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Surging Food Prices Could Thrust Millions Into Poverty In Emerging Europe: World Bank

April 16, 2011

WASHINGTON, April 16 (Bernama) — The recent price hikes in food and energy could push more than five million people in Eastern Europe and Central Asia into poverty, reports the China’s Xinhua news agency, quoting World Bank’s official.

Yvonne Tsikata, the director for Poverty reduction and economic management of the World Bank’s Europe and Central Asia region said: “The poorest people in the region will suffer the most from the high food and energy price inflation, which reduces their purchasing power’.

She said that the region’s poor often spend half of their income on food, and left with fewer funds to save or invest for future.

The news comes amid a nascent recovery from the global economic downturn and at a time when many countries in the region continue to grapple with lower wages and higher unemployment.

The rising food and energy prices in the region reflect a global trend, whereby global food inflation has surged 36 percent since a year ago and disproportionately hit developing countries.

The rise in prices comes even as 44 million people worldwide have been thrust into poverty since June last year.

Food inflation has hit the region’s poorer countries hard — the Kyrgyz Republic has seen prices jump by 27 percent and Georgia has seen a price hike of 23 percent, according to World Bank statistics.

Tsikata said among factors to have contributed to the price spike are temporary factors such as poor weather; permanent factors such as a changing diet in developing countries — people are eating more meat — that drive up commodity prices; and bio fuel policies that divert food crops.

She said countries like Kyrgyz Republic, Armenia, Moldova, Tajikistan and Georgia will experience a rise in poverty levels if no measures are taken and unemployment continues at current rates, warns World Bank.

Recommending expanding social safety nets to keep people from sliding into poverty, Tsikata said: “In order to help cushion the impact of higher prices, governments in the region need to ensure that programs targeted to the poor get more funding as necessary, from government budgets.

“More funding will allow governments to increase the number of people covered in their programmes and to better offset their losses.”

Some countries have enacted trade restrictions on exports, but the World Bank warned against the implementation of such policies, arguing that they could hinder long term adjustment in markets and could worsen price volatility.

While, Tsikata said despite rising food prices, growth is returning to Eastern Europe and Central Asia after the region underwent a period of uneven economic improvement, the World Bank said.

Countries such as Turkmenistan and Turkey showed strong growth while a handful of countries including Latvia and Romania saw negative growth.

The World Bank said every country in the region should see positive growth this year, although growth is more tepid in Central and Southeastern Europe.

The World Bank is also working on a new code of conduct for countries with regards to export bans, World Bank Group President Robert Zoellick said, adding that having better information on food stock quality and quantity would be beneficial.

The organization also supports the “pre-positioning of small, humanitarian food stocks, in places like the Horn of Africa, operated by the World Food Program,” he said.

The World Bank also aims to help countries better manage agricultural risks and with quick support for people most vulnerable to health risks due to food shortages by “effective, targeted nutrition safety nets, rather than through mistaken price controls or broad-based wage increases,” he said.

The World Bank is also investing US$7 billion a year in improving agricultural production, from seeds to irrigation to storage.

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