Transcript THE FOOD CRISIS & CHANGING VIEWS OF THE ROLE OF THE STATE
THE FOOD CRISIS & CHANGING VIEWS OF THE ROLE OF THE STATE
2008 World Bank-IMF Annual Meetings Civil Society Policy Forum ActionAid 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 remain high relative to past 30 yrs.
Food price index (nominal $)
250 200 150 100 50 0 2000 2001 2002 2003 2004 2005 2006
Source: IMF index of food prices
2007 2008
Fertilizer prices continue to surge upwards
500 400 300 200 100 0 1960
Real fertilizer prices, 1960-2008* Index in constant 2000 $s relative to MUV
1970 1980 1990 2000
Increased volatility in food prices anticipated, as grain stocks likely to remain at record lows
World Grain Stocks-to-Use % 40 35 30 25 20 15 10 5 0 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 access Severe localized food insecurity August 22, 2008
Source: http://www.fao.org/giews/english/hotspots/map_m.htm
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 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
reach 967 million, up from 848 million in 2003 to 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 1 0
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 continue
Increased volatility in food prices
grain stocks are still at record lows anticipated, as
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
design in program
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, capacity governance requirements size of country and history of trade, etc.
Promote longer-term agricultural growth
Food prices: short-run options
Better policy choices
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
Food 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
IMF, WTO, OECD in consultation with countries and civil society organizations by UN Agencies, World Bank,
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 (%) SS Africa M.E. & N. Africa Europe & C. Asia Lat. Am. & Carib.
( % of Total Approved GFRP Projects) S. Asia 18 3 10 Budget support (DPOs) Investment lending Social protection Agriculture Project management, M&E TOTAL (100%) 10 16 2 46 5 8 8 5 1 14 10 8 12 2 22
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 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
food-crisis-related lending in Africa not under GFRP, coming for Board approval in the next six months for 24
Examples 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: million Development policy grant of $5 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)
Agricultural-based countries spend too little on agriculture (and R&D)
Ag GDP/GDP 15 10 5 0 35 30 25 20 29 Agriculture-based 16 Transforming 10 Urbanized Public Spending on Ag (% of Ag GDP) Spending on Ag R&D (% of Ag GDP) 14 12 10 4 2 8 6 0 Agriculture based Transforming Urbanized 30
Crowding out of long term public goods by short term private ones
31 7 6 5 4 3 2 1 0 A major South Asia power….
Subsidies
Subsidies
Public Investment 1975-79 1980-84 1985-89 1990-94 1995-99 2000-02
Donors have dropped the ball…
32 Donor support to agriculture 1990-2004 100 90 80 70 60 50 40 30 20 10 1990 1992 1994
% rural poverty % ODA to Ag
1996 1998 2000 2002 2 2004 0 6 4 14 12 10 8
So have developing country States WORLD POOR AGRICULTURE 4% OFFICIAL DEVELOPMENT ASSISTANCE
(12% in 1990)
RURAL 75% AGRICULTURE 4% PUBLIC SPENDING
(Sub Saharan Africa)
Priorities from WDR 2008
1.
2.
3.
4.
5.
Accelerate smallholder productivity increases for agricultural growth and food security
in Africa
Follow a comprehensive approach to reduce sectoral disparities
and poverty in transforming countries of Asia
Enhance sustainability and environmental services
from agriculture
Pursue multiple pathways out of poverty:
smallholder farming, labor market, rural non-farm employment, migration
Improve the quality of governance
in agriculture at local, national, and global levels
Role of the State in WDR 2008
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 35 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 Board 36