.
"Temporary increases in food prices need not call for countervailing monetary policy, particularly if monetary policy is already accepted as credible," it added.
But there may be a need to tightened policies if sustained high good inflation started to have a significant second-round effects, the IMF said.
The effect of temporary price shocks could be mitigated by temporary and targeted subsidies, temporary tax measures, or more aid, the IMF said.
Permanent shocks require "over time a full pass-through of prices," it said, "depending on individual country circumstances, there may be a case for temporary, time-bound mitigating measures."
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