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Asia sets $2.5bn farm boost, aid in food price fight

Manila, May 6, 2008

The ADB pledged $2.5 billion in emergency aid and loans in Asian nations hit hardest by soaring food costs as finance chiefs agreed on Tuesday to boost farm output as a long term solution to the crisis.

After four days of talks governments remained split on whether they should use export bans and market intervention to ensure one billion poor Asians living on less than $2 a day do not slip back into hunger and malnutrition.

Finance chiefs called on the Asian Development Bank to take an active role in stabilising surging food prices in a region that is home to two thirds of the world's poor and risks civil unrest after wheat and rice prices doubled in the last year.

ADB president Haruhiko Kuroda said the Manila-based bank stood ready to act.

 'I am pleased to announce that ADB will provide $500 million as immediate budgetary support to the hardest hit countries so that they can bring food to the tables of the vulnerable, poor and needy,' he told a news conference, adding that he expected to make the first loans within weeks.

But Kuroda said the best long term solution to painful price spikes was through boosting agricultural output, adding that the bank would double lending to agricultural and natural resource and infrastructure projects to $2 billion in 2009.

'Trade measures or price controls are not efficient ways to combat the food crisis or food price inflation. It distorts the market and could exacerbate the situation in the international grain market,' Kuroda told Reuters in an interview earlier on Tuesday.

'In many meetings here in Madrid I have emphasised that the best way to address the immediate difficulty is to strengthen social safety nets through targeted support for the poor rather than generalised food subsidies or trade measures or price controls.'    

His views were echoed by Japan and many other rich nations among the 67 economies that fund the multilateral lender.
    'Price and export controls could remove incentives for farmers to produce more,' said Caspar Veldkamp, who headed the Netherlands' delegation.

'Food price subsidies may have harmful budgetary consequences and prove to be wasteful.'    

Rice producers like India and China gained support for export restrictions from poorer ADB members who said they had to guarantee food supplies.

Sri Lanka was among countries that backed market intervention as a short term measure to protect poor families who spend more than half their income on food.

'If you produce the food and don't give it to your people then they're going to get very angry,' said Sri Lankan Minister of Enterprise Development and Investment, Sarath Amunugama.

Export bans and prices floors established by key rice exporters China, Pakistan, Vietnam and India have increased price volatility and raised uncertainties about future supplies, according to the ADB.

Indian sugar and soyoil futures dropped on Tuesday over market talk the government may halt their trading to guarantee food supplies and rein in 3-1/2 year high inflation.

The deputy prime minister and finance minister of Thailand -- the world's largest rice exporter -- urged the ADB to take an active role in steadying food prices.

'The ADB could set up a programme to finance farmers to buy seeds, fertilisers, and other inputs used for crop growing. At the same time, ADB could buy forward contracts from those farmers at agreed-upon prices,' Surapong Suebwonglee told delegates.

'In this way, not only could the ADB help stabilise food prices, it could also create an additional supply of food on the world market.'    

Finance officials urged the ADB to keep its focus on poverty reduction and cautioned against risky project investments as it plans to direct 50 percent of its funding to the private sector by 2020. -


Tags: Asia | Food | ADB |

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