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Nigeria: High Food Prices Here to Stay, IMF Warns
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This Day (Lagos)
13 May 2008
Posted to the web 13 May 2008
Constance Ikokwu
Washington, D.C.
Global food prices will remain high in the near future, giving room for only temporary relief, says the International Monetary Fund (IMF).
The Fund's First Deputy Managing Director, John Lipsky, says policy response, particularly in developing countries, which include new investment and reforms may take time to materialize, thereby prolonging the crisis.
"We expect that agricultural prices will remain high in the foreseeable future, as supply responses may require both new investment and policy reforms. This will take time. Hopefully, the inflationary impulse from higher food prices will wane, even if prices do not retreat significantly. "However, this also indicates that the humanitarian challenges of higher food prices will not disappear anytime soon,"he notes. Lipsky says advanced, emerging and developing countries have to ensure their policies do not hinder the restoration of demand-supply balances in commodities markets, adding that countries may have to adjust to the reality of â permanent relative price shifts. He emphasized that appropriate structural policy response at this point should focus on sufficient infrastructure to increase cultivation, boost productivity and bring agricultural products to the market.
Without this, supply response in emerging and developing countries which are hard hit by the food crisis will remain elusive, he argues.Policies should also target the upgrading of infrastructure, distribution and storage systems, expansion of irrigations systems, re-directing subsidies toward high-yield products and key agricultural inputs such as fertilizer. Lipsky urged advanced countries to phase out subsidized production over time rather than continue to undermine farmers in developing and emerging economies. He also pointed to rising concerns about new inflationary pressures around the world.
The pick-up of inflation around the world reflects the impact of higher energy and commodity prices, he argues. This new inflationary pressure should be taken seriously as it poses significant challenges to economic stability, could undermine prospects for restoring solid growth and low inflation rate, he states. "In emerging economies whose currencies are closely linked to the dollar and that are facing overheating concerns, macroeconomic policies need to be strengthened in response to generalized inflationary pressures," he notes.
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In addition to assisting countries facing acute food crisis financially, the Fund is also focusing on economic research aimed at a better understanding of the causes of the recent energy and food price increases, he disclosed. It is studying the effect of financial fundamentals on prices of oil and other key commodities, the impact of fuel and food prices on overall inflation and on the macroeconomic outlook generally.
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