Recent rises in food prices are once again weighing on some developing countries amid growing global currency frictions, World Bank president Robert Zoellick said Monday. "For many developing countries, the food crisis of 2008 has never gone away. And recent prices are a serious cause for concern," Zoellick said in a conference call with reporters.
Zoellick said the 187-nation development lender had reinstated a fast-track financial aid program it had used to help countries cope with the 2007-2008 food crisis that wiped out years of development gains. "The rise in wheat prices over the last few months is affecting the price of other staples due to the increased demand for substitutes. So we'll have to find a way to avoid food crises becoming the new normal," he said in a briefing ahead of annual meetings of the World Bank and the International Monetary Fund in Washington set to open Friday.
Since July, international wheat prices have soared 60-80 percent and maize rose about 40 percent, according to recent UN Food and Agriculture Organisation figures. Zoellick noted the gap between slow economic growth in the developed world and fast growth in developing countries was causing distortions in global financial markets.
"You've heard the warnings of currency wars," he said. "Money is chasing yield, it can't find those yields in developed economies and this is not only pushing up currency values in emerging and developing countries, it's also pushing up the price of some assets with the risk of bubbles in property and some commodities."
But questioned by a reporter, Zoellick said he did not foresee the world moving into an "era" of currency wars, but noted the tensions add to the "overall sensitivity" as the global economy recovers from the worst recession since World War II. Meanwhile, the largest international group of financial institutions urged major economies to take steps to improve policy co-operation, and decried what it saw as rising unilateralist that threatens global stability. The Institute of International Finance, which groups the major banks of 70 countries, said urgent action was needed to broker agreements on macroeconomic and exchange-rate issues.
"As countries struggle to cope individually with the lack of upward momentum in global growth - and in many cases unacceptably high unemployment - urgent action is needed to arrest the disturbing trend towards unilateral moves on macroeconomic, trade and currency issues," the IIF said in a letter to finance chiefs who will be meeting this week as part of the IMF's International Monetary and Finance Committee.
"Today, these are more pressing than ever issues," Charles Dallara, the IIF managing director, told a news conference. "You see that in 2010, US, Japanese and Chinese imbalances on the current account have all moved again in the wrong direction. "If we continue on this path on unilateralist over multilateralism, we could end up in a state that is unstable," Dallara said.
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