WORLD TRADE ORGANIZATION  
ORGANISATION MONDIALE DU COMMERCE  
ORGANIZACIÓN MUNDIAL DEL COMERCIO  G/AG/GEN/76 
7 January 2008 
 (08-0047) 
Committee on Agriculture Original:   English/ 
 anglais/  inglés 
 
 
ANNUAL MONITORING EXERCISE IN RESPECT OF THE FOLLOW-UP TO 
THE MINISTERIAL DECISION ON MEASURES CONCERNING THE POSSIBLE 
NEGATIVE EFFECTS OF THE REFORM PROGRAMME ON LEAST-DEVELOPED 
AND NET FOOD-IMPORTING DEVELOPING COUNTRIES 
 
 Attached are copies of contributions
* by the representatives of  the Food and Agriculture 
Organization of the United Nations (FAO), th e International Monetary Fund (IMF) and the UN 
Conference on Trade and Development (UNCTAD) at the meeting of the Committee on Agriculture on 
21 November 2007 (Agenda Item 2.B refers). 
 
 Comité de l'agriculture  
  
EXERCICE ANNUEL DE SURVEILLANCE DE LA SUITE DONNÉE À LA DÉCISION 
MINISTÉRIELLE SUR LES MESURES CO NCERNANT LES EFFETS NÉGATIFS 
POSSIBLES DU PROGRAMME DE RÉFORME SUR LES PAYS LES MOINS 
AVANCÉS ET LES PAYS EN DÉVELOPPEMENT IMPORTATEURS 
NETS DE PRODUITS ALIMENTAIRES 
 
 On trouvera ci-joint la copie des contributions
* des représentants de l' Organisation des Nations 
Unies pour l'alimentation et l'agricu lture (FAO), du Fonds monétaire international (FMI), et de la 
Conférence des Nations Unies sur le commerce et le  développement (CNUCED) à la réunion du Comité 
de l'agriculture du 21 novembre 2007 (voir point B de la deuxième partie de l'ordre du jour). 
 
 
Comité de Agricultura  
  
EJERCICIO ANUAL DE VIGILANCIA DEL SEGUIMIENTO DE LA DECISIÓN 
MINISTERIAL SOBRE MEDIDAS RELATIVAS A LOS POSIBLES 
EFECTOS NEGATIVOS DEL PROGRAMA DE REFORMA EN 
LOS PAÍSES MENOS ADELANTADOS Y EN LOS PAÍSES 
EN DESARROLLO IMPORTADORES NETOS 
DE PRODUCTOS ALIMENTICIOS 
 
 A continuación se adjuntan copias de las contribuciones
* de los representantes de la 
Organización de las Naciones Unidas para la Agricultura y la Alimentación (FAO), el Fondo Monetario Internacional (FMI), y la Conferencia de  las Naciones Unidas sobre Comercio y Desarrollo 
(UNCTAD) en la reunión del Comité de Agricultura  celebrada el día 21 de noviembre de 2007 (véase 
el punto B de la segunda parte del orden del día). 
                                                     
 
* In English only./En anglais seulement./En inglés solamente. G/AG/GEN/76 
Page 2  
 
   
I.
 CONTRIBUTION BY THE REPRESENTATIVE OF THE FOOD AND 
AGRICULTURE ORGANIZATION (FAO) .........................................................................2  
II. CONTRIBUTION BY THE REPRESEN TATIVE OF THE INTERNATIONAL 
MONETARY FUND (IMF) .....................................................................................................7  
III. CONTRIBUTION BY THE REPRESENTATIVE OF THE UN CONFERENCE ON TRADE AND DEVELOPMENT (UNCTAD)...............................................................12
 
 
_______________ 
  
I. CONTRIBUTION BY THE REPRES ENTATIVE OF THE FOOD AND 
AGRICULTURE ORGANIZATION (FAO) 
 The last two years are characterised by a surg e in agricultural commodity prices.  Prices rose 
sharply in 2006 and, in some cases, are soaring at an even faster pace this year.  The FAO food price 
index rose by 9 per cent in 2006 compared to th e previous year.  In September 2007 it stood at 
roughly 37 per cent higher than the same time in 2006.  The surge in prices has been led primarily by 
dairy and grains, but prices of other food commod ities, with the exception of sugar, have also 
increased significantly.   High price events, like low price events, are not  rare occurrences in agricultural markets.  
Often high prices tend to be short-lived compared to low prices, which persist for longer periods.  
What distinguishes the current situation is how widespread this phenomenon is, affecting not just 
some but nearly all major food and feed commod ities.  The sustained increase in primary food 
commodity prices contributed to a rise in retail pri ces of such basic foods as bread, pasta, milk and 
meat.  There is now a widespread and commonly sh ared concern about food price inflation and food 
riots have been witnessed in several countries. 
  For most cereals, supplies are much tighter this  year than in previous years while, in addition 
to rising demand for food and feed, there is an incr easing use of cereals for industrial use.  Stocks, 
which were already low at the start of the seas on, are likely to remain equally low because global 
cereal production would only be sufficient to meet e xpected world utilization.  Because of the high 
and volatile prices, coupled with soaring freight rat es, trade is expected to  contract this year.  
However, in spite of lower import volumes, many c ountries are expected to pa y substantially more for 
food imports compared to previous years.   As reported in the November issue of the FAO publication Food Outlook , the global value of 
imported foodstuffs in 2007 is expected to reach  US$745 billion, or 21 per cent more than the 
previous year and the highest level on record
1.  Developing countries as a whole could face an 
increase of over 25 per cent.  The sustained rise in food import bills for the most vulnerable among the developing countries is worrisome.  FAO estimat es that in 2007 the cost of the food basket 
imported by the Least Developed Countries (L DCs) and the Net-Food Importing Developing 
Countries (NFIDCs) could be more than twice the level of 2000. 
 
