Apr 20, 2011
Food price rises pushing millions into extreme poverty, World Bank warns
From the Guardian
Food producing countries must relax export controls and divert production away from biofuels to prevent millions more people being driven into poverty by higher food prices, the head of the World Bank Robert Zoellick said in Washington.
Without action to increase the supply of food, 10 million more people could fall below the $1.25 (76p) a day extreme poverty line over the next few months – in addition to the 44 million pushed into poverty by soaring food prices during the last year, he warned on Thursday.
A report by the World Bank found prices had jumped by 36% since April 2010, driven in part by higher fuel costs connected to instability in the Middle East and North Africa.
Higher transport and fertiliser costs have sent the price of wheat, maize and soya back to levels last seen in the price boom of 2008.
"More poor people are suffering and more people could become poor because of high and volatile food prices," Zoellick said. "We have to put food first and protect the poor and vulnerable, who spend most of their money on food."
He was speaking before the IMF and World Bank meetings later this week, which will be attended by finance ministers and central bankers including the chancellor of the exchequer, George Osborne, and Bank of England governor Mervyn King.
A further 10% increase in food prices could drive an additional 10 million people below the poverty line, while a repeat of the last year's increases would affect 34 million who are already close to the poverty line.
Some analysts have argued that a slowdown in global growth will bring food prices down from their recent peaks.
Goldman Sachs said in a recent note that oil prices would begin to drop, along with other commodities.
In recent days oil prices have slipped from a high of $127 to $120. But rival analysts remain concerned that oil prices will continue their long upward path, albeit with a few blips along the way.
The World Bank's food price index found that several key foods for developing countries shot up last year, including maize by 74% and wheat by 69%, though rice prices have been stable.
It said the Kyrgyz Republic, where the poorest 10% of the population spends 73% of their budget on food, food price inflation was 27% in 2010.
A range of measures are needed to tackle further price rises and should be adopted by food producing nations quickly to prevent further food poverty and famine, including "targeting social assistance and nutritional programmes at the poorest, removing grain export restrictions, and relaxing biofuel mandates when food prices exceed threshold levels", the World Bank said.
A clampdown on speculators who had brought excessive volatility to commodity markets was also needed, it said.
World Bank officials have joined the UN and charities in strife-torn Middle Eastern and North African countries to try to protect some of the poorest groups from even worse suffering.
In the past, the World Bank has being accused of attaching to its offers of generous aid demands for the introduction of aggressive Anglo Saxon market policies, with less restrictive labour laws and cuts in government spending.
In Tunisia, talks on an aid package backed by the World Bank were described as advanced. Talks were also taking place in Ivory Coast, following its recent civil war, and in Egypt – though those talks appear to have stalled.
"We have discussions with the Egyptian authorities. We haven't yet reached an understanding about the types of support that could be most helpful," Zoellick said.
He added: "The Egyptian authorities are also discussing the overall situation with the IMF, so those will be some of the discussions going on over the week.
"The early indications are that, given the drop in the tourism industry and some other [sectors], there are going to be some budget challenges to be addressed."
About the author
Phillip Inman is economics correspondent of the Guardian.