World Bank expands response to food price crisis to $2 billion

from World Bank
Published on 21 Apr 2009 View Original
- The Bank expands its food crisis facility to $2 billion to provide immediate relief to countries hard hit by food prices

- Since last May, the facility has approved $916 million worth of projects in 31 countries; with nearly half of the funds supporting projects in Africa

- The number of undernourished is now thought to exceed 1 billion

When word got out earlier this year that cash could be earned to clear garbage, hoe fields or hack brush near Banga in Bong County, Liberia, the desperate stampeded.

"People came rushing on us and we could not recruit them all," says Rene Gibson, project supervisor of a local non-governmental organization called RICE.

"Many of them were vulnerable, but we could not exceed the 500, and so it was a hard thing for us to leave people out."

The overwhelming response to the cash-for-work project in northeastern Liberia is just one sign that the food crisis is not over.

With the number of undernourished people in the world hovering around 1 billion, the World Bank Group announced April 16 it would increase its food crisis fund from $1.2 billion to $2 billion to further help countries respond to ongoing food price volatility.

"In this risky economic environment and given the continued volatility of food prices, the crisis is not over for many poor people," says World Bank Group Managing Director, Ngozi Okonjo-Iweala.

"The fact is the downward trend internationally has not fully translated into lower food prices in many poor countries... so we have to continue to help."

Bank Approves More than $900 Million in Projects in 31 Countries

The move comes less than a year after the World Bank set up the fast-track facility under the Global Food Crisis Response Program (GFRP) to support global efforts to cope with the food crisis.

Since it was established last May, the facility has approved projects totaling $916 million in 31 countries, with nearly half of the funds supporting projects in Africa. The remainder of the $1.2 billion is committed to projects in 11 countries.

Before the food price crisis, 923 million people were undernourished. Most recent estimates have increased this number to 963 million people as a result of soaring food prices in the first half of 2008, according to the U.N.'s Food and Agricultural Organization.

The number of undernourished is now thought to exceed 1 billion.

Although prices have declined from their peaks in 2008, major food grain prices are still higher than average, and high volatility in food prices, combined with the impact of the financial crisis, threatens to further increase food insecurity and exacerbate the hardships faced by the poorest, who already spend more than half their incomes on food.

Facility Provided Immediate Relief

The rapid food crisis financing facility has provided immediate relief to countries hard hit by food prices.

Projects implemented by the World Bank and partners in the United Nations system have supported social protection programs such as employment schemes, providing supplementary rations and micronutrients for mothers and their children, and school feeding programs for the most vulnerable.

For example, in Sierra Leone 119 cash-for-work projects have been approved, providing 42,000 person-days of employment for more than 5,300 people.

In Liberia, monthly school feeding has been provided to 60,000 children since October 2008.

With $735 million disbursed to date, the GFRP also provides support for smallholder food production by supplying farmers with seeds and fertilizer, improving irrigation, and supporting livestock-related activities that will reach approximately 5.5 million farmers. The GFRP is also providing budget support for government policies, such as offsetting tariff reductions for food and other unexpected costs.

Medium and Longer Term Interventions Eyed

In addition to emergency operations, the World Bank is also working on medium and longer term interventions. In 2008, the World Bank reaffirmed the critical importance of agriculture when it released the 2008 World Development Report (WDR), Agriculture for Development.

"With 75 percent of the world's poor located in rural areas, and most earning their livelihoods from farming, we must emphasize agriculture's unique position as a lead sector for poverty reduction, economic growth and environmental sustainability," says World Bank Director of Agriculture and Rural Development, Juergen Voegele.

To date, the World Bank has mobilized nearly $200 million in external funds from Australia, the European Commission and Russia to scale up activities under the GFRP. The World Bank Group is committed to increasing its annual lending to agriculture and food from $4 billion to $6 billion a year by 2010.

The World Bank's Board of Directors approved the new ceiling of $2 billion for the use of the funds or a deadline of June 30, 2010, whichever comes first.

Including GFRP, the World Bank expects to approve over $3 billion in new IDA/IBRD operations in agriculture, and about $1 billion in new social protection projects related to food security for the current fiscal year. Another $1.5 billion in private sector agribusiness lending through the International Finance Corporation will bring the annual total to $5.6 billion.

The expansion of GFRP funding and the increase in the World Bank's lending to agriculture and rural development advance the five action areas of the World Bank's forthcoming Agriculture Action Plan: reducing risk and vulnerability, raising agricultural productivity, linking farmers to market and strengthening value addition, facilitating rural non-farm income generation and exit from agriculture, and enhancing environmental services and sustainability.