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April 19, 2008

ADB: Ready to support fight against food inflation

The Asian Development Bank is willing to provide budgetary support to countries struggling with high food prices, its president, Haruhiko Kuroda, was quoted by Reuters as saying Friday.

A global surge in food prices had disproportionately affected the poor in Asia, he said, adding that the bank was against protectionism or trade restrictions being resorted to by some countries to keep prices in check.

"The way to help is to provide targeted income support for the needy poor, particularly in South Asia and some parts of Southeast Asia," Kuroda said at the ADB's Manila headquarters.

In Asia, the surge in prices of rice, a staple in most nations in the region, has governments worried about the prospect of hoarding and social unrest. Major exporters have started to cut back on sales to ring-fence supplies.

Governments are struggling to deal with the situation and many are stepping up subsidising food. But across-the-board subsidies carry an enormous cost and the ADB has recommended giving targeted cash handouts to the poor instead.

Countries which do this would nevertheless incur larger than programmed fiscal deficits, Kuroda said.

Longer-term, Kuroda said nations must liberalise their agricultural sectors, including trade restrictions and price controls. But he accepted this would be difficult to implement, because of the sensitivity of the issue.

"Trade measures, price control measures, are not efficient or effective in the long run and in the short run they can intensify or exacerbate the situation in the world or in the region as a whole. But it's a difficult decision to be made by governments."

Agriculture is not among the five core focus sectors identified by the ADB in its long-term strategy, but Kuroda said funds would be made available to support rural finance, irrigation and rural infrastructure.

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