Food Crisis Background Statement
Jubilee Debt Campaign UK * Jubilee USA Network
June 3, 2008
In recent months some of the poorest countries in the world have experienced a massive rise in the price of basic foods, which threatens serious long-term impacts on hunger, malnutrition and poverty. The responsibility for many of the long and short term causes of this crisis lies with Northern-based institutions and governments. Jubilee USA Network and Jubilee Debt Campaign UK call on these institutions and governments to take urgent action to alleviate the crisis in the short-term and to make radical long-term changes to their development policies and practices. To meet such a challenge, the World Bank's recently announced $1.2 billion funding program is woefully inadequate.
We are calling for:
Debt cancellation, and an interim moratorium on payments, for all countries suffering from the food crisis, whether they be Heavily Indebted Poor Countries (HIPC) yet to complete the process, such as Haiti, or countries such as Bangladesh that have been excluded from debt relief schemes to date.
Recognition by the IMF/ World Bank of the role that economic policy conditions have played in the creation of the food crisis and immediate cessation of such conditions from debt relief and aid program;
International assistance to deal with the food crisis should take the form of grants not loans.
THE CASE OF HAITI
Haiti is the poorest country in the Western Hemisphere. 80% of Haiti's population live in poverty as defined by the World Bank (under $2 a day). Average life expectancy is just 52 years. Half of all Haitian adults cannot read or write.
Despite this Haiti is saddled with a $1.3 billion debt burden and has only recently qualified for debt relief under the Heavily Indebted Poor Country Initiative (HIPC), established in 1996. It will not receive debt relief until it has met a series of conditions, including economic policy reforms.
Haiti is paying around $1 million a week to the rich world in debt repayments. The World Bank's funding program offers Haiti $10 million - a figure which will effectively cover its debt repayments for 10 weeks. This is clearly insufficient to deal with a crisis that the United Nations Food and Agriculture Organization (FAO) has predicted could last for 10 years.
Haiti's plight is a clear example of the damage done to poor countries by structural adjustment policies. In 1995 the IMF forced Haiti to slash its rice tariff from 35% to 3%. According to Oxfam, this resulted in an increase in imports of more than 150% between 1994 and 2003, with 95% of them coming from the US. By 2005, three out of every four plates of rice eaten in Haiti came from the US. Traditional rice-farming areas of Haiti now have some of the highest concentrations of malnutrition and a country that was self-sufficient in rice is now dependent on foreign imports.
The FAO has said 37 countries face a food crisis, with 22 particularly vulnerable. Recent weeks have seen riots and food protests sweep across a vast swath of these countries. The FAO has said that although prices might come down, they are not likely to reach their previous low levels for several years to come.
Those countries include Bangladesh, which with an $18.9 billion stock of debt makes payments of $791 million a year to the rich world in debt payments, despite a literacy rate of only 41%.
It is not right that these countries are still repaying large amounts of money to the rich world at the same time as their people are struggling to get the basics of life. We call for cancellation of the debts of all poor countries, with a moratorium on payments from all such countries impacted by the food crisis to come into immediate effect.
The moral case becomes even clearer when it is remembered that the creditors - in particular the International Financial Institutions - have played a role in creating such vulnerability in the countries impacted by the food crisis. For over two decades, poor countries have been forced to adopt a series of liberalization policies which have weakened domestic agricultural sectors and removed safety nets. Often, debt relief was conditional on the adoption of these policies.
In the long-term, economic liberalization has made it impossible for countries to control their own food supply. Poor countries were made to dismantle support for farmers and remove tariffs on agricultural products. They then found themselves competing with cheaper subsidised products from the richer world. In addition they were told to stop stockpiling grain and other essentials in order to stabilize prices.
Honduras which used to be - the breadbasket of Central America - now imports 83% of its rice. Many poor countries have experienced similar restructuring. Since de-colonisation, Africa has turned from being a net food exporter to a net food importer. According to NGO coalition Our World is Not For Sale: "A food trade surplus of US$1.9 billion in the 1970s was transformed into a US$17.6 billion deficit in 2000 and a US$9.3 billion deficit in 2004."
There is no sign that the International Financial Institutions have learned these lessons. Debt relief programs are still premised on flawed policy prescriptions. It is clear that solutions need to be long-term and structural, as well as providing immediate assistance. Long-term solutions must be found in re-empowering governments and communities control over their own food production and supply, working to iron out price volatility, ensuring the sustainability of small producers and re-establishing safety nets.
GRANTS NOT LOANS
The indebtedness of poor countries is still key to their vulnerability. The debt crisis has meant both that many poor countries spend more on debt service payments than they do on social spending and that their economic policies are seriously constrained by the International Financial Institutions. Countries have been forced to take out new loans to repay old loans and have found themselves in a vicious cycle of debt, poverty and lack of control over their economies.
Although the World Bank has set aside $200 million in grant aid for the poorest countries impacted by the food crisis, the majority of the funding program will be through new loans, thus only adding to the long-term debt burden of these countries. If high food prices are here to stay, as suggested by the FAO, it is imperative that we do not make the situation faced by poor countries even more difficult in the long-term by adding to their burdens.
While the FAO has called for a diverse range of measures to be considered in response to the food crisis, the World Bank's response to date has been woefully inadequate.
We call on the G8 and the G8 Finance Minister's meetings in Japan in June and July to ensure both adequate short-term provision and a structural, long-term response to the current crisis. A debt moratorium is an obvious and necessary first step which will both free up essential funds and provide the policy space for countries to begin controlling production and supply of the food needed by their populations.
 World Bank Launches $1.2 Billion Fast-Track Facility for Food Crisis, World Bank, May 29, 2008
 Two-pronged trade attack will destroy poor farmers, warns Oxfam, Oxfam International, April 11, 2005
 The International Monetary Fund, World Bank and regionally-based multilateral banks
 World Bank `Destroyed Basic Grains' in Honduras, Bloomberg.com, May 14, 2008
 Manufacturing A Food Crisis, The Nation, May 15, 2008 and Africa Farming Sense, OECD Observer, May 2005
 World Food Crisis & Doha Statement, May 2008 [WORD DOC]
 World Food Crisis & Doha Statement, May 2008 [WORD DOC]
 See for instance: High food prices - supporting the poor and re-launching agriculture, Food & Agriculture Organization of the United Nations, May 28, 2008
Especially calls for "targeted direct food distribution, food subsidies and cash transfers as well as nutritional programmes including school feeding. Strengthening social protection is especially important for vulnerable groups, including children, pregnant women and the elderly. As a short-term response, local food production should be boosted urgently. Measures should include the distribution to small-scale farmers of seeds, fertilizers, animal feed and other inputs through vouchers or smart subsidies."