IMF warns of threat to poorer nations
Javier Blas | Monday, 7 July 2008
FT Syndication Service
LONDON: The rise in food and oil prices could "severely weaken" the economies of up to 75 developing countries, including Pakistan and Indonesia, the International Monetary Fund said in its first broad assessment of the crisis.
Dominique Strauss-Kahn, IMF managing-director, warned that some countries were now at "a tipping point" because of the double impact of rising food and oil prices.
The warning is a sign that policymakers are increasingly concerned about the impact of the food and fuel crisis, not just in humanitarian terms but also its effect on economic and political stability. The problem will be high on the agenda at the G8 summit this month.
In its assessment of the impact of the commodities crisis, the IMF warned that "a prolonged period with prices around or above current levels will place serious strains on the balance of payments of many countries".
Its concern over balance of payments is a change from the focus on inflation and fiscal balances, both considered more manageable.
Until recently, the escalation in food and fuel prices had not sparked a significant shortfall in export incomes relative to imports but the IMF last Tuesday said: "The most recent increases are having larger balance of payments effects."
The world has not witnessed a multiple-country balance of payments' crisis since 1997-1998. Mr Strauss-Kahn said some countries faced having to deplete currency reserves to continue feeding their population.
The IMF estimates that the adverse balance of payments impact of rising prices between January 2007 and April 2008 for poor importing countries could exceed $37.1bn - 2.7 per cent of the countries' annual gross domestic product.
Countries in Asia, the former Soviet Union, sub-Saharan Africa and central America have been hardest hit, it said. The multilateral organisation has already fast-tracked funding to countries in need and had doubled funding to Burkina Faso, Kyrgyzstan, Mali, Niger and Benin. It was also in talks with 11 others.
"The recent sharp increases in prices ... could pose risks to macroeconomic stability in a number of low and middle-income countries," it said.
The IMF's warning came as commodity prices surged more than 30 per cent in the first half of the year, boosted by record oil and food costs.
"The global economy is in the midst of the broadest and most buoyant commodity price boom since the early 1970s," the body said. Mark Plant, deputy director of IMF policy development, warned: "High prices are here to stay."
The price of soyabean - a key source of oil and proteins for some countries - last Tuesday surged to a fresh high of $16.20
LONDON: The rise in food and oil prices could "severely weaken" the economies of up to 75 developing countries, including Pakistan and Indonesia, the International Monetary Fund said in its first broad assessment of the crisis.
Dominique Strauss-Kahn, IMF managing-director, warned that some countries were now at "a tipping point" because of the double impact of rising food and oil prices.
The warning is a sign that policymakers are increasingly concerned about the impact of the food and fuel crisis, not just in humanitarian terms but also its effect on economic and political stability. The problem will be high on the agenda at the G8 summit this month.
In its assessment of the impact of the commodities crisis, the IMF warned that "a prolonged period with prices around or above current levels will place serious strains on the balance of payments of many countries".
Its concern over balance of payments is a change from the focus on inflation and fiscal balances, both considered more manageable.
Until recently, the escalation in food and fuel prices had not sparked a significant shortfall in export incomes relative to imports but the IMF last Tuesday said: "The most recent increases are having larger balance of payments effects."
The world has not witnessed a multiple-country balance of payments' crisis since 1997-1998. Mr Strauss-Kahn said some countries faced having to deplete currency reserves to continue feeding their population.
The IMF estimates that the adverse balance of payments impact of rising prices between January 2007 and April 2008 for poor importing countries could exceed $37.1bn - 2.7 per cent of the countries' annual gross domestic product.
Countries in Asia, the former Soviet Union, sub-Saharan Africa and central America have been hardest hit, it said. The multilateral organisation has already fast-tracked funding to countries in need and had doubled funding to Burkina Faso, Kyrgyzstan, Mali, Niger and Benin. It was also in talks with 11 others.
"The recent sharp increases in prices ... could pose risks to macroeconomic stability in a number of low and middle-income countries," it said.
The IMF's warning came as commodity prices surged more than 30 per cent in the first half of the year, boosted by record oil and food costs.
"The global economy is in the midst of the broadest and most buoyant commodity price boom since the early 1970s," the body said. Mark Plant, deputy director of IMF policy development, warned: "High prices are here to stay."
The price of soyabean - a key source of oil and proteins for some countries - last Tuesday surged to a fresh high of $16.20