Key Instruments of International Development Agencies

Presentation at Seminar on“Informing the G20 Agenda: Actions to Address Food Price Volatility”

OUTLINE

I. CHALLENGES

II. RESPONSE INSTRUMENTS– Long-term – Short-term

III. COORDINATION

3

FOOD DEMAND + PRODUCTION SHOCKS + STOCKS = FOOD PRICE VOLATILITY

1998/1999

1999/2000

2000/2001

2001/2002

2002/2003

2003/2004

2004/2005

2005/2006

2006/2007

2007/2008

2008/2009

2009/2010

2010/2011

1,400

1,500

1,600

1,700

1,800

1,900

2,000

10

15

20

25

30

35

40

Stock-to-UseProductionConsumption

Mill

ions

MT

(Con

sum

ption

, Pro

ducti

on)

Perc

ent (

Stoc

k-to

-Use

)

World Maize, Wheat, Rice

CHALLENGES

4

CONSECUTIVE AND PRONOUNCED PRICE SPIKES

Price Index, 2000 = 100 (Prices through to end May 2011)

CHALLENGES

Source: World Bank

1999199919991999199919991999199919991999199919992000200020002000200020002000200020002000200020002001200120012001200120012001200120012001200120012002200220022002200220022002200220022002200220022003200320032003200320032003200320032003200320032004200420042004200420042004200420042004200420042005200520052005200520052005200520052005200520052006200620062006200620062006200620062006200620062007200720072007200720072007200720072007200720072008200820082008200820082008200820082008200820082009200920092009200920092009200920092009200920092010201020102010201020102010201020102010201020102011201120112011201150

100

150

200

250

300

350

5

-7.6

-24.7

-4.0

3.8 3.45.4

Stocks

Developed Countries

Trade

DEVELOPING COUNTRIES ENTERED 2010/11 WITH HIGHER PRODUCTION, MORE STOCKS, AND DEEPER TRADE

Developed countries• Handicapped by lower

production, stocks, trade• Weather induced• Account for 70% of

world cereals trade• Declines contributed to

world food price increases

Developing countries• Improved resilience in some

countries, but not all• Dampened pass-through of

world prices so far in some countries but not all

Cereals, % change 2009/10 to 2010/11 [FAO forecast]

… BUT MUCH MORE IS NEEDED

CHALLENGES

Production

Developing Countries

Source: FAO

6

Low and Middle Income Countries

Exploit Opportunities• Productivity growth• Link farmers to markets

Manage risks• Coping strategies for

most vulnerable• Climate smart

CHALLENGES

World food prices are expected to remain

higher and more volatile than their pre-

2007 levels

Short term price volatility is

increasingly becoming a long term

phenomenon

OUTLOOK RESPONSE

FINANCING AND ANALYTICAL SUPPORT TO RAISING LONGER-TERM PRODUCTIVITY GROWTH

Focus:• Using existing technology better• Improving water management• Strengthening land tenure security

and land markets • Improving livestock management• Investing in agricultural research for

technology generation

Instruments:• Budget support (e.g. Ghana)• Investment project financing (country,

regional, programmatic)• Analytical work (e.g. Rising Global

Interest in Farmland)

7

1970197419781982198619901994199820022006

0.5

1.0

1.5

2.0

2.5

3.0

3.5

RESPONSE INSTRUMENTS

Examples

Growth Rate of Cereal Yields in Developing Countries Has Improved But is Still Low Rolling 10 year growth rates (%)

Need continued vigilance and preparedness with short-term rapid response facilities (e.g., GFRP)

8

RESPONSE INSTRUMENTS

Examples

GLOBAL FOOD PRICE CRISIS RESPONSE PROGRAM (GFRP)44 countries, 38 million beneficiaries

Focus:• Food price policies, fiscal support• Safety nets and nutrition

(contributing to the broader Bank Strategy on Social Protection)

• Short-term food production

Instruments:• Expedited processing• Budget support (e.g. Sierra Leone)• Project financing (e.g. Niger, Liberia)• Analytical work (e.g. food prices)

FINANCING AND ANALYTICAL SUPPORT FOR SHORT-TERM RAPID RESPONSES

World Grain Price Index, 2000 = 100 (Prices through to end May 2011)

20062006

20062007

20072007

20082008

20082009

20092009

20102010

20102011

2011100

150

200

250

300

350

COORDINATED ACTION

COORDINATED ACTION

JOINT POLICY INPUT TO THE G20

1. Longer-term productivity2. Market information system3. Transparency in futures & OTC mkts4. Trade policy5. Humanitarian food6. Biofuels policies7. Strategic food emergency reserves8. Safety nets9. Market based risk management 10. Policy co-ordination

IMPLEMENTATION

• Country level– Co-financing– Analytical work

• Regional level– CAADP– LCR Donor Platform for

Rural Development

• Global level– Global Agriculture and

Food Security Program– Global Donor Platform for

Rural Development