Soaring food prices hit Asia anti-poverty drive

 

Soaring food prices have hampered Asia's fight against poverty and some countries may need foreign aid to feed their hungry millions, the Asian Development Bank president said on Friday.

 

"The current food price inflation has already affected the pace of poverty reduction in some countries," Haruhiko Kuroda said.

 

"Poverty reduction has been very rapid in many Asian economies but the current high food price inflation has really affected poor people in the region, particularly in low income countries like Bangladesh."

 

Bangladesh could potentially require outside help and the Manila-based ADB was ready to assist it and other low-income Asian countries that may have to spend more to help their poorest citizens, Kuroda said.

 

Kuroda said inflation was the most immediate threat to developing Asia's economic growth and that it was impacting heavily on the more than 600 million Asians still living on a dollar a day or less.

 

Vietnam, Cambodia and the former Soviet republics in central Asia now have double-digit inflation.

 

Some economies would do well to allow their currencies to rise to cool prices, he said. A stronger currency helps to make food imports cheaper.

 

"All of them are relatively small countries and that means controlling inflation is very difficult," he told a news conference in Manila.

 

"Governments are well advised to refrain from using trade measures or price control measures to address this food price inflation issue," he said.

 

"The best way is to provide targetted income support for the needy poor, particularly in South Asia and in some parts of Southeast Asia" where the poorest spend more than half their income on food, he added.

 

Kuroda said some countries in the region suffered from large fiscal deficits "and may need some help from ADB."

 

He said the lender was ready to provide loans as budgetary support for "targetted assistance to the poor," although he said no ADB member country had yet sought aid from the bank.

 

Many Asian nations had lost out from the rising cost of food imports and countries such Bangladesh "may" eventually seek budgetary support, Kuroda said.

 

Some countries, such as China, were in a strong position to allow their currencies to rise and should do so to help ease the pain from higher-priced food imports, he said.

 

Thailand, the Philippines and Malaysia have partially "insulated their economies from global commodity inflation" by allowing their currencies to rise in the last few years, he said.

 

However, he said "that may not be so good" for some countries such as Vietnam that have a large current account deficit.

 

While a steady stream of foreign direct investment has largely helped Hanoi, "allowing the currency to appreciate substantially might undermine competitiveness and that might further increase the current account deficit."

 

China, with a huge current account surplus and a very competitive economy, "has been allowing (its) currency to appreciate faster," he said.

 

Longer term, Kuroda said the solution to high food prices was raising productivity through increased government investments in the farm sector.

 

The ADB was a key player in infrastructure development in Asia and would help member countries with irrigation, electricity, roads and other infrastructure that could boost farm production, he said. (AFP)