The existing global financial architecture was supposed to ensure stability by providing liquidity when capital retreats and cushioning vulnerable economies against shocks. So, why is the system doing exactly the opposite?
ADDIS ABABA—The closure of the Strait of Hormuz has caused severe price spikes, which are hitting the world’s most vulnerable people the hardest. Since the start of this year, the price of Brent crude has risen by at least 41% (topping $100 per barrel), that of urea (a component in fertilizer) by about 50%, and container freight rates by 21%. Maritime insurance premiums have surged up to ninefold, and 29 African currencies have depreciated. And as if these shocks were not bad enough, the global financial system’s response has made matters worse.
ADDIS ABABA—The closure of the Strait of Hormuz has caused severe price spikes, which are hitting the world’s most vulnerable people the hardest. Since the start of this year, the price of Brent crude has risen by at least 41% (topping $100 per barrel), that of urea (a component in fertilizer) by about 50%, and container freight rates by 21%. Maritime insurance premiums have surged up to ninefold, and 29 African currencies have depreciated. And as if these shocks were not bad enough, the global financial system’s response has made matters worse.