Donors Urged To Support Countries Affected By Surging Food Prices

“The World Bank and the International Monetary Fund (IMF) urged donors on Sunday to take immediate action to help countries seriously affected by the surging food prices.

‘We urge donors to provide the needed assistance to the World Food Program to enable immediate support for countries most affected by the high food prices,’ said a communique released after the meeting of the Development Committee of the Bank and the IMF. ‘The impact of higher commodity prices is mixed across countries depending on whether they are net importers or exporters,’ said the communique. ‘Within countries, large groups of poor people are severely affected by high food and energy prices across the developing world.’ The Development Committee thus asked the World Bank and the IMF to respond to developing countries' requests for advice on management of natural resource revenues, and ‘to be ready to provide timely policy and financial support to vulnerable countries dealing with negative shocks including from energy and food prices.’  …” [Xinhua (China)/Factiva]

NYT notes that “The world's economic ministers declared on Sunday that shortages and skyrocketing prices for food posed a potentially greater threat to economic and political stability than the turmoil in capital markets. The ministers … turned their attention to the food crisis and called on the wealthiest countries to fulfill pledges to help prevent starvation and disorder in Asia, Africa and Latin America.

‘Throughout the weekend we have heard again and again from ministers in developing countries and emerging economies that this is a priority issue,’ said Robert B. Zoellick, president of the World Bank. ‘We have to put our money where our mouth is now, so that we can put food into hungry mouths. It is as stark as that.’ …” [The New York Times/Factiva]

FT reports that “… Leaders agreed to support a World Bank ‘New Deal’ for food and called on donors to provide $500 million in funding for short-term relief. Zoellick welcomed calls from Gordon Brown, the UK prime minister, and Susilo Yudhoyono, the President of Indonesia, to make the ‘global food crisis’ the top priority of the next G8 meeting in Tokyo. …

Dominique Strauss-Kahn, Managing Director of the IMF, warned of ‘terrible’ consequences if food prices continued to rise. … All the good work that had been done in recent years in Africa could be ‘destroyed very rapidly by the crisis coming from rising food prices,’ Strauss-Kahn said.         …” [The Financial Times (UK)/Factiva]

WSJ Europe writes that Secretary General of the UN Conference on Trade and Development, Supachai Panitchpakdi said “Countries need to strike bilateral agreements to secure food supplies as prices soar, rather than wait for a new global trade deal. Supachai said in an interview he is still optimistic about the stalled Doha round of global trade talks, which he helped to launch. … ‘You see governments going country to country negotiating’ trade deals involving key commodities like rice, wheat and milk, Supachai said. ‘That is something that is necessary.’ …” [The Wall Street Journal Europe/Factiva]

World Bank Changes Tack, To Broaden Investments

“The World Bank plans to invest up to $3 billion over the next two to three years in stock and bond indices, to stabilize its income and safeguard against rising inflation and falling interest rates, Bank officials said on Sunday. …

‘At the request of shareholders, we created the Long-Term Income Portfolio to stabilize IBRD's income and improve the return on capital over the long term for development purposes,’ World Bank Chief Financial Officer Vincenzo La Via told Reuters. …

Board officials, who agreed to speak on condition of anonymity, said a communiqué expected later on Sunday after meetings of the Bank and International Monetary Fund's Development Committee would refer to the need for ‘better deployment of the Bank's capital.”

The officials said the up to $3 billion set aside for the investment represented less than 10 percent of IBRD's $36 billion capital, which includes paid-in capital from the Bank's member countries and accumulated reserves. World Bank officials said the idea sprang from discussions among the Bank's member countries last year and was not a reaction to current turmoil in financial and credit markets. …Officials said the investments will be managed by one or more outside managers and will probably be composed of a 60/40 split between equities and bonds invested in sophisticated markets. …” [Reuters/Factiva]

Japan To Use ODA to Promote Business Investments in Poor Nations

“The Japanese government is planning to establish a new framework for its official development assistance in a bid to encourage private firms' investments in developing countries. The government is expected to give its formal go-ahead for the new ODA scheme at a meeting of relevant ministries on Friday, government officials said.

Under the scheme, the government will finance road construction and other infrastructure projects through yen loans and grant aid in countries where Japanese companies plan to establish business footholds. This is a big shift in Japan's ODA policy, which so far has not allowed aid to projects that would benefit specific private businesses, the officials said.

