IMF warns rising food prices raising risk of war

Channel NewsAsia 13 Apr 08;

WASHINGTON - Rising food prices could have terrible consequences for the world, including the risk of war, the IMF said Saturday, calling for action to keep inflation in check.

"Food prices, if they go on like they are doing today ... the consequences will be terrible," International Monetary Fund managing director Dominque Strauss-Kahn said.

"Hundreds of thousands of people will be starving ... (leading) to disruption of the economic environment," Strauss-Kahn told a news conference at the close of the IMF spring meeting here.

Development gains made in the past five or 10 years could be "totally destroyed," he said, warning that social unrest could even lead to war.

"As we know, learning from the past, those kind of questions sometimes end in war," he said. If the world wanted to avoid "these terrible consequences," then rising prices had to be tackled.

Skyrocketing prices on rice, wheat, corn and other staple foods like milk particularly hurt developing nations, where the bulk of income is spent on the bare necessities for survival.

Higher energy prices, too, are driving up the cost of food, as well as stoking broader inflation.

In recent months, rising food costs have lead to social unrest in several countries such as Haiti and Egypt. Thirty-seven countries currently face food crises, according to the Food and Agriculture Organization.

Escalating inflation is complicating the already complex challenges of a global financial crisis battering the world economy, Strauss-Kahn said.

The 185-nation IMF called for a strong front to put the reeling world economy back on track.

"The global crisis has to be addressed with a global view and by strengthening the role of multilateral institutions," Tommaso Padoa-Schioppa, chair of the the International Monetary and Financial Committee (IMFC), the IMF's top policy-making body, told reporters in a briefing.

In a statement, the IMF said that "policymakers should continue to respond to the challenge of dealing with the financial crisis and supporting activity, while making sure that inflation is kept under control."

The IMF stressed that "the challenges facing the world economy are of a global nature, requiring strong action and close cooperation among the membership."

Unlike the last IMF meeting in October, where internal reforms were high on the agenda, this time the multilateral institution faces a full-blown, and still unfolding, financial shock that began in August amid rising defaults on US high-risk sub-prime home loans.

Tasked with maintaining global financial stability, the IMF, whose own finances are strained, insists its expertise and global range make it a key player in resolving what Strauss-Kahn earlier called the worst financial crisis since the Great Depression of the 1930s.

The IMF last week warned the global economy is slowing so rapidly it could slide effectively into recession this year and next.

IMF policymakers also welcomed moves by central banks to provide liquidity support to ease strains in the credit markets.

The US Federal Reserve, the European Central Bank and others have pumped hundreds of billions of dollars into the money markets that seized up in the spreading sub-prime contagion.

The IMF also applauded Financial Stability Forum policy recommendations adopted Friday by the Group of Seven industrialized countries in the hope of improving transparency and resiliency in the financial markets within 100 days.

Regarding internal reforms, the IMF said it hoped governors would soon approve key voting and financial measures approved by the executive board.

It said it looked forward to approval of a reform of voting rights, long demanded by developing countries, by April 28, and a new income model that includes the sale of 403 tonnes of gold to raise cash, by May 5. - AFP/ir

Rising food prices could result in 'mass starvation'
Straits Times 14 Apr 08;

Developing countries, especially in Africa, will suffer the worst, warns head of IMF
WASHINGTON - MASS starvation and malnutrition among children - with consequences for the rest of their lives - will result if global food prices continue their upward spiral.

This warning came from the head of the International Monetary Fund (IMF), Dominique Strauss-Kahn, who added that people in developing countries, especially in Africa, will bear the brunt of the 'dire consequences from high food prices'.

His comments came as violence flared in Haiti, with mobs protesting against soaring food prices pulling a United Nations police officer from his car and shooting him execution-style.

Over the past few months, riots and demonstrations sparked by the cost of food have also broken out in Guinea, Mauritania, Mexico, Morocco, Senegal, Uzbekistan, Yemen, Bangladesh, the Philippines and Indonesia.

Mr Strauss-Khan was speaking on Saturday, ahead of yesterday's meeting of the IMF's sister institution, the World Bank, which was due to discuss a massive plan to reduce hunger announced earlier this month by bank president Robert Zoellick.

The IMF chief also warned richer countries that the problem of high food prices 'is not only a humanitarian question', as the developed world would also be affected by trade imbalances.

But he made it clear that it is the world's poor which will bear the brunt of the problem.

'Food prices, if they go on like they are doing today...the consequences will be terrible,' he said.

'Thousands, hundreds of thousands of people will be starving. Children will be suffering from malnutrition, with consequences for all their lives.'

He also said that development gains made in the past five or 10 years could be 'totally destroyed', and that social unrest could even lead to war.

'As we know, learning from the past, those kinds of questions sometimes end in war,' he said.

According to a World Bank policy note released last week, increases in global wheat prices reached 181 per cent over the 36 months leading up to February, while overall global food prices increased by 83 per cent.

Meanwhile, the global price of rice has roughly doubled in the last year.

Singapore shoppers are feeling the pinch too, with overall food prices rising by 6.7 per cent year on year, according to the Consumer Price Index for February.

Mr Zoellick last week said that global food stocks had fallen to a level that was bordering on an emergency because of strong food demand, dietary changes and the use of biofuels as an alternative energy source. Some biofuels such as palm oil are also foodstuffs.

Meanwhile, World Bank policymakers were yesterday set to discuss Mr Zoellick's proposed 'new deal' for global food policy.

He is urging countries to provide the minimum US$500 million (S$670 million) immediately sought by the World Food Programme to address the food crisis.

The World Bank plans to nearly double its lending for agriculture in Africa, to US$800 million.

Mr Zoellick also wants sovereign wealth funds to increase their investments in Africa among other measures to soften the impact of a slowing world economy on the most vulnerable countries.