Concerns about soaring food prices

Times have changed. In normal circumstances, multilateral financial institutions used to discuss global economic trends with particular reference to the developments in the international financial and monetary system. The emphasis has now shifted to the soaring food prices and their impact on different economies. In the spring meetings of IMF and the World Bank this year, this subject virtually topped the agenda.
The Asian Development Bank (ADB) seems to be even more concerned about the issue. Speaking at the 41st Board of Governors meeting in Madrid on 5th May, ADB President Haruiko Kuroda warned that the food problem could cut into decades of economic gains in the Asia-Pacific region and called for "immediate response" to soaring food prices which threatened a billion Asians with the risk of malnutrition.
According to him, "these are troubling times for the world economy. On the heels of turmoil in the financial markets and economic slowdown in the US and elsewhere, soaring food prices are hitting the poor very hard. This price surge has a stark human dimension".
The purchasing power of ordinary people has been greatly eroded, placing them at a greater risk of hunger and malnutrition. The stocks of foodgrains were at the lowest levels for decades. Kuroda stressed the need for prudent macro-economic management along with targeted income support to protect food entitlements and livelihoods of the most vulnerable.
The absence of such measures could seriously undermine the global fight against poverty. On its part, the ADB is prepared to respond with immediate financial assistance to relieve fiscal pressures on affected countries.
We feel that the multilateral financial institutions have done a service to mankind by moving the problem of food scarcity and its soaring prices to the top of their agendas. Food is the most basic requirement of all the living species who can't care for anything else if their stomachs are empty. Chaos of the worst kind and even wars cannot be ruled out in such situations.
Therefore, utmost attention needs to be focused on alleviating the sufferings of people likely to be hit by starvation and malnutrition. This is all the more necessary because the problem seems to be structural and endemic in nature. Emphasis on biofuels due to surging prices of POL products, climate change and rising incomes in China and India are some of the factors constraining supplies and encouraging over-consumption of food which are likely to last in the foreseeable future.
Prices for the benchmark Thai variety of rice, a food staple across much of Asia, are currently at about 1000 dollars a tonne, up three-fold from the last ADB annual meeting a year ago. High food prices are seriously affecting two billion peoples across the world and threaten to push 100 million poor people further into poverty.
Asia - home to two thirds of the world's poor - is facing growing social unrest as doubling of wheat and rice prices in the past one year has hurt them severely because most of the people in this region spend almost half of their incomes on food. Already, rise in global prices have sparked violent protests in Cameroon and Burkina Faso as well as rallies in Indonesia following reports of deaths by starvation.
Food riots in Somalia have claimed five lives so far. The World Bank has already announced certain initiatives like assistance of 700 million dollars to the Sub-Saharan African countries to stave off the problem. The ADB has now promised to provide 500 million dollars to nations hit hardest by soaring food prices.
Hopefully, other donors would also join the effort and contribute generously to mitigate the threat. Highlighting the issue should not be seen as an end in itself but must mark the beginning of an effort to achieve a greater goal by all the stakeholders.
Coming specifically to Pakistan, the issue has become quite serious in the last two years or so mainly because of shortage of wheat crop which has pushed up the annual food inflation by about 20 percent. The rise of such a high magnitude in food prices must have increased poverty level in the country and made the lives of ordinary persons much more miserable than before.
According to the ADB estimates, a ten percent increase in food prices in Pakistan will add another 7.05 million to the number of poor people. And in the event of food prices increasing by 20 and 30 percent, the increase in the number of poor people will be 14.67 million. Besides, the import of huge quantities of wheat and its supply at subsidised rates had a very negative impact on the current account and fiscal position of the country.
All of these problems are despite the fact that Pakistan could not only be self-sufficient in food but could serve as a granary of the region due to its conducive soil and weather conditions. The truth is that we have not given adequate attention to the farming sector and exploited the country's comparative advantage in harvesting of food crops.
In India, availability of computer technology and efficient extension services have revolutionised the agriculture sector and vastly improved living standards in the rural areas. With the right type of attitude and reasonable level of investment, we can also attain autarky in food production and insulate the country from the vagaries of unkind global economic environment.