IMF and World Bank raise alarm over food prices, warn on further rises
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Further gains in food prices would be “terrible” for the world’s poor and throw hundreds of thousands of them into starvation, the International Monetary Fund has warned. Governments throughout Asia and the Middle East are seeking to combat food inflation and avoid social unrest by curbing exports or lifting import duties on basic food staples such as rice. (UPDATED)
Global food prices surged 57 percent last month from a year earlier, according to the United Nations, and the World Bank warns civil disturbances may be triggered in 33 countries.
If food inflation keeps accelerating at its current rate, “the consequences will be terrible,” IMF managing director Dominique Strauss-Kahn told reporters at the IMF’s semi-annual meetings in Washington.
“Hundreds of thousands of people will be starving, leading to a disruption of the economic environment.”
Proposals for dealing with the unfolding global financial crisis that has roiled economies around the world and led to higher food and energy prices have dominated the spring meetings of the IMF and the World Bank.
The sessions conclude Sunday with a meeting of the Bank’s policy-setting committee, which is expected to focus on how the crisis is affecting developing countries, especially the poor ones where the World Bank is trying to help reduce poverty.
“We must respond to the immediate emergency situation,” said Robert Zoellick, the Bank’s president, before the meeting.
“But we must respond in such a way that [we] can seize opportunities” to help developing countries achieve objectives such as improving health care and reducing malnutrition and infant mortality.
He said other topics included promoting investment in Africa, climate change and rising food prices.
“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.”
He said in many developing countries, the poor were spending up to 75 percent of their income on food, so when basic food prices rise, “it hits hard.”
Zoellick has said that in order to deal with the immediate crisis, the international community must close an at least $500-million food gap identified by the United Nations World Food Program.
THOUSAND WILL STARVE
Governments in Haiti, Egypt and the Philippines, among others, are already facing social unrest because of rising food prices and shortages.
If the price spike continued, Strauss-Kahn said, “Thousands, hundreds of thousands of people will be starving. Children will be suffering from malnutrition, with consequences for all their lives.”
Earlier Saturday, Germany’s development minister, who is attending the World Bank’s meeting on Sunday, called for greater regulation of the global bio-fuels market to prevent its expansion from driving up food prices.
“It is unacceptable for the export of agro-fuels to pose a threat to the supply situation of the very people already living in poverty,” Heidemarie Wieczorek-Zeul said in a statement.
She said the world needed new rules that balanced goals including climate change mitigation, food security and social development.
The development group Oxfam, a frequent IMF critic, said rich countries were largely responsible for the food crisis because they had been cutting aid to developing countries and encouraging bio-fuel production, which the IMF says is responsible for almost half the increase in the demand for food crops.
“Rich countries’ demand for bio-fuel is driving up food prices and is a big part of the problem,” said Elizabeth Stuart, an Oxfam policy adviser. “Meanwhile, by cutting aid levels, they are doing precious little to be part of the solution,” she told Bloomberg.
Strauss-Kahn spoke at a news conference after a daylong meeting of the steering committee of the 185-nation IMF that dealt with the unfolding global financial crisis, which has affected economies around the world.
In its communiqué, the committee noted “that a number of developing countries, especially low-income countries, face a sharp rise in food and energy prices, which have a particularly strong impact on the poorest segments of the population.”
The committee urged the IMF to work closely with its sister institution, the World Bank, and other organizations to provide developing countries with financial support and policy advice to deal with these problems.
The Washington-based IMF and World Bank were established 64 years ago to respectively regulate the global economy and provide aid to poor countries to reduce poverty.
The finance ministers and central bankers said their meeting took place “at a time of unusual uncertainties surrounding global and financial market prospects. It stresses that the challenges facing the world economy are global in nature, requiring strong action and close cooperation among the membership.”
They said risks to economic outlook “come from the still unfolding financial market turmoil and from the potential worsening” of housing markets and the credit crisis.