The Hindu Business Line : Fund and famine

The article “The Fund, Fed and finance feed the famine” (Business Line, May 16) rightly warns of the seriousness of recent food price increases but its analysis of the causes demands a response.

The origins of the crisis are complex: rapidly rising demand, especially in emerging market countries; bad weather and poor harvests in key food-exporting countries; the shift of certain crop production toward bio-fuels; the steep increase of oil prices, which affects all stages of the food chain; low food stocks in many countries; short-term market speculation; and even trade restraints.

The international community is responding to these challenge in a variety of ways — including through immediate food aid and balance of payments support for governments in need. The work of the World Food Programme is crucial at this time.

Globally there is enough food to feed everyone but it is not necessarily reaching the right places, a fact that argues for more open trade and markets, not for more restrictions. Indeed for much of the last two decades, increasingly open world trade in agriculture has led to substantial gains in food production, and lower and more stable prices that have benefited consumers throughout the world.

With rising prices upon us, it will be important to set up the right incentives and devise longer-term strategies for farmers to produce more crops in a less costly manner, and to rationalise the functioning of key food crop markets. But throwing out market mechanisms — by introducing price controls or encouraging hoarding, for example — would worsen an already difficult situation. While agricultural development and policies may have been neglected in the recent past, now is the time to get the reforms right all around the world.

Finally, the IMF does not provide policy advice in agriculture because this is outside our remit, although occasionally, we have pointed to related issues that could endanger economic stability. For example, we have advised against inefficient and fiscally wasteful subsidies whose beneficiaries are usually not the most vulnerable consumers or farmers.

Over the last five years, less than 1.5 per cent of lending conditions in IMF-supported programmes have been related to agriculture. So, accusations about “structural adjustment” simply obscure serious discussion. Furthermore it is wrong to claim that IMF-recommended policies contributed to food shortages in Ethiopia and Malawi. Documentary evidence on these issues is available on the IMF website ( www.imf.org ). And IMF programmes with Haiti have not required the importation of US rice. Haiti’s shift toward rice imports came at a time when there was not even an IMF programme with that country.

Mark Plant Deputy Director, Policy Development and Review Department, International Monetary Fund

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