Soaring food prices may throw millions of Asians back into poverty, undo a
decade of gains and stoke civil unrest, regional leaders said on Sunday as they
urged a boost to agricultural production to meet rising demand.
Asia -- home to two thirds of the world's poor -- risks rising social tension as
a doubling of wheat and rice prices in the last year has slammed people who
spend more than half their income on food, Japanese Finance Minister Fukushiro
Nukaga said during the Asian Development Bank's annual meeting.
If food prices rise 20 percent, 100 million poor people across Asia could be
forced back into extreme poverty, warned Indian Finance Secretary D. Subba Rao.
"In many countries that will mean the undoing of gains in poverty reduction
achieved in the past decade of growth," Rao told the ADB's meeting in Madrid.
The ADB estimates that about 20 percent of people in Asia are presently living
on less than $1 a day -- the international definition of extreme poverty --
compared to more than 60 percent who did so in the mid-1960s.
A 43 percent rise in global food prices in the year to March sparked violent
protests in Cameroon and Burkina Faso as well as rallies in Indonesia following
reports of starvation deaths.
Many governments have introduced food subsidies or export restrictions to
counter rising costs, but they have only exacerbated price rises on global
markets, Nukaga said.
"Those hardest hit are the poorest segments of the population, especially the
urban poor," Nukaga told delegates.
"It will have a negative impact on their living standards and their nutrition, a
situation that may lead to social unrest and distrust," he added.
The ADB estimates the very poorest people in the Asia Pacific region spend 60
percent of their income on food and a further 15 percent on fuel -- the key
basic commodities of life which have seen their prices rise relentlessly in the
last year.
POVERTY TIME BOMB
Japan is one of 67 ADB member economies gathered in Spain to discuss measures to
counter severe weather and rising demand that have ended decades of cheap food
in developing nations.
The Asia-Pacific has three times the population of Europe -- around 1.5 billion
people -- living on less than $2 a day.
Rice is a staple food in most Asian nations and any shortage threatens
instability, making governments extremely sensitive to its price.
But the steadily rising cost of providing fuel and food subsidies harms budget
finances, puts at risk the macroeconomic stability international investors
demand in return for buying government bonds and, in some cases, curbs the
access nations have to global financial markets. Indonesia, for example, has
pledged to reduce its budget deficit by cutting fuel subsidies ahead of planned
global bond sales this year worth around $12 billion.
"We have to reduce the budget deficit for investor confidence," Anggito
Abimanyu, a senior Indonesian fiscal policy official told ADB delegates on
Sunday, saying that fuel and electricity subsidies of $20.5 billion this year
hampered efforts to raise money on international capital markets.
Decade-high inflation, driven by food and raw materials costs, has topped the
agenda of the ADB's annual meeting.
The Manila-based multilateral lender has had to defend itself from U.S.
criticism it is focused on middle income countries and has neglected Asia's
rural and urban poor.
Smaller countries such as Cambodia urged the ADB to focus its lending on the
poorest Asian states.
The Bank on Saturday called for immediate action from global governments to
combat soaring food prices and twinned it with a pledge of fresh financial aid
to help feed the Asia Pacific region's poorest nations. [ID:nL03466006]
Leading members Japan, China and India backed long-term ADB strategy to provide
low-cost credit and technical assistance to raise agricultural productivity.
The United Nations said the rural poor represented a political time-bomb for
Asia that could only be defused by higher agricultural investment and better
technology.
"Unless you can look at the plight of the poorest farmers in the region and how
they are going to add to the numbers of very poor, very deprived people, we are
unnecessarily going to create a problem that will erupt into a political
crisis," said Rajendra Pachauri, head of the U.N. panel on climate change.