Rising food prices: Is there a solution on the horizon? | The Daily Star
12:00 AM, April 05, 2008 / LAST MODIFIED: 12:00 AM, April 05, 2008

Rising food prices: Is there a solution on the horizon?

CRISIS is nothing new to this nation. In fact, it's hard to think of a time when we Bangladeshis, have not been faced with a crisis. With that said, there are always a few problems, which in my opinion deserve immediate attention.
I am, of course, referring to the rising food prices in Bangladesh. This is a crisis which everyone is aware of, or more brusquely, everyone is a victim of, and it's clear that this is not only a huge current problem but also that it may blow out of proportion very soon if the correct steps are not taken right now.
If we consider just the basic elements, which make up the most budgeted diet in Bangladesh, we would have to take into account rice, edible oil, and salt. The prices of all these essential products have soared severely in the past few years, and have hit an all time high; and we are not even considering the prices of food products outside the basic menu, which have shot up as well.
There are reasons behind this tremendous price hike, some of which I will encompass within this article. But my main focus will be an attempt at formulating a strategy, which the government could use immediately to tackle the high food prices. The first thing to realise is that the high prices of food products are a global problem, and not only a local one, granted that developing countries like Bangladesh are most adversely affected.
Over the past few years, there have been mass protests about the cost of tortillas in Mexico City, riots over grain prices in Senegal, Mauritania, and other parts of Africa, and children marching in the streets of Yemen to call public attention to child hunger. This year, the Food and Agriculture Organisation of the United Nations (FAO) announced that 36 countries were in crisis as a result of higher food prices. In many of these countries, food insecurity has been exacerbated by conflict, floods, or extreme weather.
In the global context, food prices have increased in response to many factors, including higher energy and fertiliser prices, increased demand for bio-fuels, especially in the US and the European Union, and droughts in Australia and other countries.
For highly import-dependent countries like Bangladesh, higher food prices and a larger import bill are challenges, especially with the limited foreign exchange availability and high vulnerability to food insecurity.
Worldwide agricultural commodity price increases were significant during 2004-06: corn prices rose 54%; wheat, 34%; soybean oil, 71%; and sugar 75%. But this trend accelerated in 2007, due to continued demand for bio-fuels and drought in major producing countries.
High energy and fertiliser prices, high demand for bio-fuel production, low food stocks, low rates of food production, crops being damaged due to adverse weather conditions in certain developing countries, and as a result, high dependence on imported food supplies, are some of the main reasons behind the phenomenon of rising food prices. Energy and fertiliser prices are projected to stay high, and already fertiliser prices have increased 150 percent in the past five years.
According to the director general of the International Food Policy Research Institute, Dr. Pinstrup-Andersen, rising prices can put food out of reach of around 1.1 billion people in the developing countries, who live on a dollar a day or less. However, many of the poorest people in low-income countries depend on agriculture -- directly or indirectly --for their livelihoods, and rising crop prices may actually increase their incomes. Public policies to deal with rising prices must not harm poor producers while helping poor consumers.
Pinstrup-Anderson's views are applicable to Bangladesh, and he also gives some suggestions to help developing countries in tackling the high food prices. They are:
* Hold food stocks to provide some insurance against price hikes.
* Use foreign exchange insurance or special credit arrangements, such as the International Monetary Fund's (IMF) Compensatory Financing Facility, to finance needed imports.
* Invest in transportation, communication, and agricultural research to ensure competitive rural markets and enhance the capacity of farmers to respond to changing prices.
Pinstrup-Andersen states that these mechanisms affect the overall domestic supply and prices. Governments in developing countries may find it more cost-effective to target assistance programmes to the poor, and not to distort domestic prices for everyone. Employment generation, credit, or income-transfer programmes, such as food coupons, targeted to the food-insecure, could be expanded temporarily to help them deal with the negative consequences of short-term increases in food prices. Food aid, used wisely so it does not harm developing-country agriculture, can also assist low-income households in coping with food price increases.
In the same context, investment in bio-fuel production by low-income countries could also promote rural development, since large sections of their populations depend on agriculture for employment and livelihood. Countries such as Colombia and India have adopted production targets for increasing the share of bio-fuels in their transportation fuel supplies. Other countries are examining alternative bio-fuel sources appropriate for their particular environments and resource availability.
But what plan should be undertaken to tackle the rising food prices in Bangladesh right now, which would have immediate results? The government could consider bringing back the food ration strategy that was successful during the pre-liberation period, and also through more than a decade after liberation. The idea behind this strategy is that the government would have to procure essential food products like rice, sugar, edible oil etc., at the prevailing prices, and then sell these products at government-fixed subsidised prices to the target population through designated ration stores.
The government would allow citizens to apply for food ration privileges after taking the particulars of their income and the number of family members to determine the need. Citizens would be divided into different categories as per their financial position, and would be given a card mentioning the number of family members. Card-holders would be allowed to draw their quota of a package of essential items at a subsidised price as per their category from government appointed dealer shops. In this way, many people could get food at a much cheaper cost.
On March 11 Chief Adviser Fakhruddin Ahmed shared his deep concern about the rising food prices and ordered the advisers and concerned agencies to find ways to deal with this price hike, especially the prices of essential food products. The strategies mentioned above can be considered. Most importantly, we have to come up with a plan and implement it as soon as possible; otherwise this calamity may just get out of hand.

Shams Bin Quader is Lecturer, Department of Media and Communication, Independent University.

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