Bank announces cash for food crisis
The Asian Development Bank has announced emergency funding to help poor countries struggling with soaring food costs, warning that prices could keep rising and stifle economic growth in the region.
"The cheap food era may be over," the bank's president Haruhiko Kuroda said in Madrid, Spain, where the bank was holding its annual meeting.
The new aid will come in the form of soft loans for the governments of countries hardest hit by the global food crisis, such as Bangladesh.
Mr Kuroda would not give an overall figure for this expenditure, saying it would depend on requests by governments. He said the amount would be "sizeable, but not enormous".
Asia is home to two thirds of the world's poor and nearly 1.7 billion people in the region live on £1 a day or less.
Asia's poor are particularly vulnerable to rising prices for staples such as rice because 60% of their spending goes towards food, and the figure rises to 75% if fuel costs are included, the bank says.
Mr Kuroda said prices of rice, for instance, had nearly tripled in the past four months.
Higher food costs mean higher inflation, which will reduce consumption, savings and investment. And if governments raise interest rates to control inflation, this could reduce demand and trigger an economic slowdown, the ADB says in a report.
It estimated a food price shock of 50% could cut real growth in Asian gross domestic product by 1.05 percentage points in 2008 and lower growth in 2009 as well.
Many countries in the region are grappling with the crisis by imposing price controls or bans on food exports, but the bank says this can backfire by discouraging farmers from planting, thus reducing supplies and raising prices.
