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World Bank Extends Food Crisis Fund

Matthew O. Berger and Peter Boaz

WASHINGTON, Oct 20 2010 (IPS) - Amidst fears of a recurring food crisis, the World Bank has reactivated its Global Food Crisis Response Programme (GFRP), dedicating up to 760 million dollars to countries at risk of food price volatility.

In announcing the programme’s extension, World Bank President Robert Zoellick cited “growing concern among countries about continuing volatility and uncertainty in food markets”.

The programme, equipped with a wide array of options for food crisis response, is expected to enable the World Bank to respond more quickly if countries are facing dangerous prices spikes.

“World food price volatility remains significant and, in some countries, the volatility is adding to already higher local food prices due to other factors such as adverse weather,” Zoellick said.

The Bank’s decision follows a number of disquieting indicators that food prices could reach the dangerous levels of 2007 to 2008, when riots broke out in several hunger- stricken countries and the number of people suffering from hunger reached record highs.

“We do expect high volatility in food prices to continue until at least 2015, so reactivating the Bank’s food crisis fund means we’re ready to help countries calling for assistance,” said World Bank Managing Director Ngozi Okonjo- Iweala.

The GFRP was originally launched in May 2008 and, to date, has conducted 1.2 billion dollars worth of assistance operations, reaching 35 countries, especially in the most affected regions in Africa and Asia, according to the Bank. It says that external donors have also funded an additional 200 million dollars of operations.

The ways in which countries may choose to deploy funds include support for local food production such as supplying seeds and fertiliser or improving irrigation, social safety net programmes, or budget support to offset tariff reductions.

The agricultural aspects of the programme have reached 5.9 million households while the social protection programmes have reached over 5.6 million people, said Mark Cackler, manager of the Bank’s Agriculture and Rural Development Department.

“In the last two years the GFRP has been effective at catalyzing and targeting funding for food security and agriculture at a critical time,” Cackler told IPS in an email, citing concern over food price volatility as the reason for extending the programme.

Not new money

The programme is not an extra fund that would provide funding on top of that to which countries are already entitled. Rather, the 760 million dollars will come from money already destined for countries through the Bank’s low- income country lending programme, the International Development Association (IDA), or its middle-income programme, the International Bank for Reconstruction and Development (IBRD).

It will, however, allow money needed for the immediate needs of the people most vulnerable to the effects of rapid food price rises to be made available much sooner than IDA or IBRD funds normally would be.

This authority to “fast-track” funds under the GFRP had expired on Jun. 30, but the vote by the Bank’s executive board to extend the programme, announced Monday, extends this authority to Jun. 30, 2011.

Ultimately, though, minimising the impacts of food price volatility on vulnerable populations will require increased investment in women and smallholder farmers, says Neil Watkins, director of policy and campaigns at ActionAid.

“To the extent that countries are responding to a crisis that is largely external,” he says, “we don’t think loans are the appropriate tool.”

He says grants, especially for the poorest countries, would be better. It should be noted that while money coming through IBRD would be loans, that through IDA is usually termed “credits”, with no interest and long repayment periods.

Watkins sees the food price volatility acknowledged in the Bank’s GFRP announcement as a product of an international market that is increasingly affected by demand for biofuels such as corn-derived ethanol and subject to the whims of commodity traders.

“As more and more investors get involved in commodity markets, [food markets] are being pulled away from real purchasers and sellers and more into the financial world,” he says.

World Bank emerging as significant agricultural lender

But he thinks institutions are beginning to understand how they can help make communities less vulnerable to the whims of international markets: invest in smallholder farmers that produce food locally for their communities.

For its part, the World Bank seems to be playing a key role in these efforts. As the trustee of the Global Agriculture and Food Security Programme (GAFSP), launched in April, it facilitates a programme focused on long-term solutions to what are turning out to be recurring food crises. The money for GASFP comes from donor countries and the Gates Foundation and is in addition to any Bank loans or grants.

Watkins, who is on the steering committee of GAFSP as a civil society representative, says the programme “is one fund where you can tell the money that is being delivered is new money. One of the challenges of pledges in the past has been you can’t tell what pledges are new money and what is just being redirected from previous commitments.”

And ahead of the Millennium Development Goals summit at the United Nations in September the Bank announced it was increasing its agricultural lending to 8.3 billion dollars a year, 45 percent of which would be through IDA.

Chris Delgado, a strategy and policy adviser in the Bank’s Agriculture and Rural Development Department who coordinates GFRP and is programme manager for GAFSP, told IPS following that announcement that he expected agriculture and rural lending to continue to increase in future years. In 1980, he said, it was 30 percent of total Bank lending, then dipped to seven percent around the start of this decade before rebounding to about 12 percent now.

Watkins says the Bank is “showing some promise” as a place where country-led proposals for smallholder farming can find a home.