Update: ADB to provide fiscal support to help countries feed poor

The Asian Development Bank (ADB) announced here on Saturday it would provide immediate budgetary support to some Asia-Pacific countries hit hardest by rising food prices.

High and rising food prices "threaten to undermine Asia's effort to fight against poverty and achieve the Millennium Development Goals by 2015," ADB President Haruhiko Kuroda told reporters ahead of an annual meeting of the Manila-based bank which kicked off here on Saturday.

Over 1 billion people in the Asia-Pacific region are seriously impacted by the food price surge as food expenditure accounts for 60 percent of total expenditure basket. Food and energy together account for more than 75 percent of total spending of the poor in the region.

Rising food prices, together with record-high fuel costs, have placed many governments in the region under significant pressure to put food on the tables of the poor and vulnerable. They have provided generous subsidies, imposed price controls, and banned exports to keep food grain prices in check.

"We believe targeted interventions to protect food entitlements of the most vulnerable and poor are more effective to mitigate the immediate impact of rising food prices," said Kuroda.

Kuroda said the ADB would provide immediate budgetary support to hardest hit countries to alleviate their fiscal burdens and cushion the impact of rising food prices on the poor.

In the short run, the ADB would closely work with the affected governments in the region to strengthen safety net programs for food-stressed populations and emergency food security reserves systems.

Kuroda said in the medium to long run, governments need to step up investment, boost rural infrastructures and strengthen institutions to sustain higher farm output.

"We are working closely with our development partners to respond to the crisis in line with our comparative advantages and resource availability," he said.

The four-day annual meeting of the ADB was expected to be largely devoted to the issue of rising food prices as analysis showed global agricultural commodity prices have been up over 8 percent so far this year, after a 41 percent rise in 2007.

Amid worldwide economic slowdown, rising food prices could not only constrain economic growth by stoking inflation, but also threaten social stability.

One day earlier, the ADB secured 11.3 billion U.S. dollars of donation for its development fund to fight poverty in the Asia- Pacific region during the next four years.

The donation "shows the strong commitment of donor countries to make ADB a more relevant and trusted development partner for the poorer countries in the Asia and Pacific region," Kuroda said.

The money pledged will cover the period from 2009 to 2012. It was a very significant jump of over 60 percent from the previous period.

A major part of the fund's spending would continue to be on roads, clean water and sanitation, electricity networks and other essential infrastructure that improve the lives of the impoverished and accelerate growth, the Manila-based bank said.

It would also provide support to further enhance regional cooperation and integration in the Asia-Pacific region and continue to support the agriculture sector through the funding of irrigation systems, rural roads and rural finance mechanisms.

"With child malnutrition still widespread in Asia, and the global food crisis threatening to reverse the gains nations have achieved in reducing poverty, support for rural infrastructure and rural finance is critically important," Kuroda said.

However, Kuroda failed to disclose the exact amount of immediate budgetary support and which countries would receive the money.

"The amount of course depends on the requests coming from affected countries, and we are getting in touch with potential recipients of this kind of assistance," he said, adding Bangladesh and Pakistan were among the most affected members.