Soaring food prices now top threat, IMF says

from the Globe and Mail

KEVIN CARMICHAEL

WASHINGTON — The global food crisis has pushed aside fears of a recession and mounting banking woes as top priority for the world's economic leaders.

Ministers representing 185 countries agreed on the weekend that soaring food prices threaten global calamity and pledged to co-operate on a solution to save the world's poorest people from starvation.

But that solution remains elusive.

The finance ministers and central bank governors who oversee the International Monetary Fund and the World Bank left Washington yesterday without a definitive response to agricultural prices that have surged 48 per cent since the end of 2006, sparking a wave of hoarding and riots throughout the developing world.

"If food prices go on as they are today, then the consequences on the population in a large set of countries, including Africa, but not only Africa, will be horrific," IMF managing director Dominque Struass-Kahn said at a press conference. "Hundreds of thousands of people will be starving. Children will suffer from malnutrition, with consequences on all of their lives."

That level of concern didn't translate into pledges for more food aid or concrete ideas about how food inflation might be reversed.

The IMF failed to agree on a response, beyond a pledge to work with its sister organization, the World Bank, and others in an "integrated response through policy advice and financial support."

The committee of ministers that directs the work of the World Bank, led by Mexican Finance Minister Agustin Carstens, said the bank and the fund should stand ready to provide "timely policy and financial support" to the most vulnerable countries. It also endorsed a plan by World Bank President Robert Zoellick to boost agricultural productivity in poorer countries, and urged donors to respond to the United Nations' call for an immediate $500-billion (U.S.) in extra food aid.

Mr. Zoellick said only about half of that money has been committed. No new pledges came amid the alarm and worry expressed by finance ministers from some of the world's wealthiest countries.

"It's good to see the political spotlight on the food crisis, but concern is no substitute for cold hard cash," Oxfam International, the global poverty fighter, said in a statement.

The severity of the issue seemed to creep up on officials from the Group of Seven industrial countries, which account for two-thirds of the world's economy and represents the IMF's and World Bank's largest shareholders.

The G7 - the U.S., Japan, Germany, the U.K., France, Italy and Canada - went into the weekend meetings gripped by the global credit crisis, which IMF economists estimate could result in losses approaching $1-trillion.

The G7's four-page statement issued after its gathering Friday made no mention of the food issue beyond a reference to the risk "high oil and commodity prices" posed to the world economy.

Instead, U.S. Treasury Secretary Henry Paulson, European Central Bank Governor Jean-Claude Trichet and the other members of the group focused on ending turmoil in financial markets. They promised to implement a series of regulatory changes over the next 100 days aimed at restoring confidence in a system shaken by the collapse of the U.S. subprime mortgage market last year.

In an interview, Bank of Canada Governor Mark Carney said governments are considering boosting food aid and "broader" food-policy strategies.

"It's a serious issue," Mr. Carney said. "There is concern."

The Canadian government called on the IMF to use provisions in its statutes to help the hardest hit nations pay for food imports. Ottawa also urged the World Bank and other regional development institutions to co-operate to fund projects that boost agricultural production and make poor nations more energy efficient.

Finance ministers weren't the only ones caught off guard by the prominence of concern over food prices at the meetings, which have in recent years been more concerned about uneven trade flows between rich and developing countries, China's rigid exchange-rate policies and efforts to give poorer nations more say in the running of the institutions.

"I'm surprised by the prominence of food prices," said Elizabeth Stuart, a senior policy adviser at Oxfam, who expected to be spending more time talking about climate change.

In fact, advocates of polices to wean industrial economies off oil found themselves on the defensive, as some countries blamed rich-world policies that encourage the production of fuel from corn, canola and other grains as the biggest contributor to the surging cost of farm products.

Mr. Strauss-Kahn said some ministers told him that using foodstuffs to make fuel amounted to a "crime against humanity."

The World Bank did announce that it will send $10-million in food aid to Haiti, whose prime minister was dismissed on Saturday amid anger over food prices.

Mr. Zoellick pushed the politicians who run his institution to turn their new-found awareness of the risks posed by food prices into action.