This paper explains why food prices are rising and how ADB is responding to this crisis.

THE SPIKE IN GLOBAL FOOD PRICES

Soaring food grain prices in recent months have caused serious concern around the world. In Asia the estimated 1.2 billion poor people who spend on average 60% of their income on food have been hit hard. Food price inflation severely stresses the most vulnerable groups. High and rising food prices are threatening to reverse the gains in poverty reduction in the Asia and Pacific region, undermining the global fight against poverty. If high food prices persist, the Millennium Development Goal of halving poverty by 2015 could be jeopardized.

Although world food grain prices declined during the 1990s, a reversal occurred in 2000; since then the prices have been rising with a sharp upturn since mid-2007 (Figure 1). During the 1 year period ending in March 2008, wheat export prices increased by 130%, rice by 98%, and maize by 38% (Figure 2). ...

CONCLUSION
Soaring food prices have hit the poor hard. Along with record-high energy prices, these have seriously eroded the purchasing power of over-a-billion poor in Asia, increasing their food deprivation. These are threatening to undermine the global fight against poverty. These have also stoked inflation and squeezed the fiscal space in many countries, increasing the risks of higher interest rates and a slowdown in economic growth across the Asia and Pacific region.

The downside risks to macroeconomic stability have increased in a region otherwise characterized by prudent macroeconomic management for nearly a decade. The food crisis calls for immediate response of governments and the international community.

ADB is closely monitoring the situation. It is working closely with its development partners to do what it can to respond to the crisis.

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Asian Development Bank
6 ADB Avenue, Mandaluyong City
1550 Metro Manila, Philippines
www.adb.org
Publication Stock No. 041908

CONTENTS
The Spike In Global Prices 4
The Underlying Causes of High Food Prices 6
Cyclical Factors 6
Structural Factors 7
Impacts 10
Poverty Impact 10
Macroeconomic Impact 10
ADB’s Response 12
Short-Term Assistance 12
Medium-to-Longer-Term Assistance 12
Conclusion 15

About the Asian Development Bank
ADB’s vision is an Asia and Pacific region free of poverty. Its mission is to help its developing member countries substantially reduce poverty and improve the quality of life of their people.

Despite the region’s many successes, it remains home to two thirds of the world’s poor. Nearly 1.7 billion people in the region live on $2 or less a day. ADB is committed to reducing poverty through inclusive economic growth, environmentally sustainable growth, and regional integration.

Based in Manila, ADB is owned by 67 members, including 48 from the region. Its main instruments for helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance. In 2007, it approved $10.1 billion of loans, $673 million of grant projects, and technical assistance amounting to $243 million.

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