World Bank Forms $1.2 Billion Credit Line to Combat Food Crisis

[Red_Letters88]

World Bank Forms $1.2 Billion Credit Line to Combat Food Crisis By Christopher SwannMay 29 (Bloomberg) -- The World Bank said it will establish a $1.2 billion loan facility to help impoverished countries ease social and economic strains caused by rising food prices. The plan includes the launch of derivative products and $200 million in grants to the world's poorest countries, the Washington-based lender said today in a statement. The funding will boost the World Bank's support to agricultural and food projects to $6 billion next year, up from $4 billion this year. Total lending by the bank reached $24.7 billion in 2007. Government-funded lenders from Abidjan to Washington are scrambling to make hundreds of millions of dollars available in loans and grants to prevent a reversal of progress made in recent years fighting malnutrition. World Bank President Robert Zoellick called last month for a ``New Deal'' to end hunger worldwide, a reference to social programs in the 1930s designed to pull the U.S. economy out of the Great Depression. ``These initiatives will help address the immediate danger of hunger and malnutrition of the 2 billion people struggling to survive in the face of rising food prices,'' Zoellick said in the statement. The announcement follows the Inter-American Development Bank's decision May 27 to form a $500 million line of credit for countries in Latin America and the Caribbean. Food prices that rose 68 percent worldwide between January 2006 and March this year threaten the well-being of the world's poorest citizens, the IDB said. The World Bank said today it approved $5 million in grants for Djibouti, $10 million for Haiti and $10 million for Liberia. The World Bank is also setting up risk-management tools to hedge against bad weather or crop failure. The bank's governing board is considering a facility for Malawi that would use financial derivatives to protect the country against drought. Drought Protection ``Should Malawi suffer a drought, then it would be protected against a rise in the price of imported maize,'' the bank said in the statement. Earlier this month, the Abidjan, Ivory Coast-based African Development Bank said it aims to raise $500 million to help subsidize fertilizer costs to farmers on the continent. The AFDB gives low-interest loans to poor countries to help boost economic growth and cut poverty. The Asian Development Bank, based in Manila, said in a report earlier this month that the global rise in food prices may push 5 percent of low-income households in the Asia-Pacific region into poverty this year. ``The effects of high prices on Timor-Leste and the Fiji Islands are of particular cause for concern,'' the ADB said May 8. IMF's Concern Dominique Strauss-Kahn, the managing director of the International Monetary Fund, said in April that rising prices for wheat, corn and soybeans could wipe out a decade of progress in the developing world. Wheat and corn prices may be as much as 26 percent higher in a decade than was predicted last year because of increasing demand for food and biofuels, the Organization for Economic Cooperation and Development said earlier today. Wheat is likely to cost $231.60 a metric ton in 2016-2017 and coarse grains such as corn may be at $166.60 a ton, the OECD said in a report produced with the United Nations' Food and Agriculture Organization. A year ago they predicted prices of $183.20 and $138.20 in their report. Wheat, corn, rice and soybeans have climbed to records this year on shrinking global stockpiles and rising demand. The World Bank says 33 nations from Mexico to Yemen may face social unrest after food and energy costs increased for six consecutive years. The jump in prices has already prompted deadly riots in Egypt, Haiti and Cameroon.

 

[Wakka]

Fist off, who's going to pay for the loan?Second of all, where are they going to buy food during a food shortage. It isn't like money is going to automatically transform into bags of rice.