The government now finds it necessary to utilize ODA programs to promote private-sector investment in developing counties with poor social infrastructure, they noted. In addition, the government plans to regularly hold ODA meetings with the Japan Business Federation and invite private companies to ODA-related meetings hosted by Japanese embassies in developing countries. …” [Jiji Press (Japan)/Factiva]

Kyodo News notes that “An expert panel decided Monday to issue an emergency appeal to Prime Minister Yasuo Fukuda's administration to pledge to raise Japan's foreign aid to meet the UN target of 0.7 percent of gross national income by 2015, a panel member said. …

Noting that the current ODA budget is subject to an annual cut of 2 to 4 percent until 2011 under the 2006 government policy to trim expenditure amid tight state finances, the panel believes Fukuda must make the political decision to reverse the trend.

As a short-term target, it calls for Japan to increase ODA to improve its aid ratio to gross national income from 0.17 percent in 2007 - ranking 20th among 22 major donors - to about 0.25 percent. …” [Kyodo News (Japan)/Factiva]

In a separate piece, Kyodo News reports that “World Bank President Robert Zoellick expressed hope Sunday that Japan will lead discussion for international action on food problems in developing countries as host of this year's G8 meetings.

Zoellick, speaking after a meeting of the World Bank-International Monetary Fund Development Committee in Washington, welcomed Japanese initiatives to take up issues linked to development and growth in Africa. ‘I hope Japan will join with the other countries in adding to the contribution for the World Food Program,’ Zoellick said …” [Kyodo News (Japan)/Factiva]

Party's Over For Banks, Says Top Supervisor

“Banks will have to accept that regulators demand higher capital provisioning for risk in response to the latest crisis in financial markets, the head of the Basel Committee of bank supervisors said on Sunday.

‘They spoiled the party,’ Nout Wellink, head of the Basel Committee on Banking Supervision, told Reuters in an interview two days after governments of the G7 economic powers announced plans to try to make financial markets less accident-prone. …

‘The impact of these proposals - I'm talking here about the off-balance sheet items, I'm talking about structured products and assets in the trading book - will be an increase in capital requirements.’ He declined to set a time for when new capital rules would be put in place but said the authorities were well aware of the need to avoid compounding current strains on banks by raising capital requirements in the middle of a financial storm. …” [Reuters/Factiva]

Meanwhile FT reports that “…While the banks sought a self-regulatory approach centered around a new code of conduct and banks’ disclosure of how far they met these codes, finance ministers and central bankers insisted on much more prescription and regulation. …

Banking supervisors will enhance their co-operation in dealing with banks that operate across borders and supervisors will monitor banks’ performance against a code of practice on liquidity management.

But the big fight is likely to come if authorities seek to raise banks’ regulatory capital requirements in good times to provide a greater buffer for the next financial crisis. The FSF report suggests regulators should investigate the issue next year or later. Any new rules would have to be part of the Basel process of banking regulation. …

Much of the action is in the banks’ own interests, but the G7 is worried that without formal rules, some banks would flout voluntary guidelines and take the rest of the banking sector with them on another journey towards lax risk management.” [The Financial Times (UK)]

Russia Plans To Reduce Borrowings From World Bank By Half – Kudrin

“Russia plans to reduce borrowings from the World Bank to the minimum, Deputy Prime Minister and Finance Minister Alexei Kudrin …told the press in Washington after talks with World Bank President Robert Zoellick.

Russia currently has the right to draw $300 million - $400 million, annually, from the World Bank, but has not used this quota for several years now. This limit is likely to be reduced by more than half, Kudrin said. …

Russia is in no need of World Bank loans, because it has sufficient financial resources of her own. But Russia is in need of World Bank specialists, experienced in implementing key reforms in different countries, Kudrin said. …” [Interfax Russia & CIS General Newswire/Factiva]

Prime-TASS adds that “Russia plans to pay back $3 billion in debt to the World Bank ahead of schedule in June, Russian Deputy Finance Minister Dmitry Pankin told reporters …

Russia’s total debt to the World Bank currently amounts to about $4.5 billion. Pankin said the issue of early debt redemption had not been discussed at the meeting. …” [Prime-TASS News (Russia)/Factiva]

