Rising food prices threaten poverty reduction: WB

The world is facing what’s being called the worst financial crisis since the Great Depression of the 1930s, with worldwide food prices spiralling and millions of people in danger of being pushed into deep poverty

The World Bank and the Food and Agriculture Organisation (FAO) have warned that globally rising food prices could push 100 million people into deep poverty and hit poorest countries hard. “High food prices are threatening recent gains in overcoming poverty and malnutrition, and are likely to persist over the medium term,” says a new World Bank Group policy note released in Washington.

According to ‘Rising Food Prices: Policy Options and World Bank Response’, increases in global wheat prices reached 181% over the 36 months leading up to February 2008, and overall global food prices increased by 83%. Food crop prices are expected to remain high in 2008 and 2009 and then begin to decline. But they are likely to remain well above 2004 levels through 2015 for most food crops.

“Since 2005, the prices of staples have jumped 80%. Last month, the real price of rice hit a 19-year high; the real price of wheat rose to a 28-year high, and almost twice the average price of the last 25 years. The realities of demography, changing diets, energy prices and biofuels, and climate change, suggest that high -- and volatile -- food prices will be with us for years to come. Rising food prices could wipe out successes in reducing poverty and malnutrition,” said the World Bank release.

The World Bank Group estimates that 33 countries around the world face potential social unrest because of the acute hike in food and energy prices. For these countries, where food comprises between half to three-quarters of consumption, there is no margin for survival, it said.

“Skyrocketing food prices have increased attention to the larger challenge of overcoming hunger and malnutrition, the “forgotten” U N Millennium Development Goal (MDG). Even though hunger and malnutrition fall under the very first MDG, beyond traditional food aid, they receive only about one-tenth of the resources appropriately directed to HIV/AIDS, another killer,” said the World Bank Group.

“Yet, malnutrition is the MDG with the greatest “multiplier” effect: it is the largest risk factor for kids under five and the underlying cause of an estimated 3.5 million of their deaths each year. More than 20% of maternal deaths are traced to malnutrition. Hunger and malnutrition are a cause, not just a result, of poverty.”

World Bank President Dominique Strauss-Kahn and International Monetary Fund (IMF) chief Robert Zoellick said that richer countries must help poorer nations to improve healthcare and reduce malnutrition and infant mortality, and should increase investments in Africa.

“In the US and Europe, over the last year we’ve been focused on the prices of gasoline at the pump,” Zoellick said. “While many worry about filling their gas tanks, many others around the world are struggling to fill their stomachs. And it’s getting more and more difficult every day.”

“Based on a rough analysis, we estimate that a doubling of food prices over the last three years could potentially push 100 million people in low-income countries deeper into poverty,” Zoellick said in a statement at the conclusion of the World Bank spring meeting in Washington.

The FAO cautioned that fast-rising food prices would hit hard the poorest countries whose cereal import is expected to rise by 56% in 2007-2008. The report comes over and above the 37% increase it had witnessed in 2006-2007. As many as 37 countries worldwide are facing cereal shortages. Among them China, Bangladesh, Nepal, Sri Lanka and Vietnam face severe localised food insecurity and Afghanistan widespread lack of access, it said.

“We have to put our money where our mouth is now so that we can put food into hungry mouths. It’s as stark as that,” Zoellick said. “This is not just a question about short-term needs, as important as those are. This is about ensuring that future generations don’t pay a price too,” he added.

The grim warnings by the top UN agencies, which wanted governments to quickly put urgent measures in place to avert a global food crisis, come amid mounting alarm at the social and political upheavals that world leaders fear could be triggered by spiralling prices of cereals.

“The poor are not just facing higher food prices but also higher energy costs, which is a worrying combination,” said Danny Leipziger, World Bank Group Vice President for poverty reduction and economic management. “Policy responses to protect the poor from food price rises are urgent, and need to be designed in a way that is conducive to stimulating greater agricultural production in the long run.”

Increased biofuel production has contributed to increases in food prices. Concerns over oil prices, energy security and climate change have prompted governments to increase biofuel production and use, leading to greater demand for raw materials including wheat, soy, maize and palm oil. Food price hikes are also linked to higher energy and fertiliser prices, a weak dollar and export bans.

The World Bank report notes that many governments are already taking action. Some are expanding targeted safety nets, such as cash transfer programmes to vulnerable groups, food-for-work programmes, or emergency food aid distribution. Several countries have lowered tariffs and other taxes on key staples, in order to provide some relief to consumers. Other countries have put in place export bans, which are detrimental to food importers and reduce incentives for production.

India’s Finance Minister P Chidambaram has called for a global consensus on tackling the spiralling prices of food and oil across the world, and warned about it turning into a global contagion. “Unless we act fast for a global consensus on the price spiral, the social unrest induced by food prices in several countries will conflagrate into a global contagion, leaving no country, developed or otherwise, unscathed,” Chidambaram told the development committee of the World Bank and the IMF last week.

Though inflation in India rose to 7.41%, Agriculture Minister Sharad Pawar said the food situation in the country was comfortable. “We have over half-a-million tonnes of foodgrain, more than the buffer norms (of 4 million tonnes) as on April 1, this year,” he said.

Confronted by what the IMF head says is the worst financial crisis since the Great Depression of the 1930s, finance chiefs from Britain, Canada, France, Germany, Italy, Japan and the United States decided only greater transparency in the financial system could restore normalcy to the markets. The G7 endorsed recommendations from an international forum and set for some of them a deadline for implementation unprecedented in its brevity -- 100 days.

http://infochangeindia.org/200804167063/Agriculture/News/Rising-food-prices-threaten-poverty-reduction-WB.html