In the current century, the world has suffered three major food price spikes. The first two happened in 2007-2008 and 2010-2012. The third one is happening now. Brought on by the COVID-19 pandemic and the war in Ukraine, food prices have risen to historic heights (Figure 1).

But there is a major difference among these price spikes, with severe consequences for net food-importing developing countries. During the first two spikes, as food prices went up, the value of the US dollar, the main currency used in international trade transactions, went down. The depreciation of the US dollar and the consequent appreciation of other currencies made imports cheaper and provided some ease to food import bills for many developing countries.

However, the current price spike is different. In an attempt to combat high inflation in the United States of America, the Federal Reserve increased its interest rates causing the US dollar to appreciate some 24 per cent between May 2021 and October 2022 (Figure 1). This made the US dollar and the food that developing countries buy with it more expensive.

For net food-importing developing countries, the international market for food is a lifeline. And as it becomes more expensive to buy US dollars, it also becomes harder for these countries to prevent millions of people from going hungry. These countries face a double burden of high food prices and a depreciation of their local currency against the US dollar. With national budgets stretched thin, net food importers are placed in a vulnerable position.