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Making local sense of food, urban growth, population and energy

How the World Bank is leveraging the new food crisis

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Soon after the FAO’s Committee on Food Security (CFS) meeetings, the World Bank has said that it is “reactivating” its Food Fund (called the Global Food Crisis Response Program) “to run through June 2011”. What does this mean? In short it means that the World Bank is leveraging the food supply and food price rises for staple cereals of 2010 in much the same way it did in 2008, during the earlier food crisis.

The Global Food Crisis Response Program list

“In response to the severity of the food crisis and the need for prompt action, the World Bank Group set up the Global Food Crisis Response Program (GFRP) in May 2008 to provide immediate relief to countries hard hit by food high prices” is how the Bank puts it. There’s a lot of cross-referencing in order to legitimise its actions, such as “The Bank response has been articulated in coordination with the United Nations’ High-Level Task Force (HLTF) on food security. Through its response, the Bank is supporting the implementation of the joint Comprehensive Framework for Action (CFA)”.

According to the Bank, the GFRP has approved US$1,238.2 million in 35 countries as of 09 September 2010. The Bank says that “grant funding has also been made available through several external-funded trust funds in support of the full range of interventions available under the GFRP”. There’s more cross-referncing to make it all sound happily multi-national: a “Multi-Donor Trust Fund (MDTF) has received contributions” of AUD 50 million from the Australian government, €80 million from the government of Spain, 3 billion Korean Won from the Republic of Korea, CAD 30 million from the government of Canada, and $0.15 million from International Finance Corporation (IFC).

The point is, how are governments of small countriess with populations vulnerable to the price volatility of global food market being pressurised by the Bank? Take the case of Honduras, one of the 35 countries. The Bank calls it “Honduras – Food Prices Crisis Supplemental Financing to the First Programmatic Financial Sector Development Policy Credit”. US$10 million in “development assistance” for “budget support”.

From the project document for this assistance, here is the objective: “2. Proposed objective(s). The proposed SDR [XXX] million (US$10 million equivalent) operation would support the Government’s commitment to maintain macroeconomic stability and persevere in its Financial Sector DPC’s (development policy credit) development objectives and allow the government to respond to the food price crisis. As such, the supplement will be processed under GFRP procedures.”

World Food Day 2010

16 October is World Food Day 2010

We’re seeing two objectives here: (1) macroeconomic stability and (2) response to food price crisis. Nowhere in the project documentation (there’s only one document publicly available) is there an explanation of why the World Bank thinks the macroeconomic stability of Honduras is threatened by the rise in prices of food staples, and nowhere is there mention of the Honduran government’s own response.

A new objective appears soon after: “Honduras is committed to a reform program aimed at strengthening the financial sector so as to ensure that it contributes to long-term growth and poverty reduction. The authorities have expressed their intention to continue the implementation of the financial sector reform program and more specifically their intention to strengthen supervisory activities, keeping updated the database of related parties, and further strengthening banking resolution including through fully capitalizing the recently created bank capitalization fund.”

This has to do with rising food prices? Any government can make any number of commitments to ‘growth’ and ‘poverty reduction’, but what’s the financial sector reform doing in a Global Food Crisis Response Program? The Bank doesn’t say.

The Honduras project document continues in its two track logic: “This commitment is particularly important because of the new challenges that the food crisis is creating for the financial sector, as higher food prices negatively affect the portfolio of consumer loans and the country’s macroeconomic stability.” If there is a connection between consumer loans being affected by rising food prices (repayments?) how much over how long from how many?) there’s no explanation) and ‘macroeconomic stability’ (which has to do with a variety of other factors), the Bank has not bothered to explain them.

The Bank then says: “In particular, strong supervisory activities and a well capitalized bank capitalization fund are crucial stabilizing factors for the financial system, because they signal to the market that the authorities would be able to respond to banks in difficulties and avoid a systemic crisis.” Here the Bank trots out the typical systemic crisis bogey, implying that without its intervention, in the name of Food Crisis Response, Honduras would be in serious trouble. How easily one crisis of external making get translated into another of deliberate design.

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  1. […] Food production and grain trade / FAO food price index tops the 2008 peak / Food inflation crippled India’s households in 2010 / Early price indicator for 2011 foodgrain / Only 16 points under the 2008 peak, FAO’s food price index / Bringing nutrition back into climate change talks / Grain market outlook, end October 2010 / How the World Bank is leveraging the new food crisis. […]


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