1. THE FOOD CRISIS & CHANGING VIEWS OF THE ROLE OF THE STATE
2008 World Bank-IMF Annual Meetings
Civil Society Policy Forum
ActionAid Int’l and Oxfam Int’l Meeting
October 10, 2008
Christopher Delgado
Rural Strategy and Policy Adviser
Agriculture and Rural Development Department
The World Bank

2. State of the Food Crisis

3. Source: IMF index of food prices
Food prices declining, but likely to remain high relative to past 30 yrs.
Food price index (nominal $)
Food prices to decline, but remain high relative to history, unless energy prices fall sharply
Source: IMF index of food prices

4. Fertilizer prices continue to surge upwards
Real fertilizer prices, * Index in constant 2000 $s relative to MUV

5. Increased volatility in food prices anticipated, as grain stocks likely to remain at record lows%

6. Countries with food price protests and riots, Jan. 2007- May 2008
Source: USAID Office of Food for Peace

7. Global Information and Early Warning System: 33 Countries in Crisis
Shortfall in aggregate food production/supplies
Widespread lack of access
Severe localized
food insecurity
Countries in Crisis Requiring External Assistance are expected to lack the resources to deal with reported critical problems of food insecurity. Food crises are nearly always due to a combination of factors, but for the purpose of response planning, it is important to establish whether the nature of food crises is predominantly related to lack of food availability, limited access to food, or severe but localized problems. Accordingly, the list of countries requiring external assistance is organized into three broad, not mutually exclusive, categories:
Countries facing an exceptional shortfall in aggregate food production/supplies as a result of crop failure, natural disasters, interruption of imports, disruption of distribution, excessive post-harvest losses, or other supply bottlenecks.
Countries with widespread lack of access, where a majority of the population is considered to be unable to procure food from local markets, due to very low incomes, exceptionally high food prices, or the inability to circulate within the country.
Countries with severe localized food insecurity due to the influx of refugees, a concentration of internally displaced persons, or areas with combinations of crop failure and deep poverty.
August 22, 2008
Source:

8. Why have food prices risen?--demand
Sustained food demand from emerging markets (of the 73 million net additional persons in the global population each year, 97.5% are in developing countries)
Diet changes, from grain to more diversified diet, meats and dairy with higher derived demand for grains and oilseeds
Biofuel policies => demand shift, particularly in the United States (corn-based ethanol), and Europe (rapeseed for biodiesel), Argentina (soybeans for biodiesel)

9. Why have food prices risen?--supply
Increasing production costs, sharply increasing costs of energy, transport, and fertilizer, and competition for land and water for biofuel croips, esp. in OECD
Drought, flooding, pests and disease in key grain regions, these shocks are hard to deal with when stocks are low
Disappearance due to policy reforms of stabilizing sales from large intervention stocks in USA and EU that had been built up to support producer prices

10. Impacts on poverty
Increase in the number of global poor due to rising food prices estimated exceed 100 million
The number of undernourished people could increase by up to 44 million in 2008 alone to reach 967 million, up from 848 million in 2003
Already poor households suffer further detrimental effects beyond increase in poverty headcount (decreased access to educ./health)
Rising inequality from recent rise in food prices
Gini index of inequality raised by 5% in Bangladesh
Rich-poor gaps widening in Latin America
1010

11. Global food prices: recent changes
International food prices are declining, but likely to remain high relative to 2005 levels
Weakening import demand and improved supply have lowered global prices somewhat
Domestic prices have not declined to the same extent as international prices in many countries
Food price inflation remains very high (92% in Ethiopia, 22.5% in Liberia, 23.7% in Togo, 76.4% in Afghanistan)
Fertilizer prices continue to surge upwards, despite recent declines in energy and natural gas prices 11

12. Negative impacts likely to continue
Increased volatility in food prices anticipated, as grain stocks are still at record lows
Increased input prices linked to oil a major concern, likely to discourage smallholders who supply most of the food in developing countries
Countries are in the process of reverting to the food policies of the 1970s (food self-sufficiency at any cost, costly strategic grain reserves, reversal of diversification policies, etc) which would eventually be harmful to both poverty alleviation and food security

13. What Is the Bank Doing w.r.t. the Food Crisis?

14. Applying response lessons from the avian influenza crisis
Speed of response is critical
Rapid national response planning and coordination, and country-based needs assessments are essential
Alignment with national priorities, & national ownership, are central
Emphasize flexibility and simplicity in program design
Pragmatism for immediate responses, balanced with focus on sustainability over the medium term
Carefully coordinated communications strategy

15. Consensus on lessons
Avoid short-term policies targeting short-term food insecurity that have difficult longer-term implications
Short-run policies require planning exit strategies in advance
Different countries need different policies, depending on:
institutions, capacity
governance requirements
size of country and history of trade, etc.
Promote longer-term agricultural growth

