Poor countries are increasingly threatened by the surging food and fuel prices, which is eating up reserves and seriously frustrating poverty reduction efforts, the International Monetary Fund (IMF) said in a broad 162-country survey.
The report said that the impact is being felt globally but is most acute for import-dependent poor and middle-income countries confronted by balance of payments problems, higher inflation, and worsening poverty.
"Some countries are really at a tipping point," IMF Managing Director Dominique Strauss-Kahn said upon the release of the report on Tuesday.
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
Analyzing the macroeconomic policy challenges arising from the price surges, the study argues that many governments will have to adjust policies in response to the price shock while the international community will need to do its share to address this global problem.
Food prices have doubled on average since 2006, while oil prices have quadrupled since 2003. Global demand has grown faster than the ability of producers to boost supplies in the last decade.
That has forced several countries -- especially in Africa -- into short-term measures to address food shortages, such as importing goods that severely impacted trade deficits, at the expense of longer term economic development.
"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," Strauss-Kahn said.
The higher prices have cost 33 net food importers about 0.5 percent of their economic output since January 2007, or 2.3 billion dollars, while 59 net oil importers have had to spend about 2.2 percent, or 35.8 billion dollars, according to the IMF report.
Strauss-Kahn also urged food producing nations not to block exports in order to address shortages and price-hikes in their own countries. Nearly 30 countries have curbed exports last year.
Mark Plant, the IMF's deputy director for policy, also highlighted the ongoing "tension" between food and biofuels for crops. Maize prices in particular have been driven up largely due to U.S. demands for maize-based ethanol.
The IMF warned that both food and fuel costs were likely to remain high for the foreseeable future. Crude oil has been trading at record levels of more than 140 dollars per barrel since last week.
Strauss-Kahn said the findings of the study underscored the need for a broad cooperative approach involving the countries affected, donors, and international organizations to cope with the effects of high prices.
Annual food price inflation for 120 low-income and emerging market countries rose to 12 percent at the end of March 2008 from10 percent three months earlier, while fuel prices accelerated to 9 percent from 6.7 percent in the same period. Preliminary data indicate the problem is worsening.
The IMF's African Department has produced an analysis of the implications of the price shocks for the balance of payments of low-income countries in sub-Saharan Africa.
The note identifies a list of 18 countries in the region that are especially hard hit and that, consequently, face a pressing need for additional balance of payments and budget support.
Source: Xinhua
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