Asia food export curbs an over-reaction: ADB
Wednesday, 23 April 2008

Reuters, Singapore- Asian governments are over-reacting to surging food prices by resorting to market-distorting export curbs and they should use fiscal measures instead to help the poor, the Asian Development Bank (ADB) said on Tuesday.

World rice prices have surged, not only because stocks have hit their lowest level in decades, but also because of growing disposable incomes, high fuel prices driving production costs, erratic weather and stagnant yields, said Rajat Nag, ADB's managing director general.

"The era of cheap food is over," Nag told reporters at Singapore's Foreign Correspondents Association. "We want to temper what we think is a bit of an over-reaction. There is still enough supply." The growing unease over rice supplies has reached fever pitch in recent weeks as surging food inflation prompted India and Vietnam to curb exports, hoping to tame prices at home -- while goading them higher abroad.

"Banning of exports is no different from hoarding at a national level," Nag said.

The price of rice from Thailand, the world's number one exporter, has more than doubled this year. The benchmark Thai 100 percent B grade white rice was quoted at a historic high at $950 a tonne this week , up from $383 earlier this year.

"We believe the situation in Asia is one marked by very high food prices and not supply shortages," Nag added.

He also said that direct help to the poor was preferable to raising interest rates to tackle the problem of rising prices.

"It is an entitlement issue, the ability to buy. You have got to get support to the poor immediately. We'd rather that be done through direct fiscal stimulus than monetary policy," he said.

The comments from ADB echoed recent statements by the International Monetary Fund and the United Nations, urging countries to ensure more funds in the hands of the poor to buy food, instead of resorting to protectionist trade barriers.

Nag said food prices could ease from current levels because of cyclical factors but would settle at a relatively higher level, compared with levels seen in previous years.
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