The WSJ has published a report on the outcome of last week’s annual meetings of the World Bank and the IMF and how leaders there proposed to deal with the very real problem of rapidly rising food prices worldwide. For a variety of reasons, there has been a dramatic surge in the prices of all commodities, including primary agricultural products, like rice and wheat. This has already led to rioting in Haiti and Egypt (see a previous blog post here) and could lead to even more social and political unrest in developing countries around the world, where large majorities rely on rice and wheat as staple foods. Here are some excerpts from the WSJ article:
WASHINGTON — Finance ministers gathered this weekend to grapple with the global financial crisis also struggled with a problem that has plagued the world periodically since before the time of the Pharaohs: food shortages.
Surging commodity prices have pushed up global food prices 83% in the past three years, according to the World Bank — putting huge stress on some of the world’s poorest nations. Even as the ministers met, Haiti’s Prime Minister Jacques Edouard Alexis was resigning after a week in which that tiny country’s capital was racked by rioting over higher prices for staples like rice and beans.
Rioting in response to soaring food prices recently has broken out in Egypt, Cameroon, Ivory Coast, Senegal and Ethiopia. In Pakistan and Thailand, army troops have been deployed to deter food theft from fields and warehouses. World Bank President Robert Zoellick warned in a recent speech that 33 countries are at risk of social upheaval because of rising food prices. Those could include Indonesia, Yemen, Ghana, Uzbekistan and the Philippines. In countries where buying food requires half to three-quarters of a poor person’s income, “there is no margin for survival,” he said.
I encourage you to read the whole article, which is free on the WSJ web site. Here is a chart demonstrating how rising food prices have affected balance of payments accounts in select countries around the world. As the graphic states, worsening balance of payments figures will make it much more difficult for some countries to pay off foreign debt and provide the infrastructure necessary for further economic and social development.