Governments in Latin America should provide targeted and temporary fiscal support to help poor families cope with higher food and energy prices and reduce the risk of social unrest from soaring inflation, according to the International Monetary Fund.

The IMF, long criticized for advocating painful austerity, said that in nations where social safety nets aren't well developed, governments can implement temporary measures to smooth the pass-through of surging international prices due to Russia's invasion of Ukraine. At the same time, the Washington-based fund warned about the fiscal cost and potential for distortions.

Since the start of the war, 40% of countries have introduced new measures to help contain the effects of rising prices on vulnerable groups, ranging from tax and import tariff reductions to price caps or social transfers, with an average estimated fiscal cost of 0.3% of gross domestic product this year, the IMF said.

Inflation's impact has already stirred protests in Peru, where the fastest cost of living increases in two decades prompted riots that led President Pedro Castillo to impose a curfew on the capital, Lima.

Some economies in the region such as Argentina, Brazil, Colombia and Chile are significant producers of food, oil and metals. Countries that benefit from higher prices for their exports may find it easier to finance social assistance measures, IMF officials wrote in a blog post published Tuesday.

Still, "any additional space should be used wisely given the unusually high risks surrounding the global recovery and the evolution of commodity prices, as well as the increasing costs for government financing," the officials said.

For instance, any further slowdown in China due to the COVID-19 pandemic or other reasons could hurt the region's exports and trade, according to the blog, written by Ilan Goldfajn, the fund's Western Hemisphere director and former president of Brazil's central bank; Jorge Roldos, the assistant director; and Santiago Acosta-Ormaechea, a senior economist in the department.

Additionally, higher global and domestic financing costs resulting from the Federal Reserve's monetary policy tightening could eventually affect global financial conditions, with higher financing costs accelerating capital outflows from Latin America, the fund said.

The IMF last week forecast growth of 2.5% for Latin America and the Caribbean for this year. While that's a marginal upgrade compared with 2.4% expected in January, it's the slowest rate among regions of the world other than emerging and developing Europe, which is dragged down by Russia's recession due to Western sanctions.

Eric Martin reports for Bloomberg News.

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