Asia calls for funding to fight food shock amid tension
Wednesday, 07 May 2008

REUTERS, MADRID - Over a billion Asians may sink back into extreme poverty without extra aid to counter soaring food prices, the region's development bank warned on Monday as a battle brewed over who would fund its spending.

The call for cash to secure food supplies for Asia -- home to two thirds of the world's poor -- was accompanied by debate on whether developing countries or rapidly expanding nations like China and India should foot the bill.

There was also tension over who was responsible for a more than 40 percent rise in global food prices in the year to March that has triggered violent riots in Africa and Asia.

"The global fight against poverty will be won or lost in our region," Asian Development Bank President Haruhiko Kuroda said in a keynote speech to delegates at the bank's annual meeting.

Asia risks rising social tension as a doubling of wheat and rice prices in the last year slams poor families who spend more than half their income on food, Japan's finance minister warned.

With grain stocks at their lowest levels in decades, turmoil in global financial markets and an uncertain outlook for the world economy, Kuroda made a plea for "money and ideas" to boost development and rescue millions from hunger and malnutrition.

"The absence of such measures could seriously undermine the global fight against poverty and erode the gains of the past decades," he said.


The call for action was accompanied by requests to rapidly accelerate the ADB's investment program, particularly its core portfolio of infrastructure project lending, funded by loans linked to market interest rates.

The 67 economies which fund the ADB -- 48 from the Asia Pacific region -- broadly agree that solving the food crisis will require short term emergency finance as well as long term loans and technical support to raise agricultural productivity.

Sources inside the ADB say to meet soaring demand for assistance, the Bank must substantially increase its capital base from its current $56 billion. If it doesn't, the ADB's core non-concessional lending activity -- some $8.2 billion of the $10.1 billion it invested in total in 2007 -- risks being slashed.

The United States, the ADB's second largest donor, was non-committal when asked about the need to increase funding. Washington has criticized the ADB for failing to focus lending on the very poor, its lack of accountability and investing too heavily in Asia's middle-income economies. "We don't have analytical justification as to whether capital increase is necessary or not," Clay Lowery, U.S.

Assistant Secretary of International Affairs at the Department of Treasury, told Reuters. India said the ADB urgently needed extra funds if it was to cut poverty among the 1.5 billion people in Asia-Pacific living on less than $2 a day -- a number three times the population of Europe.

"We seem to moving into an era where increasingly poor countries will be asked to help out their poor brethren," said Indian Finance Minister Palaniappan Chidambaram. Asian officials say the United States would like countries like China and India to provide a bigger chunk of ADB funding, given they are some of the world's fastest growing economies.

Asian countries at the ADB meeting have blamed one another for exacerbating price inflation by resorting to export restrictions, subsidies and food imports.

Tensions over the food crisis bubbled to the surface in India on Monday after a remark by U.S. President George W. Bush that the Asian country's growing middle class is partly responsible for rising prices after demanding better nutrition.

Unease with the ADB's lending activities was evident in the Philippines capital Manila, the Bank's headquarters, where around two dozen people demonstrated against its role in privatization deals and blamed the lender for failing to do more to combat rising food prices.

"In its 41 years of existence, the ADB has brought very little development to poor countries in the region, but left them heavily indebted," Eman Hizon, one of the protesters, told Reuters.

Comments Add New
Write comment
  We don't publish your mail. See privacy policy.
Please input the anti-spam code that you can read in the image.