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Agriculture - Nutrition | Economy - Development

IMF presents recipe to address food price shocks

afrol News, 28 May - The International Monetary Fund warns against control policies being adopted by some countries in trying to address the current food crisis, saying these could have long-term draw-backs. The Fund has other proposals to African governments.

Recently addressing a videoconference of civil society organisations, at the World Bank Headquarters in Washington, IMF Managing Director Dominique Strauss-Kahn said three priority areas have been identified to deal with the situation.

"I must say that I see some responses that concern us like price controls, which discourage production; and [controls] on exports, which export hunger from one country to another; and indiscriminate subsidies that help the rich more than the poor and undermine gains made in recent years in reducing poverty and achieving macroeconomic stability," Mr Strauss-Kahn was quoted as saying by the Fund's own publication 'IMF Survey'.

34 sub-Saharan Africa countries are listed under the most vulnerable to the food crisis and with the recent food riots in some African countries, many countries are now resorting to emergency measures to stand up to the evolving situation.

While the IMF has applauded those countries for implementing effective remedial policies to short-circuiting the food crisis, such as transferring priority targets to the most vulnerable and opening more access to financing for agricultural investment, it has further called for urgent measures to be taken in ensuring that the hungry are given food, social safety-nets are established and that the global community should fast-track support to respond to the crisis.

"In the short term we need to get food - and money to buy food - to the most affected places," said Mr Strauss-Kahn, adding that the second priority would be to offset support geared towards food production for the next harvest.

A third priority was to look at issues that caused the food price problem. According to the IMF, some sources of the crisis were clear: distortion of global and local agricultural markets that discourage production in low-income countries; some biofuel policies; and high energy prices that drive up the cost of fertilizer and food transport.

To these, the IMF is proposing stringent policy measures aimed at correcting the distortions caused by the food crisis.

World Bank President Robert Zoellick told the same videoconference that the Bank is trying to work with some countries to enable them to lower some tariffs and import food. "This does sometimes cut into their revenues, and that is where we are working with the IMF on offsets," Mr Zoellick added.

Mr Zoellick said the Bank was trying to put together a global food crisis response programme to fast-track financial support for the most vulnerable countries. "We have actually got some packages moving right through our system right now for Haiti, Djibouti, Liberia, we have done some reallocation for Burkina Faso, we are doing some for Bangladesh and Togo; we have got a list of about 15 countries that are most on the edge," Mr Zoellick said.

Also the IMF says it is working with vulnerable member countries to assess the fiscal, balance-of-payments, and income effects of higher food prices and of higher commodity prices more generally. It has been revealed that several countries - mostly in Africa - have already asked for extra financial support to cover higher food import costs, to which the IMF says it will be reviewing a country by country need for increased financial assistance.

According to the Fund's internal publication 'IMF Survey', IMF research had shown that higher prices for food pose new challenges for African policymakers, in particular, and could have especially adverse effects on the poor because food represents a larger share of what poorer consumers buy.

While trying to reinforce its internal instruments to responding to the shocks, the IMF says it is also coordinating closely with the World Bank, the UN system, and with other international agencies and donors on issues that require regional and international action, including trade policies and the need for additional financing resources from donors.

The UN's World Food Programme (WFP) said on 22 April that high global food prices are creating "a silent tsunami", threatening to plunge more than 100 million people into hunger. The WFP estimates it needs an additional US$ 755 million on top of its base budget to cover the increased cost of food and fuel since June 2007 - a target backed by the IMF and World Bank.

As the IMF had recently warned that a rise in food prices of 48 percent since end-2006 is a huge increase that may undermine gains the international community has made in reducing poverty, an early April meeting of the IMF's African Consultative Group also concurred that many sub-Saharan Africa countries have significant exposures to higher prices for fuel and other commodities, especially food saying high food prices risked undermining the gains made by many countries in reducing poverty in the last 5-10 years.

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