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World Bank president says high food and oil prices pushing world into “a danger zone”.

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G8 faces food aid pressure

By David Pilling in Tokyo

Published: July 5 2008 03:00 | Last updated: July 5 2008 03:00

The Group of Eight richest nations will come under strong pressure at their annual summit in Hokkaido next week to boost food aid sharply, after the Asian Development Bank added its voice to those warning that rising prices pose a grave threat to the world’s poor.

Haruhiko Kuroda, ADB president, said soaring prices for cereals, rice and other staples risked malnutrition for 1bn Asians, who spend at least 60 per cent of their income on food.

His remarks echoed those of Robert Zoellick, World Bank president, who said this week that high food and oil prices were pushing the world into “a danger zone”. Mr Zoellick said $10bn should be made available to alleviate hunger and to help pay for seeds and fertilisers.

The Asian Development Bank plans to lend $1bn this year for agricultural sector reforms and will double that next year to $2bn, Mr Kuroda said. At its annual meeting in Madrid in May, it announced it would make $500m available immediately to help provide safety nets for the very poor.

ActionAid, a charity, blamed G8 countries in a report for what it said was a halving of agricultural aid since 1980 to $3.9bn, just 3 per cent of the subsidies given to farmers in the developed world. “Structures that provided access to credit, agricultural inputs and technical assistance have been dismantled,” it said.

The charity also called for a scrapping of all biofuel subsidies and a five-year moratorium on the diversion of arable land for biofuel production.

Mr Kuroda said that high food and oil prices posed serious macroeconomic problems in Asia. Inflation had been pushed up to 7.7 per cent in China, 7.8 per cent in India, 8.9 per cent in Thailand and 27 per cent in Vietnam. “Many countries face a growing dilemma on monetary policy: how to gauge the right mix to control rising inflation without excessively slowing economic growth.”

He said that if countries raised rates too sharply, not only would they risk stifling growth, but the interest rate differential could attract hot money, increasing the possibility of a hard landing. Raise them too slowly and an even greater danger was that “prices spiral out of control”.

Japan, which has added the food crisis to the list of highpriority issues to be discussed at next week’s G8 meeting, said it would provide an extra $50m in emergency food aid, adding to the $200m already announced. Tokyo said it had already assigned $1.1bn to food and agricultural aid projects this year, though at least some of that was existing money diverted from other aid-related budgets.

G8 under fire, Page 2

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