Microfinance Focus May 2, 2011: A new report by the Asian Development Bank (ADB) titled ‘Global Food Price Inflation and Developing Asia’ says that resurgent global food prices, which posted record increase in the first two months of 2011, may push millions of people in developing Asia into extreme poverty.

Food prices had been expected to continue a gradual rise in the wake of the sharp spike in 2008. The report says that a persistent increase in the cost of many Asian food staples since the middle of last year, coupled with crude oil reaching a 31-month high in March, are a serious threat for a region that has rebounded from the global economic crisis.

Domestic food inflation in many regional economies in Asia has averaged 10% in early 2011. The ADB study finds that a 10% rise in domestic food prices in developing Asia, with a population of 3.3 billion people, could push an additional 64 million people into extreme poverty based on the $1.25 a day poverty line.

ADB Chief Economist Changyong Rhee said, “For poor families in developing Asia, who already spend more than 60% of their income on food, higher food prices further reduce their ability to pay for medical care and their children's education.”

The report further adds that if the global food and oil price hikes seen in early 2011 persist for the remainder of the year, economic growth in the region could be reduced by up to 1.5 percentage points.

The report notes that production shortfalls caused by bad weather along with the weak US dollar, high oil prices and subsequent export bans by several key food producing countries have caused much of the upward global price pressure since last June, with double digit increases seen in the price of wheat, corn, sugar, edible oils, dairy products and meat.

Furthermore, the report states that Asian governments have already taken many short term measures to cater to the harsh impacts of food price inflation, including measures to stabilize prices. However rising demand for food from developing Asia and low food productivity mean policymakers must also focus on long term solutions to avert a future crisis, the report says.

It also notes that cooperation between Asian nations can help secure food supply for the region’s people. The ASEAN Integrated Food Security Framework, under the 10 member ASEAN group of countries has been establish as an emergency regional rice reserve system in this regard.