IMF Closely involved in Drive to Relieve global Food Crisis

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The IMF is preparing a study about the impact of high food and fuel prices. In the following interview, Mark Plant, Deputy Director of the IMF's Policy Development and Review Department, explains the status of the various strands of work taking place within the IMF on food and fuel prices.

IMF Survey: It seems as though this crisis crept up on the world. Were the warning signs ignored?

Plant: Signs of a possible food problem have been visible for a while. The world has been consuming more food than it has been producing for a few years, prices have been creeping up, and inventories are at historic lows. And we should not forget that this time around, the food price cycle is positively correlated with the one for oil. Fertilizer and transportation costs are affected by the oil price. And the oil price rose dramatically in a very short period of time.

Also, global food markets-that is, food export markets-are often thin, especially the one for rice. In the current environment of uncertainty, financial turmoil, and the search for safe havens such as commodities, this can lead to very volatile prices, perhaps with some overshooting.

Nobody could have foreseen that the financial crisis, some flight into commodities, and an oil price hike would all happen at a time when food stocks happen to be low.

IMF Survey: How quickly will the IMF revamp its lending instruments to be able to help out more quickly in this crisis?

Plant: Very quickly. The IMF is preparing a review of the Exogenous Shocks Facility (ESF) for Board consideration in June. The modified facility will provide more rapid and effective shocks financing and be a streamlined version of the structure of financing instruments for low-income countries. But I would underscore that the ESF is available now, if any country needs immediate help.

IMF Survey: Is the PRGF [Poverty Reduction and Growth Facility] a suitable instrument for assisting crisis-hit countries?

Plant: Yes. Countries with PRGF-supported programs can request augmentations of their arrangements if they are confronting balance of payments problems. The IMF's area departments are in active discussion with 10-15 low-income countries on possible Fund financial assistance to help address the balance of payments impact of rising food and fuel prices.

IMF Survey: How much does the IMF expect to lend to countries affected by the food price hikes? What will it do to ensure that the money goes to worst-affected people?

Plant: ...