Food-fuel surge puts poor countries at "tipping point" : IMF
4/7/2008 17:34
Poor countries are increasingly threatened by the surging food and fuel
prices, which is eating up reserves and seriously frustrating poverty reduction
efforts, the International Monetary Fund (IMF) said in a broad 162-country
survey.
The report said that the impact is being felt globally but is most
acute for import-dependent poor and middle-income countries confronted by
balance of payments problems, higher inflation, and worsening poverty.
"Some
countries are really at a tipping point," IMF Managing Director Dominique
Strauss-Kahn said upon the release of the report on Tuesday.
In advanced
countries, higher food and fuel prices are reducing people's living standards
and making it more difficult for governments and central banks to support growth
while containing inflation.
In emerging economies, and especially in some
low-income countries, the stakes are even higher. For the very poor, high food
prices can mean deep poverty, hunger and malnutrition
Analyzing the
macroeconomic policy challenges arising from the price surges, the study argues
that many governments will have to adjust policies in response to the price
shock while the international community will need to do its share to address
this global problem.
Food prices have doubled on average since 2006, while
oil prices have quadrupled since 2003. Global demand has grown faster than the
ability of producers to boost supplies in the last decade.
That has forced
several countries -- especially in Africa -- into short-term measures to address
food shortages, such as importing goods that severely impacted trade deficits,
at the expense of longer term economic development.
"If food prices rise
further and oil prices stay the same, some governments will no longer be able to
feed their people and at the same time maintain stability in their economies,"
Strauss-Kahn said.
The higher prices have cost 33 net food importers about
0.5 percent of their economic output since January 2007, or US$2.3 billion,
while 59 net oil importers have had to spend about 2.2 percent, or US$35.8
billion, according to the IMF report.
Strauss-Kahn also urged food producing
nations not to block exports in order to address shortages and price-hikes in
their own countries. Nearly 30 countries have curbed exports last year.
Mark
Plant, the IMF's deputy director for policy, also highlighted the ongoing
"tension" between food and biofuels for crops. Maize prices in particular have
been driven up largely due to US demands for maize-based ethanol.
The IMF
warned that both food and fuel costs were likely to remain high for the
foreseeable future. Crude oil has been trading at record levels of more than
US$140 per barrel since last week.
Strauss-Kahn said the findings of the
study underscored the need for a broad cooperative approach involving the
countries affected, donors, and international organizations to cope with the
effects of high prices.
Annual food price inflation for 120 low-income and
emerging market countries rose to 12 percent at the end of March 2008 from 10
percent three months earlier, while fuel prices accelerated to 9 percent from
6.7 percent in the same period. Preliminary data indicate the problem is
worsening.
The IMF's African Department has produced an analysis of
the
implications of the price shocks for the balance of payments of
low-income countries in sub-Saharan Africa.
The note identifies a list of 18
countries in the region that are especially hard hit and that, consequently,
face a pressing need for additional balance of payments and budget
support.
Xinhua
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