16. Food prices: short-run options
Better policy choices
Reduce Food Grain Taxes/Tariffs
School Feeding Programs
Conditional Cash Transfers to the Poor
Targeted Food Subsidies
Cash for Work
Food for Work and Food Aid
Build-up Government Buffer Stocks for Distribution
Food Rationing
Price Controls
Export Restrictions/Taxes
Export Bans
Worse policy choices

17. Food prices: international action
Finance Ministers at the April 2008 World Bank-IMF Spring Meetings endorsed a “new deal” for a global food policy to embrace a short, medium and long-term response:
Support for humanitarian assitance (WFP)
Support for systems of safety nets
Increased agricultural productivity
Better understanding of the impact of biofuels
Action on trade to reduce trade barriers

18. Internal consensus on immediate vehicles for Bank responses
Priority to support fundraising by WFP
Rapid financing to countries
Policy analysis linking country to global
Risk mitigation using financial tools as well as physical hedging
Social protection
Maintain productive capacity and transit to longer term food production viability

19. Coordination with United Nations on food crisis response
WB response to the food crisis has been in close collaboration and partnership with the UN as agreed in Berne, April 28-29, 2008
UN Task Force on the Global Food Crisis has functioned throughout with active WB senior management and staff participation, including staff outposting to NY
The Comprehensive Framework for Action (CFA) was collaboratively prepared by UN Agencies, World Bank, IMF, WTO, OECD in consultation with countries and civil society organizations
27 countries identified for intensive and coordinated response to realize CFA outcomes: 17 countries in AFR, 5 in SAR, 2 in MENA, 2 in LAC and 1 in ECA. The Bank is working in 22 of these countries through GFRP 19

20. The Bank’s Global Food Crisis Response Program (GFRP)
Approved May 29
Umbrella for providing rapid Bank support for a comprehensive response to the crisis
Provides balance between short run food stabilization and measures to ensure countries able to cope better in medium term, including longer term action and lending to enhance agricultural productivity
Fast-tracking of up to $1.2 billion of Bank resources: existing country envelopes, re-programmed funds, regional IDA funds where appropriate, a new $200 million trust fund from IBRD surplus (Food Price Crisis Response Trust Fund)
Greatly expedites procedures for rapid response

21. Menu of GFRP Components
Component 1: Food price policy and market stabilization
Examples: Support for grain stock management, improved use of market-based instruments to manage food prices, tax and trade policies
Component 2: Social protection actions to ensure food access and minimize the nutritional impact of the crisis on the poor and vulnerable
Examples: Cash transfer program (CCTs, food stamps), school feeding, targeted food supplements and micronutrients
Component 3: Enhancing domestic food production & marketing response
Examples: Seed and fertilizer supply and market development, Rehabilitation of small-scale irrigation, Strengthening access to finance and risk management tools
Component 4: Implementation support, communications and monitoring and evaluation

22. Overview of World Bank lending in response to the food crisis
Global Food Crisis Response Program (GFRP): $851 million approved and pipeline
Food Price Crisis Response (FPCR) Trust Fund: $200 million committed
IDA/IBRD (including reallocations): $651 million
Multi-donor Trust Fund established, first contribution of A$50 milion rec’d yesterday from Australia
Additional $400 million non-GFRP food crisis response approved and pipeline 22

23. Activities financed through approved GFRP operations by region (%)
SS Africa
M.E. &
N. Africa
Europe &
C. Asia
Lat. Am. & Carib.
S. Asia
( % of Total Approved GFRP Projects)
Budget support (DPOs) 18 3 10
Investment lending
Social protection 5 8
Agriculture 16 12
Project management, M&E 2 1
TOTAL (100%) 46 14 22
Budget support: activities include reduction in food prices through trade and tax policy measures; social protection programs and emergency interventions and support to agricultural production
Investment lending: social protection includes school feeding, cash for work, nutrition, health, and cash transfers; agriculture includes seeds, fertilizers, rehabiliation of irrigation infrastructure, livestock and post-harvest infrastructure 23

24. Other non-GFRP food crisis-related lending
$90 million in additional IDA funding in AFR approved for food crisis response in 7 countries since April 2008
Programs include:
Fertilizer supply in Ghana
Improved seed distribution and nutritional safety nets in Burkina Faso
Provisions for therapeutic feeding in Eritrea
Improving maize productivity in Malawi
An additional $295 million in the IDA pipeline for food-crisis-related lending in Africa not under GFRP, coming for Board approval in the next six months 24

