concerning the allocation of funds decommitted from projects under the 10th and 11th European Development Funds for the purpose of financing actions addressing the food security crisis and economic shock in African, Caribbean and Pacific (ACP) countries following Russia's war of aggression against Ukraine

EXPLANATORY MEMORANDUM

1.CONTEXT OF THE PROPOSAL

•Reasons for and objectives of the proposal

The food security situation in the world is rapidly deteriorating and many of the countries affected are least developed countries or low-income, food-deficit countries.

Before the exacerbation of global food insecurity by Russia’s war of aggression against Ukraine, close to 193 million people (almost 40 million more than the previous year) across 53 countries/territories were acutely food insecure and in need of urgent assistance. Russia’s war of aggression against Ukraine has resulted in drastic reduction in supply of grains to global markets as Black Sea routes are blocked, and grain silos deliberately attacked. Global food prices are rising rapidly and are at their highest level in three decades. The increase in energy prices drives up prices of agricultural inputs (notably fertilizers), transport and ultimately food. These price hikes are worsening the macro-economic outlook in a context where fiscal space was already reduced by the COVID-19 pandemic. This could lead to a further increase in the number of countries in debt distress and/or with balance-of-payments crises. Conflicts and droughts further exacerbate the situation in vulnerable regions. The most vulnerable countries are the least developed and low-income ones. As seen with uprisings in the past decades, it is often a food price shock that sets off instability and conflict.

The political sense of urgency in support of the most exposed countries has been underlined by the European Council in its Conclusions of 24-25 March where it invited the Commission to prioritise work on global food security and affordability, in particular by supporting food security and agriculture in Ukraine and the most vulnerable and exposed third countries. Subsequently, in its Conclusions of 30-31 May 2022, the European Council invited the Commission to explore the possibility of mobilising reserves from the European Development Fund to support the most affected partner countries. Funds under the Neighbourhood, Development and International Cooperation Instrument - Global Europe (NDICI-Global Europe) geographic pillar are fully programmed and around EUR 3 billion is already focusing on agriculture, nutrition, water and sanitation programmes. Additionally, approximately EUR 520 million were initially allocated in 2022 to African, Caribbean and Pacific (ACP) countries under the humanitarian aid budget, of which a significant part is addressing food insecurity and related needs. Nevertheless, given the extent of the needs and potential consequences, additional finance to support partner countries should be mobilised. Availabilities under the EU budget are very limited (the NDICI-Global Europe emerging challenges and priorities cushion will be entirely used in 2022 to respond to other urgent priorities and the initial 2022 Humanitarian Aid budget towards food security and related needs in ACP countries identified before the start of Russia’s war of aggression in Ukraine is close to full implementation), and given the impact in various ACP partner countries, the mobilisation of decommitted funds from the 10th and 11th European Development Funds (EDF) could allow the EU and its Member States to step up their support and contribute to the efforts to address the food security crisis exacerbated by Russia’s war of aggression against Ukraine, in a Team Europe approach.

The objective of this proposal for a Council decision is to obtain the authorisation of the Council to use decommitted funds from the 10th and 11th EDFs to finance actions addressing the food crisis and economic shock in ACP countries following Russia’s war of aggression against Ukraine with an amount of up to EUR 600 000 000, of which EUR 488 000 000 under from the 10th EDF and EUR 112 000 000 from the 11th EDF.

Out of these funds, up to EUR 582 000 000 will contribute to the financing of actions and up to EUR 18 000 000 will cover the support expenditure incurred by the Commission.

These funds will be used to the benefit of the most affected partner countries, paying particular attention to the most vulnerable and exposed countries, notably to provide:

·macro-economic support (EUR 100 million);

·support to food production and resilience of food systems (EUR 350 million);

·humanitarian assistance (EUR 150 million).

As regards the support to food production and resilience of food systems, the EU will support investments in local production capacities as part of sustainable aquatic and agri-food systems, based on agroecological approaches, including diversification of agricultural value chains and food production. The following criteria could be used to focus the assistance on selected countries:

·The partners’ (increasing) levels of food insecurity and malnutrition;

·The partners’ exposure to the consequences of the Russian aggression against Ukraine, based notably on their share of food imports into their GDP;

·The partners’ macroeconomic vulnerabilities, which could be established on the basis of their debt to GDP ratio, international reserves / months of imports coverage and Debt Sustainability Analysis rating;

·The potential impact of Union funding in partner countries or regions, assessed notably through the scope to scale up relevant production and resilience enhancing interventions.

Actions financed under this proposal will support the EU Global Food Security Response, which was developed following a request by the European Council. The Response includes immediate and medium-term actions to demonstrate partners worldwide that the EU is providing integrated, comprehensive and swift support to address the impact the war is having on them. The EU Global Food Security Response operationalises the various strands of action – as foreseen within FARM and the G7 Global Alliance and providing the necessary support to the UN Global Crisis Response Group.

•Consistency with existing policy provisions in the policy area