Global food situation

At the recent meetings of the World Bank and International Monetary Fund (IMF) in Washington, food shortages emerged as the major issue, requiring immediate attention of the governments. There was a consensus that the world was moving towards a food crisis that may lead to riots and war.
According to World Bank President Robert Zoellick, the price of wheat had risen 120 percent over the past year and overall food prices had increased by 83 percent during the last three years. In many developing countries, the poor spent upto 75 percent of their incomes on food.
As such, the phenomenon of surging food prices could mean "lost years" in the fight against worldwide poverty and contribute to malnutrition, one of the "forgotten" Millennium Development Goals. To meet the crisis, Zoellick called for a "new deal on global food policy" and urged the governments to immediately fill the $500 million food gap identified by the UN's World Food Programme. Under the new deal, the World Bank will nearly double agricultural lending to Sub-Saharan Africa over the next year to $800 million to increase crop productivity.
In addition, the International Finance Corporation will boost its agribusiness investments. The World Bank President also proposed that the sovereign wealth funds around the world allocate $30 billion - one percent of their $3 trillion assets - to investments for African "growth, development and opportunity."
IMF Managing Director Strauss Kahn also issued a dire warning about the food crisis and its economic and political impact. "Food prices, if they go on like they are doing today - the consequences will be terrible," he said, adding that if they continued, "hundreds of thousands of people will be starving."
The Managing Director reiterated that this was a huge problem which could put at risk years of development gains and "as we know, learning from the past, those kinds of questions sometimes end in war." Other financial experts warned that food riots were breaking out in many regions and food shortages threatened millions of people, sparking protests around the globe.
It is good to see that the emerging food crisis has attracted such a great deal of attention at the spring meetings of World Bank and its twin institution, the International Monetary Fund, sparking loud warnings of dire consequences.
Of course, many countries of the world are moving rapidly towards a situation where they could face severe food shortages and skyrocketing of food prices. Where the crisis will ultimately lead to is difficult to tell but the possibility of economic and social instability, arson and rioting and destabilisation of the existing order cannot be ruled out.
In fact, in some of the countries like Haiti and Egypt, such manifestations are already there and most sub-Saharan and some south-east Asian countries could also face unrest of varying degrees soon. The more worrying aspect is that price rises of farm commodities are believed to be structural. The World Bank is of the view that food prices would remain elevated throughout 2008 and 2009 and not return to the levels of the early 2000s, at least until 2015. Global wheat stocks are at historic 30-year lows and US wheat stocks are at 60-year lows.
Analysts are almost unanimous in concluding that rising appetite of the biofuels industry, increasing consumption in emerging economies and a "sense of complacency" towards agricultural investment over the past two decades, were the main reasons for triggering the food crisis. Since these factors are of long-term nature, the inhabitants of various countries would continue to experience the consequences of past policy lapses for a considerable length of time.
The world food crisis has, unfortunately, coincided with poor wheat crop in Pakistan which is the main staple diet of our population. The country had to import 1.7 million tons after a shortage last September that resulted in soaring domestic prices.
Although no firm estimates are available for the current year, wheat output is likely to fall to 20-22 million tons as against the target of 24 million tons, necessitating imports of nearly 3 million tons this season. Delay in the announcement of procurement prices, erratic weather and lower acreage were some of the factors responsible for the fall in output. The extent of the crisis could be gauged from the fact that we are at the start of the wheat season but are already experiencing the phenomenon of rising prices and long queues at the utility stores and other outlets.
At the meetings in Washington, Pakistan was listed among the 36 countries that face a serious food crisis and if the situation worsens, people may raid storage facilities for food. Although highlighting the problem by UN agencies and earmarking of some financial resources for the alleviation of crisis, needs to be appreciated, it would be difficult to take the developed countries fully on board due to their own constraints.
They cannot be expected to join the effort in a big way because of recessionary tendencies in their own economies and a credit crunch threatening their lifestyles. Therefore, it is incumbent upon the food deficient countries to survive mainly by their own devices.
There is absolutely no doubt in our mind that our government is also facing a tough challenge of ensuring food security in the country which can only be guaranteed through arranging wheat imports of around 3-4 million tons at the earliest and then by providing enough subsidy on the commodity to keep its price within affordable limits of ordinary households. Such a policy would be a huge drain on both the current account and the budget but in the short run there seems to be no other way. Global initiatives could help but only partly.