The rapid increase in food commodities prices is having a significant impact on poverty reduction and developing countries’ macroeconomic conditions. Rising food prices increase poverty for millions of poor and near-poor people throughout the developing word. If high food prices persist, there could be irreversible damage to the human capital of the poor and a significant reversal in the progress made towards achieving the Millennium Development Goals. The damage to human capital, if large and persistent enough, could in turn have a negative impact on long-term growth particularly in the poorest countries.
High food prices are a source of social unrest and many countries have faced food protests and riots, some of them quite violent. Persistent high food prices could also become a contributing factor to new conflicts or relapses in post-conflict countries. The more vulnerable cases are likely to be those in which food production or marketing, or the pain of higher food prices, is concentrated in certain geographic areas and/or in certain ethnic or religious groups. High food prices can also exacerbate the devastating consequences of conflict by undermining access to food for the poor and vulnerable. And as the World Food Program has demonstrated, they have created severe budgetary difficulties for food aid programs and made planning for food relief excruciatingly difficult.
Multilateral financial institutions can play a key role in providing financial resources to allow countries that are facing negative terms of trade shocks to gradually adjust to adverse external conditions. They can also provide technical assistance in the design of safety nets and add fiscal space to countries that need external resources to fund them. Finally, international organizations can help countries design the appropriate macroeconomic policy response. This will call for greater flexibility in the menu of policy options traditionally deployed by the Bretton Woods institutions. Such flexibility may have high pay-off not just for the countries themselves but for a rules-based trading system which has been weakened by myriad of unilateral decisions that restrict the flow of food commodities in the international markets.
Multilateral organizations can help countries design, implement and finance an adequate safety net system to mitigate the impact of higher food prices on poor net consumers. When food prices rise (fall) poor net consumers (poor net sellers) of food get hurt and poor net sellers (poor net consumers) are better off. Available evidence suggests that in the majority of countries, an increase in food prices is likely to result in an increase in overall poverty. Governments and multilateral organizations should accept that there will always be part of the poor who get hurt—and often severely—by higher, or lower, food commodities prices. The appropriate policy response is to have safety nets to help those who get hurt.
Since many of the extreme poor in low-income countries live in rural areas and between two thirds and three fourth of them have access to small plots of land, policy interventions that would further expand their access to land and increase the productivity of their plots could kill two birds with one stone. Greater access to improved seeds, fertilizers and small animals, credit to purchase inputs and land, and technical assistance could reduce the impact of higher food prices on the rural poor. These policies can lower the amount that must be purchased by them in the market and convert those with sufficient assets into self-sufficient farmers or even marginal net sellers. These measures would also help address the supply-side constraints on food commodity production for the extreme poor living in rural areas in low-income countries. Multilateral organizations like The World Bank can help countries design, implement and fund programs whose main objective is to enhance the productive capacity, and thereby improve the food security, of millions of poor farmers throughout the developing world.
One of the key roles of the lender is a control after the borrower spending. The World Bank often is being considered like last source of financial support especially for Heavily Indebted Poor Countries.
Multilateral organizations can help countries design, implement and finance an adequate safety net system to mitigate the impact of higher food prices on poor net consumers. When food prices rise (fall) poor net consumers (poor net sellers) of food get hurt and poor net sellers (poor net consumers) are better off. Available evidence suggests that in the majority of countries, an increase in food prices is likely to result in an increase in overall poverty. Governments and multilateral organizations should accept that there will always be part of the poor who get hurt—and often severely—by higher, or lower, food commodities prices. The appropriate policy response is to have safety nets to help those who get hurt.
Since many of the extreme poor in low-income countries live in rural areas and between two thirds and three fourth of them have access to small plots of land, policy interventions that would further expand their access to land and increase the productivity of their plots could kill two birds with one stone. Greater access to improved seeds, fertilizers and small animals, credit to purchase inputs and land, and technical assistance could reduce the impact of higher food prices on the rural poor. These policies can lower the amount that must be purchased by them in the market and convert those with sufficient assets into self-sufficient farmers or even marginal net sellers. These measures would also help address the supply-side constraints on food commodity production for the extreme poor living in rural areas in low-income countries. Multilateral organizations like The World Bank can help countries design, implement and fund programs whose main objective is to enhance the productive capacity, and thereby improve the food security, of millions of poor farmers throughout the developing world.
One of the key roles of the lender is a control after the borrower spending. The World Bank often is being considered like last source of financial support especially for Heavily Indebted Poor Countries.
During my last research on the government debt issue I came to know how hard to get rid from the debt overhang for undeveloped and poor country. And in most cases the debt overhang pressure is being doubled by looting and corruption inside local governments.
The World Bank is one of most powerful creditor and generous donor so should play a key role in economic and political reforms be helping with developing an efficient and transparent regulations witch will help to prevent fraud and corruption. I am convinced that such activities will multiple effect of the multilateral support for poor countries and individuals.
Oleksandr Tsaruk, Ph.D.
The World Bank is one of most powerful creditor and generous donor so should play a key role in economic and political reforms be helping with developing an efficient and transparent regulations witch will help to prevent fraud and corruption. I am convinced that such activities will multiple effect of the multilateral support for poor countries and individuals.
Oleksandr Tsaruk, Ph.D.
