G20 meeting urged to act on food price inflation
What to do about the rising price of basic goods like food is likely to preoccupy the G20 meetingThe G20 is being urged to tackle the issue of price inflation affecting basic goods ahead of a two-day meeting which kicks off later.
Finance ministers and central bankers from 20 of the world’s biggest developed and developing nations will gather in Paris.
Ahead of the meeting, the International Monetary Fund warned food price rises have increased economic imbalances.
Earlier this week, the World Bank said food prices were at “dangerous levels”.
Forty-four million people have been pushed into poverty since last June, it said.
John Lipsky, first deputy managing director of the IMF, told the BBC that the G20 needed to work to remedy the instability: “There is great concern over the obvious high volatility of basic commodity prices especially food.”
French President Nicolas Sarkozy, who is currently the head of the G20, has argued that commodity speculators should be reined in in order to reduce food price spikes and volatility.
Unchecked speculation
Meanwhile, more than 100 European and international organisations led by the World Development Movement (WDM) have signed a statement warning the G20 of what they see as the dangers of unchecked speculation.
Julian Oram of the WDM said: “By taking action now to curb excessive speculation on food, G20 leaders could save lives, reduce chronic hunger and prevent civil and political unrest.”
Rapid food price inflation in 2008 sparked riots in a number of countries. At that time, the World Bank estimated 125 million people were in extreme poverty.
The World Bank also called on this week’s G20 meeting to address the problem, saying in a report that rising food prices were an aggravating factor of the unrest in the Middle East, although not its primary cause.
Some analysts have pointed to the difference between speculation, which can provide up-front money to a farmer to plant new crops, for example, and market manipulation, which is designed purely as a play on prices.
Currency and trade
Mr Lipsky said the market for food and other basic commodities was heavily burdened by controls and subsidies: “I think it would be very useful for the G20 to look at these markets in much better detail and see if they can be improved to better serve the global community and not be a source of instability and worry.”
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G20 meeting urged to curb prices
Other key imbalances on the menu will include currency and trade.
Mr Lipsky said that the idea was that some of the fast-growing “surplus” countries, like China, whose exports far outweigh its imports, have been relying too much on exports to fuel growth, while deficit countries, like the UK and the US, who buy in more than they export, rely too much on domestic demand to fuel their growth.
Currency values are at the heart of this, with critics arguing the Chinese keep their currency artificially low to make its exports more attractive.
China denies this.
Although G20 countries have been working for some time on how to correct mismatches in the global economy they have not reached agreement even over what criteria they should use as a starting point.
Summit host Christine Lagarde, the French finance minister, said her focus was going to be on finding those criteria: “What we want to achieve Friday and Saturday is to identify a list of indicators, measuring tools, that will allow us to identify imbalances, then the causes of these imbalances, so that we can propose methods to coordinate our economic policies.”
The list includes countries’ trade deficits or surpluses, budget deficits and levels of debt.
Sourced from The BBC
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