THE FOOD CRISIS & CHANGING VIEWS OF THE
ROLE OF THE STATE2008 World Bank-IMF Annual Meetings
Civil Society Policy ForumActionAid Int’l and Oxfam Int’l Meeting
October 10, 2008
Christopher Delgado Rural Strategy and Policy Adviser
Agriculture and Rural Development Department The World Bank
State of the Food Crisis
Food prices declining, but likely to Food prices declining, but likely to remain high relative to past 30 yrs.remain high relative to past 30 yrs.
Food price index (nominal $)
0
50
100
150
200
250
2000
2001
2002
2003
2004
2005
2006
2007
2008
Source: IMF index of food prices
Fertilizer prices continue to surge upwards
0
100
200
300
400
500
1960 1970 1980 1990 2000
Real fertilizer prices, 1960-2008*Index in constant 2000 $s relative to MUV
Increased volatility in food prices anticipated, as grain stocks likely
to remain at record lowsWorld Grain Stocks-to-Use
05
10
15202530
3540
1960 1970 1980 1990 2000
%
Countries with food price protests and riots, Jan. 2007- May 2008
Source: USAID Office of Food for Peace
Global Information and Early Warning System: 33 Countries in Crisis
Shortfall in aggregate food production/supplies
Widespread lack of access
Severe localized food insecurity
Source: http://www.fao.org/giews/english/hotspots/map_m.htm
August 22, 2008
Why have food prices risen?--demand
Sustained food demand from emerging markets (of the 73 million net additional persons in the global population each year, 97.5% are in developing countries)
Diet changes, from grain to more diversified diet, meats and dairy with higher derived demand for grains and oilseeds
Biofuel policies => demand shift, particularly in the United States (corn-based ethanol), and Europe (rapeseed for biodiesel), Argentina (soybeans for biodiesel)
Why have food prices risen?--supply
Increasing production costs, sharply increasing costs of energy, transport, and fertilizer, and competition for land and water for biofuel croips, esp. in OECD
Drought, flooding, pests and disease in key grain regions, these shocks are hard to deal with when stocks are low
Disappearance due to policy reforms of stabilizing sales from large intervention stocks in USA and EU that had been built up to support producer prices
Impacts on povertyImpacts on poverty
Increase in the number of global poor due to rising food prices estimated exceed 100 million
The number of undernourished people could increase by up to 44 million in 2008 alone to reach 967 million, up from 848 million in 2003
Already poor households suffer further detrimental effects beyond increase in poverty headcount (decreased access to educ./health)
Rising inequality from recent rise in food prices Gini index of inequality raised by 5% in Bangladesh Rich-poor gaps widening in Latin America
10
Global food prices: recent changes
International food prices are declining, but likely to remain high relative to 2005 levels
Weakening import demand and improved supply have lowered global prices somewhat
Domestic prices have not declined to the same extent as international prices in many countries Food price inflation remains very high (92% in Ethiopia,
22.5% in Liberia, 23.7% in Togo, 76.4% in Afghanistan) Fertilizer prices continue to surge upwards,
despite recent declines in energy and natural gas prices
11
Negative impacts likely to continueNegative impacts likely to continue
Increased volatility in food prices anticipated, as grain stocks are still at record lows
Increased input prices linked to oil a major concern, likely to discourage smallholders who supply most of the food in developing countries
Countries are in the process of reverting to the food policies of the 1970s (food self-sufficiency at any cost, costly strategic grain reserves, reversal of diversification policies, etc) which would eventually be harmful to both poverty alleviation and food security
What Is the Bank Doing w.r.t. the Food Crisis?
Applying response lessons from the avian influenza crisis
Speed of response is critical Rapid national response planning and
coordination, and country-based needs assessments are essential
Alignment with national priorities, & national ownership, are central
Emphasize flexibility and simplicity in program design
Pragmatism for immediate responses, balanced with focus on sustainability over the medium term
Carefully coordinated communications strategy
Consensus on lessons
Avoid short-term policies targeting short-term food insecurity that have difficult longer-term implications
Short-run policies require planning exit strategies in advance
Different countries need different policies, depending on:institutions, capacitygovernance requirements size of country and history of trade, etc.
