For the first time in history, the number of people living in extreme poverty has fallen below 10%. The world has never been as ambitious about development as it is today. After adopting the Sustainable Development Goals and signing the Paris climate deal at the end of 2015, the global community is now looking into the best and most effective ways of reaching these milestones. In this five-part series I will discuss what the World Bank Group is doing and what we are planning to do in key areas that are critical for ending poverty by 2030: good governance, gender equality, conflict and fragility, preventing and adapting to climate change, and, finally, creating jobs.
Seawater is rising in coastal Bangladesh. The soil contains more and more salt as the sea encroaches on the land. As a result, farmers see their crops declining. Communities are hollowing out, as working-age adults move to cities. Freshwater fish are disappearing, reducing the amount of protein in local diets. And in the dry season, mothers have to ration drinking water for their children – in some areas, to as little as two glasses a day.
Climate change is finally being taken seriously in the developed world, but it is generally seen as a future threat, to be managed over the coming years. For poor people in poor countries, particularly those living along coastlines, in river deltas, or on islands, it is a clear and present danger – and increasingly, a dominant fact of life.
The halving of world oil prices over the last six months raises questions about the implications for food prices and the welfare of poor people.
Do lower oil prices mean lower food prices? To a certain extent. But for low-energy cropping systems common in most developing countries, and in areas where food is not transported far, the impact will be dampened. For large oil exporters, however, food prices may increase. In general, lower oil prices should lower the cost of moving food from producers to consumers and reduce on-farm fuel and fertilizer costs. But a countervailing factor is that cheap oil may also induce people to drive more, and as fuel ethanol mandates link biofuel use to overall fuel use, ethanol use and the volume of maize used to produce it would also go up. In countries where oil is a large share of exports, real exchange rates may depreciate, which will disproportionately increase the price of traded goods like grains relative to other prices.
Is the downturn in agriculture commodity prices necessarily bad for farmers who produce food? A major downturn in commodity prices would not be great for farm incomes, and high crop yields would be needed to help dampen the effect on farm profits. Lower fertilizer and transport costs may help mitigate any negative impacts.
How long will oil prices remain low? While there is no certainty in forecasts, current estimates suggest fuel prices will remain low for 2015, increasingly slightly in 2016. There are three main drivers of the oil price decline which are structural: Significant increases in US shale oil production, receding concerns of oil supply disruptions in the Middle East, and a change in OPEC policy to maintain rather than cut production.
Today the world seems to hold its breath again amidst the sudden hike in food prices caused by a historical drought in the US and lack of rain in Eastern Europe. It is a thorny task to predict whether the very recent increases in food prices will unfold into magnitude of the crises seen in 2007-08 and again in 2010-2011: differences between now and then in the price of energy, a critical driver of food prices, give a reason for optimism; as does the hope that governments now better understand the painful consequences of some panic policies that have been put in place during previous episodes. On the other hand, months of volatility in global food prices, low food stocks and food security crisis alerts in parts of East and West Africa all paint a gloomy picture.
(Summary of parallel session 10 at the ABCDE, Paris)
This session involved the presentation of three papers. The first looked at the importance of high food prices for poverty in developing countries. The second looked at the optimal policies for an individual country using trade policies to insulate its market from price volatility in the world market. And, the third considered the implications of the policies actually undertaken by developing countries.
The first paper presentation showed that high food prices raise poverty substantially, implying that policy makers in developing countries are right to be concerned. The second showed that—for individual countries—an appropriate response to high food prices appears to be use of export restrictions in exporting countries or reductions in import barriers in importing countries. The third showed that most countries actually respond in this way, but that these actions are collectively ineffective in reducing the volatility of domestic prices. What appears to be needed is to identify policies that can more effectively deal with the problem of food price volatility.
The World Bank-IMF Spring Meetings concluded Sunday, having brought renewed attention to the impact of the food crisis, challenges facing conflict-affected states, and progress toward the Millennium Development Goals, among other issues.
In case you missed one of the many announcements or discussions held over the last two weeks, here are a few highlights:
As the Bank reported earlier this week, global food prices are rising to dangerous levels and threaten tens of millions of poor people around the world. Rising prices have pushed an estimated 44 million people into poverty since last June.