Klaus Rohland Interview to Prime-Tass

Klaus Rohland, Country Director for Russia, World Bank
Interview with PRIME-TASS News Agency

Moscow - June 11, 2009

Question: How is Russia participating in addressing the issue of global food crisis? How do you assess the role of Russia on this matter? Will Russia increase its participation in the World Bank programs targeted to help countries in need?

Answer: Last year, the World Bank put in place a special global food security facility. It is a program of food aid in times of crisis for the total amount of $1.2 billion, of which $1 billion provided by the World Band and the remaining $200 million being provided as cofinancing. Funds are coming from Australia, the EU and Russia. Russia has already allocated $15 million to support implementation of this initiative in Tajikistan and Kyrgyz Republic. The World Bank appreciates Russia's contribution.

In parallel to this facility, the World Bank has created another program - the Rapid Social Response Program. In the framework of this program the Bank provides assistance to countries that have been most affected by the global financial crisis, in particular to enhance social safety net programs, access to social services, and to mitigate the labor market problems. The World Bank appreciates Russia's support to the initiative and its contribution to the Program in the amount of $50 million, which was announced in April this year. Actually, these two funds are aimed to address similar tasks.

Question: The issue of a potential global food crisis is currently being vigorously discussed. For example, world population continuously increasing but food reserves are limited

Answer: Definitely, the issue is not only about food aid. China, for example, is the most populated country, but also potentially very rich. It can produce or buy everything it needs. It is also interesting to examine this issue with regard to other countries, not only China. Due to growth of BRIC economies over previous years, in the current situation many people can afford to start consuming milk and meat instead of grain products because of a higher income.
 
Unfortunately to produce one kilogram of meat one must use seven kilograms of grain. Therefore, the use of grain is now less efficient compared to the situation in the past, when people used grain only for food. There is a certain boundary, a limit beyond which production of meat cannot be increased. It is this issue that the world should focus on in a near term. Countries are becoming wealthier and demand for food is increasing, and changing. In the past when I was a child, we did not eat meat every day. Now people eat meat almost every day. To my regret, I do not have now an answer as to how this situation will be addressed in a longer term.

Question: Minister of Agriculture Elena Scrynnik said that a food crisis can be triggered by the financial crisis. But concerted actions of governments can help avert it. What countries are running the risk of such developments?

Answer: The interrelation between the financial crisis and the food crisis is not so direct. If we assume that a deep financial crisis will reoccur, which is not likely, but quite possible, then it will affect the real sector of economy, including the food sector. As the issue of food crisis is linked to affordability of food, with rising food prices, some countries may be facing a food crisis. It is a real risk. As a response, many countries could provide appropriate support to those poor people that cannot afford to buy food. It may mean improvement of the welfare system, including in the Russian Federation.

Question: How do you assess the state of Russian economy and its outlooks for 2009?

Answer: With more recent data it is possible to revise our projections from the March 2009 Russian Economic Report. The World Bank in Russia revises its forecasts roughly once a quarter, and we are currently working on a new forecast that we are planning to present by the end of June (forecast for the period up to the end of 2009). We already know that economic and social situation in early 2009 was more difficult than it had been expected earlier. At the same time, there are some encouraging signs, including easing of the credit crunch at the global level and the rise in oil prices.

Question: Recently Vice-Prime Minister, Minister of Finance Alexei Kudrin has mentioned that Russia can borrow from the World Bank "several billion" dollars. Are some negotiations under way on such loans? What projects are being discussed?

Answer: I cannot provide you with any figures as the Government of Russia intends to finance the federal budget this year mostly using the Reserve Fund, so there is no need to borrow externally in the current year 2009. A possibility of returning to global financial markets in 2010 and borrowing from the Bank is being discussed. But it is the Government of Russia to decide within the next months how much and from which sources it will borrow next year.

Question: Is it possible to say that in 2010 Russia will borrow from the World Bank?

Answer: The Bank is ready to provide Russia with appropriate financing in 2010. But I will reiterate again, that this decision is for the Government to make. A lot will depend on dynamics of oil prices.