Promote longer-term agricultural growth
Food prices: short-run options
Reduce Food Grain Taxes/Tariffs School Feeding Programs Conditional Cash Transfers to the Poor Targeted Food Subsidies Cash for Work Food for Work and Food Aid Build-up Government Buffer Stocks for
Distribution Food Rationing Price Controls Export Restrictions/Taxes Export Bans Worse policy choices
Better policy choices
Food prices: international actionFood prices: international action
Finance Ministers at the April 2008 World Bank-IMF Spring Meetings endorsed a “new deal” for a global food policy to embrace a short, medium and long-term response:
Support for humanitarian assitance (WFP) Support for systems of safety nets Increased agricultural productivity Better understanding of the impact of
biofuels Action on trade to reduce trade barriers
Internal consensus on immediate vehicles for Bank responses
• Priority to support fundraising by WFP• Rapid financing to countries• Policy analysis linking country to global• Risk mitigation using financial tools as
well as physical hedging• Social protection• Maintain productive capacity and transit
to longer term food production viability
Coordination with United Nations on food crisis response
WB response to the food crisis has been in close collaboration and partnership with the UN as agreed in Berne, April 28-29, 2008
UN Task Force on the Global Food Crisis has functioned throughout with active WB senior management and staff participation, including staff outposting to NY
The Comprehensive Framework for Action (CFA) was collaboratively prepared by UN Agencies, World Bank, IMF, WTO, OECD in consultation with countries and civil society organizations
27 countries identified for intensive and coordinated response to realize CFA outcomes: 17 countries in AFR, 5 in SAR, 2 in MENA, 2 in LAC and 1 in ECA. The Bank is working in 22 of these countries through GFRP
19
The Bank’s Global Food Crisis Response Program (GFRP)
Approved May 29 Umbrella for providing rapid Bank support for a
comprehensive response to the crisis Provides balance between short run food stabilization and
measures to ensure countries able to cope better in medium term, including longer term action and lending to enhance agricultural productivity
Fast-tracking of up to $1.2 billion of Bank resources: existing country envelopes, re-programmed funds, regional IDA funds where appropriate, a new $200 million trust fund from IBRD surplus (Food Price Crisis Response Trust Fund)
Greatly expedites procedures for rapid response
Menu of GFRP Components Component 1: Food price policy and market stabilization
Examples: Support for grain stock management, improved use of market-based instruments to manage food prices, tax and trade policies
Component 2: Social protection actions to ensure food access and minimize the nutritional impact of the crisis on the poor and vulnerable Examples: Cash transfer program (CCTs, food stamps), school
feeding, targeted food supplements and micronutrients
Component 3: Enhancing domestic food production & marketing response Examples: Seed and fertilizer supply and market development,
Rehabilitation of small-scale irrigation, Strengthening access to finance and risk management tools
Component 4: Implementation support, communications and monitoring and evaluation
Overview of World Bank lending in response to the food crisis
Global Food Crisis Response Program (GFRP): $851 million approved and pipeline Food Price Crisis Response (FPCR) Trust Fund:
$200 million committed IDA/IBRD (including reallocations): $651 million Multi-donor Trust Fund established, first
contribution of A$50 milion rec’d yesterday from Australia
Additional $400 million non-GFRP food crisis response approved and pipeline
22
Activities financed through approved GFRP operations by region (%)
Budget support: activities include reduction in food prices through trade and tax policy measures; social protection programs and emergency interventions and support to agricultural production
Investment lending: social protection includes school feeding, cash for work, nutrition, health, and cash transfers; agriculture includes seeds, fertilizers, rehabiliation of irrigation infrastructure, livestock and post-harvest infrastructure
SS AfricaM.E. &
N. AfricaEurope & C. Asia
Lat. Am. &
Carib. S. Asia
( % of Total Approved GFRP Projects)
Budget support (DPOs) 18 3 10
Investment lending
Social protection 10 5 8 8
Agriculture 16 5 12
Project management, M&E 2 1 2
TOTAL (100%) 46 8 14 10 22
23
Other non-GFRP food crisis-related lending
$90 million in additional IDA funding in AFR approved for food crisis response in 7 countries since April 2008
Programs include: Fertilizer supply in Ghana Improved seed distribution and nutritional safety nets in Burkina
Faso Provisions for therapeutic feeding in Eritrea Improving maize productivity in Malawi
An additional $295 million in the IDA pipeline for food-crisis-related lending in Africa not under GFRP, coming for Board approval in the next six months
24
Examples of early resultsExamples of early results
Rwanda: Supplementary financing to a development policy grant of $10 million. Results to date: grant has helped fill an unanticipated financing
gap; enabled fertilizer imports and also helped maintain the Govt’s overall reform program, including a more private sector oriented fertilizer distribution system
Sierra Leone: A new development policy grant of $3 million and $4 million additional financing (AF) for emergency safety net response through the National Social Action project. Results to date: grant partially compensated the lost revenues
from reduced food and fuel tariffs. Fiscal space created will help provide basic services to almost 21,600 mothers and children. Grant support has been provided for a cash-for-work program expected to generate at least 849,000 person-days of employment
25
Early results (cont.)