25. Examples of early results
Rwanda: Supplementary financing to a development policy grant of $10 million.
Results to date: grant has helped fill an unanticipated financing gap; enabled fertilizer imports and also helped maintain the Govt’s overall reform program, including a more private sector oriented fertilizer distribution system
Sierra Leone: A new development policy grant of $3 million and $4 million additional financing (AF) for emergency safety net response through the National Social Action project.
Results to date: grant partially compensated the lost revenues from reduced food and fuel tariffs. Fiscal space created will help provide basic services to almost 21,600 mothers and children. Grant support has been provided for a cash-for-work program expected to generate at least 849,000 person-days of employment 25

26. Early results (cont.)
Liberia: $10 million grant supporting three projects: AF for agricultural and infrastructure development project ($3 million) and community empowerment project ($3 million), and new investment lending project on food support for vulnerable women and children ($4 million)
Results to date: $2.45 million has been used to support pre-school and primary school feeding programs, and to provide rations for pregnant and lactating women
Kyrgyz Republic: IDA funding of $10 million through additional financing of two projects: agricultural investment and services project ($4 million) and health and social protection project ($6 million)
Results to date: IDA funding is providing seeds, fertilizers and training for farmers. Vitamin A supplements are also being provided to 130,000 postpartum women and 500,000 children under age 5 26

27. Early results (cont.)
Haiti: Supplementary financing of $10 million to a development policy grant
The grant has contributed to maintaining macroeconomic and social stability, ensured the availability of resources for Govt. to continue to provide critical social and infrastructure services for the poor
Djibouti: Development policy grant of $5 million
Results to date: Grant funding has supported the suspension of tariffs/taxes on basic food staples, consumers have benefited from lower food prices 27

28. Food priorities going forward
Implementation of better ways of working with UN agencies in the field, especially on procurement
Shift in focus from immediate short-term needs to more medium-term responses
Increasing smallholder agricultural productivity
Ensuring adequate safety net systems are in place to cope with greater volatility in the future
More attention to better nutrition
Continuing to increase regular program (incl. IFC) new annual lending to agriculture and safety nets
Collaboration in discussions/AAA with other agencies and private sector of possible new international modalities for managing grain market risks for poor countries and humanitarian agencies 28

29. A Changing View of the Role of the State in the Longer Term Agricultural Investments of the World Bank (best expressed in WDR2008– Agriculture for Development)

30. Agricultural-based countries spend too little on agriculture (and R&D)
Ag GDP/GDP 29 16 10 5 15 20 25 30 35
Agriculture-based
Transforming
Urbanized
percent 30 30

31. Crowding out of long term public goods by short term private ones
A major South Asia power….
Subsidies
Subsidies
Public Investment 31 31

32. Donor support to agriculture 1990-2004
Donors have dropped the ball…
Donor support to agriculture
100 14
% rural poverty 90 12 80 70 10 60 8
% poverty in rural areas 50
% ODA to agriculture
% ODA to Ag 6 40 30 4 20 2 10 -
1990
1992
1994
1996
1998
2000
2002
2004 32 32

33. So have developing country States OFFICIAL DEVELOPMENT ASSISTANCE
AGRICULTURE 4%
OFFICIAL DEVELOPMENT ASSISTANCE
(12% in 1990)
WORLD POOR
AGRICULTURE 4%
RURAL
75%
PUBLIC SPENDING
(Sub-
Saharan
Africa)

34. Priorities from WDR 2008
Accelerate smallholder productivity increases for agricultural growth and food security in Africa
Follow a comprehensive approach to reduce sectoral disparities and poverty in transforming countries of Asia
Enhance sustainability and environmental services from agriculture
Pursue multiple pathways out of poverty: smallholder farming, labor market, rural non-farm employment, migration
Improve the quality of governance in agriculture at local, national, and global levels

35. Role of the State in WDR 2008 Delivering key public goods
Productivity and information enhancement
Infrastructure and institutions, rule of law
Making growth pro-poor
Connecting smallholders to new markets
Improving assets of the poor, especially women
Improving governance
New state roles, coordination, decentralization
Global governance issues (trade, standards, animal health, biodiversity, climate change, donor support)
Uncertainties—potential for shocks
Governance—Decentralization, roles and capacities of MoAs, rural investment climate 35 35

36. WB Group new lending for food and agriculture since April 2008
US$ million, over 5 months
2143
659
324 39 58
227
1160
Total 55
World
257 60 29 12 17
168
SAR 64 38 26 3 23
MNA
238
136 54 16 11 27 48
LCR
393
219 76 8 65 98
ECA
361 79 56
226
EAP
775 72 83 44
620
AFR
Grand
IFC
Social
Protect -
ion
Risk
Mitigat
Nutrition
& Food
Security
Safety
Nets
Agricult
ure
Region
Agriculture: Lending under the Agriculture and Rural Sector Board 36