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Washington: A global surge in food and fuel prices has become a serious problem for developing countries and the problems are likely to persist for years, a senior World Bank official said.
"It has reached a critical stage where you do have food riots in a dozen countries or some related disturbance," Danny Leipziger, the World Bank's vice president for poverty reduction and economic management, said.
While some benefit from higher revenue on export of commodities, the problem of surging food and fuel prices is widespread enough to have affected about 30 to 40 developing countries adversely, he said.
"The research part of the World Bank tends to think this is not a short-term cycle issue, that this is a structural issue for reasons of global demand, for reasons of what is happening in biofuels and oil prices, and this is likely to be sustained for a number of years," he added.
Global prices for food and fuel have risen sharp-ly and even accelerated in 2008, while food inflation between January 2007 and 2008 has seen increases ranging from 10 to 34 per cent.
Behind the surge are high energy and fertiliser prices, increased use of food and crops for bio-fuels, higher per capita income in developing economies like China and India, and record low world stocks of grain.
Leipziger said countries had responded in different ways to address the effects of higher prices.
"In the main, countries are acting responsibly but it depends very much on what instruments they have available," he said.
"So, take a country that has a good conditional cash transfer scheme in place, which might be Brazil, Mexico, Indonesia-type countries, then its relatively easier in the short-term to react because you can use that well-targeted program to increase support.
"The difficulty, of course, is it does have a fiscal cost as you sustain it over time," he added.
Limited options
For other countries, for example, that don't have the ability to lower grain import tariffs - another way to lower food prices - options may be limited, he said.
"In the initial stages of a problem like this, in the first three to four months, countries can rely on fiscal means and their reserves. As it persists, I think they have to look for longer-term solutions," Leipziger added.
He said the World Bank was currently assessing the extent of the problems in each country and could either increase or speed up the pace of budget support to those most in need.
"Particularly in countries that have made progress in terms of poverty reduction, we don't want to see this crisis put people back and undo the progress that has been made," Leipziger said, "So it's incumbent upon us and other actors to try to prevent that kind of backward movement in terms of poverty reduction."
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