Ria Novosti writes that “… ‘We are likely to pay off single-currency loans only. …We plan to pay it off in June,’ said Dmitry Pankin…

Though the issue of Russia's early debt payment was not raised at the Washington meeting, Pankin said, relevant agreements were available, and the process was underway despite technical difficulties. ‘As to multi-currency loans, we will see, calculate and attempt to verify each loan. We may repay more later in the year,’ the official said. …” [RIA Novosti (Russia)/Factiva]

Also in this edition; Briefly Noted…

The World Bank plans to give $10 million in emergency aid to Haiti. The Bank will provide poor households with grants and finance programs to help mitigate a jump in food prices in the very short run, Rogerio Studart, Executive Director for the region including Haiti and other Caribbean countries, said in an interview. [Bloomberg/Factiva]

The Spring meetings of the International Monetary Fund and the World Bank in Washington agreed on a three-pronged strategy for Zimbabwe in the event of regime change. In the first phase, the Fund would be responsible for restoring stability to Zimbabwe's currency, which has fallen precipitously as the country's economic crisis has caused hyper-inflation. The IMF has put aside $1 billion for a currency stabilization fund. [The Guardian (UK)/Factiva]

The International Monetary Fund's decision to cut its forecast for the US economy was widely regarded as exaggerated by world financial leaders, Mexico Finance Minister Agustin Carstens said Sunday on the sidelines of the World Bank and IMF's Spring Meetings. [Dow Jones/Factiva]

The peasant march begun on the weekend in western Guatemala to denounce the conditions of poverty and marginalization in which the country's laborers and Indians live continued on Sunday under cold and rainy skies. Some 1,300 peasants, members of the CUC Peasant Unity Committee, moved along the Interamerican Highway in a march scheduled to traverse 127 kilometers (79 miles) and conclude on Tuesday when they reach the Guatemalan capital. [EFE/Factiva]

China’s vice Minister of Finance Li Yong urged developed countries at the Development Committee meeting on Sunday to raise their aid to help the poorest countries overcome poverty, achieving the Millennium Development Goals (MDGs) set by the UN. [Xinhua/Factiva]

The number of Chinese people officially living in poverty could double to 80 million if the government adopts proposed standards for measuring the problem, the official Xinhua agency said on Sunday. Beijing may raise the amount its citizens have to earn each year to escape poverty, from 1,067 Yuan to 1,300 Yuan, a 20 percent leap which would roughly double the number of officially impoverished people. [Reuters/Factiva]

Thailand will consider a World Bank recommendation urging that food producing nations to focus on producing food to feed the growing populations of the world instead of growing crops to be used to produce alternative energy, Deputy Prime Minister and Finance Minister Surapong Suebwonglee said on Monday. [Organisation of Asia-Pacific News Agencies (Malaysia)/Factiva]

The International Finance Corporation has promised Afghanistan up to $25 million in loans to bolster its banking system, Central Bank Governor Abdul Qadeer Fitrat said late on Sunday. [Reuters/Factiva]

Pakistan's government is working to bring the country's economy back onto a more sustainable path, but is concerned about the sky-high price of oil, Pakistan Finance Minister Mohammad Ishaq Dar told Dow Jones Newswires in an interview on Sunday. [Dow Jones/Factiva]

Bahrain Finance Minister Shaikh Ahmed Bin Mohammed al Khalifa lauded progress in implementing the World Bank development strategy praising the intensified efforts being exerted to carry out the Bank's strategy towards management, fighting corruption, providing further interaction with countries with medium revenues and concentrating on international and regional commodities. [Bahrain News Agency/Factiva]

Oman is considering building a 200 kilometer railway linking the industrial town of Sohar with Barka, Economy Minister Ahmed bin Abdulnabi Mekki said on Sunday. It would be the country's first rail link. [Reuters/Factiva]

An alliance of women's groups, faith-based organizations and development agencies has pledged more than $1 billion to improve the lives of women and girls in the poorest parts of the world. Former president [Ireland] Mary Robinson, former US secretary of state Madeleine Albright and actress Ashley Judd are among those supporting the initiative, which was launched in Washington yesterday. [Irish Times/Factiva]