The New Nation - Internet Edition

Newnation BUSINESS REPORT

The recent food prices inflation has created enormous hardship for the poor families in the South Asia region.

Afghanistan and Bangladesh, net food importers, have suffered the most from the food price crisis. The food price crisis makes harder for the South Asian countries to attain the Millennium Development Goals. The experience suggests the urgency with which longer-term issues of food security need to be addressed in South Asia.

To facilitate a debate and discussion on the longer-term food security issues, the South Asia Region of the World Bank, the World Bank Institute, and the Power and Participation Research Center (PPRC) yesterday jointly organized a 2 day long conference on 'South Asia Regional Conference on Managing Food Price Inflation.

International and local experts and policy makers from six South Asian countries-Afghanistan, Bangladesh, India, Nepal, Pakistan and Sri Lanka-- exchanged experiences and discussed the mix of policy options and programs available to governments to manage food price inflation in the short, medium and longer term. The Advisor for finance and planning, Government of Bangladesh, Dr. Mirza Md. Azizul Islam inaugurated the session today.

"The adverse effect of the rise in global commodity prices on macroeconomic balances has been substantial. South Asian countries have seen a sharp increase in fiscal deficits and a worsening in the balance of payments. Inflation has been hit badly." said Sadiq Ahmed, South Asia Regional Director, World Bank. For the first time in South Asia's history all countries have simultaneously experienced double digit inflation rates, with 20 plus rates in Afghanistan, Pakistan and Sri Lanka. Economic growth is showing signs of slowdown. "The emerging global financial crisis is adding fuel to the fire, with further adverse consequences for macroeconomic balances and growth", Sadiq Ahmed added.

Although farmers benefit from higher food prices, on a net basis the food price inflation has contributed adversely to the poverty level in South Asia. This is because of the high share of food expenditure in the consumption basket of the poor and also because there are many more poor household who are net buyers of staple food than net sellers. In Bangladesh, food price shock may have increased poverty rate by around 3 percentage points. A World Bank survey finds nearly 8 percent of the surveyed households pulled their children out of schools to get jobs to assist their families cope with the crisis.

'The World Bank is helping countries address the global price shocks. The World Bank Group created a new $1.2 billion rapid financing facility-the Global Food Response Program-in May 2008 to speed assistance to the neediest countries.' said Vinaya Swaroop, Acting Country Director, World Bank Bangladesh, 'Last Thursday we signed an agreement with the Government of Bangladesh for a $130 million budget support under this facility. This credit will enable the Government to expand the social protection programs helping the poorest people dealing with rising food costs'.

Although food prices are coming down, it is very important that policy makers pay attention to the long-term challenge of raising agricultural productivity in order to achieve food security. The productivity levels for rice and wheat in South Asia are significantly lower than levels found in Europe, North America and East Asia.

"Public spending on irrigation, rural roads, rural electricity, technology and on-farm research and extension will be critical for raising productivity" said Sadiq Ahmed. Public policy also needs to focus on reducing the vulnerabilities resulting from climate change and paying greater attention to cross-boundary water management.