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THE
reality of unabated increases in oil and food prices is
already being felt around the world and is placing
extreme pressure on developing countries like the
Philippines, as they face balance-of-payments problems,
higher inflation and worsening poverty.
In the
latest report of the International Monetary Fund (IMF)
titled “Food and Fuel Prices—Recent Developments,
Macroeconomic Impact and Policy Responses,” the fund
said the food- and oil-price surge is hurting the
poorest countries the most.
The IMF
said the effect of high food and oil prices is expected
to be “most acute” in import-dependent poor and
middle-income countries like the Philippines, which is
the world’s biggest importer of rice.
“In
advanced countries, higher food and fuel prices are
reducing people’s living standards and making it more
difficult for governments and central banks to support
growth while containing inflation. In emerging
economies, and especially in some low-income countries,
the stakes are even higher. For the very poor, high food
prices can mean deep poverty, hunger and malnutrition,”
the IMF said in a statement issued at the release of the
study based on information and analysis by IMF
economists working on 162 countries.
“Some
countries really are at a tipping point,” IMF managing
director Dominique Strauss-Kahn said.
The
study showed that higher food prices have cost a group
of 33 poor net food importers $2.3 billion, or 0.5
percent of 2007 annual gross domestic product (GDP),
since January 2007.
In the
same period, the effect of rising oil prices on 59
low-income net oil importers was $35.8 billion, or 2.2
percent of their GDP.
The
study also said annual food- price inflation for 120
low-income and emerging-market countries increased to 12
percent at the end of March 2008 from 10 percent three
months earlier.
Fuel
prices, meanwhile, accelerated to 9 percent from 6.7
percent in March. “Preliminary data indicate the problem
is worsening,” the IMF added.
The IMF
said poor countries that are highly dependent on food
imports are particularly vulnerable to rising food
prices. The share of household spending on food in
emerging and developing economies like the Philippines
exceeds 50 percent.
The
study found that low-income households are the most
affected by food-price inflation and warned that the
share of undernourished people in developing countries
could rise rapidly above the current 40 percent of total
population.
Meanwhile, though the IMF expects that food and oil
prices will moderate from recent highs, more resources
need to be mobilized to address supply problems.
The
study said oil-futures markets suggest that oil-prices
may gradually ease over the next five years. The IMF
said, however, that this estimate is still uncertain and
that efforts must still be focused on the downside risks
to near- and medium-term global growth prospects and
responses to sustained high prices.
In terms
of food prices, the IMF cited projections that these
will gradually ease in the short term, but a more
substantial easing is expected in the medium term.
Better
wheat harvests are expected this year until 2009, which
has already caused a significant easing from recent
peaks. However, the IMF expects high food prices to
continue longer than usual.
As a
response to these problems, the IMF said it stands ready
to help with balance-of-payments support, and has
already provided additional financial assistance to
seven low-income countries through the concessional
Poverty Reduction and Growth Facility.
The fund
is also streamlining the Exogenous Shocks Facility to
make it more useful to members. It is also ready to
provide support for middle-income countries through
standby arrangements.
“If food
prices rise further and oil prices stay the same, some
governments will no longer be able to feed their people
and, at the same time, maintain stability in their
economies. They need good policy options and they need
help from the international community.
“Their
challenge is ours. It is to ensure adequate food
supplies while preserving the poverty-reducing benefits
derived in recent years from faster growth, low
inflation and better budget and balance-of-payments
positions,” Strauss-Kahn said. |