Liberia: $10 million grant supporting three projects: AF for agricultural and infrastructure development project ($3 million) and community empowerment project ($3 million), and new investment lending project on food support for vulnerable women and children ($4 million) Results to date: $2.45 million has been used to support pre-school and
primary school feeding programs, and to provide rations for pregnant and lactating women
Kyrgyz Republic: IDA funding of $10 million through additional financing of two projects: agricultural investment and services project ($4 million) and health and social protection project ($6 million) Results to date: IDA funding is providing seeds, fertilizers and training
for farmers. Vitamin A supplements are also being provided to 130,000 postpartum women and 500,000 children under age 5 26
Early results (cont.)
Haiti: Supplementary financing of $10 million to a development policy grant The grant has contributed to maintaining
macroeconomic and social stability, ensured the availability of resources for Govt. to continue to provide critical social and infrastructure services for the poor
Djibouti: Development policy grant of $5 million Results to date: Grant funding has supported the
suspension of tariffs/taxes on basic food staples, consumers have benefited from lower food prices
27
Food priorities going forward Implementation of better ways of working with UN
agencies in the field, especially on procurement Shift in focus from immediate short-term needs to
more medium-term responses Increasing smallholder agricultural productivity Ensuring adequate safety net systems are in place to
cope with greater volatility in the future More attention to better nutrition
Continuing to increase regular program (incl. IFC) new annual lending to agriculture and safety nets
Collaboration in discussions/AAA with other agencies and private sector of possible new international modalities for managing grain market risks for poor countries and humanitarian agencies
28
A Changing View of the Role of the State in the Longer Term
Agricultural Investments of the World Bank
(best expressed in WDR2008– Agriculture for Development)
30
Agricultural-based countries spend too little on agriculture (and R&D)
Ag GDP/GDP
0
2
4
6
8
10
12
14
Agriculture based Transforming Urbanized
perc
ent
Public Spending on Ag (% of Ag GDP)
Spending on Ag R&D (% of Ag GDP)
29
16
10
0
5
10
15
20
25
30
35
Agriculture-based Transforming Urbanized
perc
ent
31
0
1
2
3
4
5
6
7
1975-79 1980-84 1985-89 1990-94 1995-99 2000-02
Per
cent
of A
g. G
DP
Subsidies
Public Investment
Crowding out of long term public goods by short term
private ones
SubsidiesA major South Asia power….
32
Donor support to agriculture 1990-2004
% rural poverty
% ODA to Ag
Donors have dropped the ball…
-
10
20
30
40
50
60
70
80
90
100
1990 1992 1994 1996 1998 2000 2002 2004
% p
overt
y in
ru
ral are
as
0
2
4
6
8
10
12
14
% O
DA
to a
gri
cult
ure
OFFICIAL DEVELOPMENT
ASSISTANCE
(12% in 1990)
PUBLIC SPENDING
(Sub-Saharan
Africa)
AGRICULTURE 4%
RURAL
75%
AGRICULTURE 4%
So have developing country States
WORLD POOR
Priorities from WDR 2008
1. Accelerate smallholder productivity increases for agricultural growth and food security in Africa
2. Follow a comprehensive approach to reduce sectoral disparities and poverty in transforming countries of Asia
3. Enhance sustainability and environmental services from agriculture
4. Pursue multiple pathways out of poverty: smallholder farming, labor market, rural non-farm employment, migration
5. Improve the quality of governance in agriculture at local, national, and global levels
35
Role of the State in WDR Role of the State in WDR 20082008
Delivering key public goods
Productivity and information enhancement
Infrastructure and institutions, rule of law
Making growth pro-poor
Connecting smallholders to new markets
Improving assets of the poor, especially women
Improving governance
New state roles, coordination, decentralization
Global governance issues (trade, standards, animal health, biodiversity, climate change, donor support)
WB Group new lending for food and agriculture since April 2008
US$ million, over 5 months
Agriculture: Lending under the Agriculture and Rural Sector Board36
214365932439582271160Total
5555World
257602912017168SAR
64382630230MNA
2381365416112748LCR
39321976836598ECA
36179560056226EAP
775728304439620AFR
Grand TotalIFC
Total Social
Protect-ion
Social Risk
Mitigation
Nutrition & Food
Security
Social Safety
NetsAgricult
ureRegion
214365932439582271160Total
5555World
257602912017168SAR
64382630230MNA
2381365416112748LCR
39321976836598ECA
36179560056226EAP
775728304439620AFR
Grand TotalIFC
Total Social
Protect -ion
Social Risk
Mitigation
Nutrition & Food
Security
Social Safety
NetsAgricult
ureRegion
Top Related