Food Crisis Rings Alarm Bells
By Riaz Haq
CA


"I am pleased to announce that ADB will provide $500 million as immediate budgetary support to the hardest-hit countries so that they can bring food to the tables of the vulnerable, poor and needy," the Asian Development Bank Chief Haruhiko Kuroda told a news conference, adding that he expected to make the first loans within weeks. But Mr. Kuroda said the best long-term solution to painful price spikes was through boosting agricultural output, adding that the bank would double lending to agricultural, natural resource and infrastructure projects to $2 billion in 2009.
As the alarm bells sound louder in the major world capitals, the rich nations and the multilateral institutions such as the World Bank, the Asian Development Bank, World Food Program and others are showing a great sense of urgency in responding to the growing international crisis.
In the absence of any coordinated international effort to assure food supplies, nations are acting unilaterally to avert the crisis within their national borders. Export bans and prices floors established by main rice exporters China, Pakistan, Vietnam and India have increased price volatility and raised uncertainties about future supplies, according to the ADB. Indian sugar and soy-oil futures are dropping amid market talk that the government may halt trading to guarantee food supplies and rein in the inflation that is at its highest level in three-and-a-half years.
There is some evidence that, at least partially, the dramatic food price increases are being fueled by hedge funds and speculators. Investors fleeing Wall Street's mortgage-related strife have plowed hundreds of millions of dollars into grain futures, driving prices up even more. The US Federal Reserve effort to pump liquidity into the markets has exacerbated the crisis.
"Trade measures or price controls are not efficient ways to combat the food crisis or food-price inflation. It distorts the market and could exacerbate the situation in the international grain market," Mr. Kuroda said in an interview carried by Reuters.
The World Bank, with its focus on poverty reduction, is concerned about reversals of the gains made in the war against poverty if the food crisis is not dealt with effectively. "Based on a very 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," World Bank President Robert Zoellick said. "This is not just a question of short-term needs, as important as those are; this is ensuring that future generations don't pay a price too." He reiterated his call for a "New Deal for Global Food Policy" to meet the food price crisis, which includes a call for US$500 million from donor governments to close an immediate gap identified by the UN's World Food Program. To date, about half of the half-billion-dollar target has been met, Zoellick said.
US President Bush and Secretary of State Condeleeza Rice have also expressed serious concerns about potential instability in the low-income countries. The US is pledging to more than double its food aid in 2008-2009 to avert a major humanitarian and security crisis. Mr. Bush is also attempting to at least partially untie the US food assistance to purchases from US farmers. The European governments have already done so.
As the nations of the world and multilateral institutions wake up to the fact that there is a serious food crisis gripping the world, it is important that they work on a comprehensive strategy beyond just the emergency food aid. The strategy needs to focus on helping farmers in poor nations with education, infrastructure and facilities to enable them to feed themselves and their nations.
The small farmers in poor countries have very low productivity and crop yield due to lack of water management, good quality seeds, fertilizer, equipment, storage and transportation facilities, etc. Such investments are the best way to prevent a backlash against globalization, reduce conflict and poverty, and assure peace and security in the world.
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