 Four factors are responsible for this large in crease (see Table).  The first is the increase in the 
volume of imported foodstuffs.  The combined volume of cereal imports by LD Cs and NFIDCs in the 
                                                     
 
1 Much of the anticipated increase would be fuelled by higher expenditures on grain based products, 
which could rise by 37 per cent to the tune of US$230 billion, or around one-third of global food import 
expenditures.  G/AG/GEN/76 
 Page 3 
 
 
  marketing year 2007/08 is forecast by FAO to be a bout 15 per cent greater than the average of the 
1998/99 to 2000/01 period.   The second factor is the declining volumes of f ood aid.  The combined cereal food aid of the 
LDCs and NFDCs in 2007/08 is forecast to be 45 pe r cent lower than eight years earlier (1998/99 to 
2000/01).  Food aid would account for 4.6 per cent of their total cereal imports, compared to nearly 
10 per cent eight years earlier.   The third factor, as already mentioned, is th e large increase in the world market price of 
cereals.  For example, the July-October 2007 average price of US no.2 hard winter wheat  was 154 per 
cent higher than eight years earlier. 
  Finally, what also affects the cost of food im ports is the huge increase in freight rates.  The 
July-October 2007 average ocean freight rate from U. S. Gulf ports to key import destinations was 
more than 400 per cent higher than the level of eight years earlier. 
 
 Among these four factors, the first, i.e. incr easing volumes of cereal imports, is due to the 
inability of domestic production to keep pace w ith increasing domestic demand.  However, on 
average during recent years, the effect of this fact or on cereal import bills has been modest compared 
to the effects of the other three factors identified (i.e. food aid, world prices and freight rates).  What is also important to note is that the latter factor s are external to the countries concerned and well 
beyond their control. 
  The increased burden of importing foodstuffs from the world market due to the higher cost of such imports is not the only constrain faced by ma ny poor countries to attain food security.  Weather-
related reduced cereal harvests, and wars and civil strife in several countries, particularly in Africa, 
could result in severe food shortages in the 2007/ 08 marketing year and would require emergency 
food assistance.  Among the countries facing reduced cereal harvests, the most seriously affected are Zimbabwe, Swaziland and Lesotho in Africa and the De mocratic People's Republic of Korea in Asia.   
Among the countries affected by war and civil strife, the most seriously affected are Somalia, Ethiopia and the Darfur region of Sudan.  
 In Zimbabwe, a severe drought coupled with s hortages of agricultural inputs, resulted in a 
decline of more than 40 per cent in the 2007 cer eal production.  An FAO/WFP Mission estimated that 
4.1 million people are in need of emergency food aid and would require 352,000 tonnes of cereals in 
the form of food aid in the marketing year 2007/08 (May/April).  Against this requirement, 
206,000 tonnes of food aid have been r eceived/pledged by early November. 
 
 Similarly, because of a sharply drought-reduced 2007 cereal crop in Swaziland, 407,000 people are in need of 40,000 tonnes of cereal food aid, of which 10,000 have been already 
received/pledged.  Multiple years of drought in Leso tho have left 401,000 pers ons in need of 40,000 
tonnes of emergency food aid in marketing year 2007/08 (April/March) of which again 10,000 tonnes 
have been already received/pledged. 
 
 In Somalia, renewed armed conflict and civil insecurity in Mogadishu since March 2007 has 
resulted in thousands of people fleeing the capital. This, combined with the worst main cereal crop 
season in thirteen years, has led to a severe humanitarian crisis. The number of people needing food aid has increased in recent months and is currently estimated at 1.5 million persons.  Nearly one-fifth 
of these people are classified as requiring life saving interventions.  
  Emergency food aid is also needed for 600, 000 persons in conflict-affected areas of 
neighbouring Ethiopia and for additional large numbers of people affected by a reduced harvest in the 
2007 main or secondary crop season.  
 G/AG/GEN/76 
Page 4  
 
   In Sudan, despite a good 2007 cereal production at  national level, substantial amounts of food 
aid are needed in the Darfur region affected by prolonged civil conflict.   In the Democratic People’s Republic of Kor ea, food aid needs in 2007/08 are estimated at 
over 900,000 tonnes of cereals reflecting structural  economic constraints, coupled with a reduced 
2007 cereal output due to unprecedented torrential rains last August. 
  Of course more countries are facing food problem s than those mentioned here.  More detailed 
and up-to-date information will be availa ble in the December issue of the FAO Crop Prospects and 
Food Situation  Report, to be released shortly.  This report is the other major publication, besides Food 
Outlook,  produced by the FAO's Global Information and Early System (GIEWS).  
  FAO and WFP continue to take steps to  improve the methodology of assessing food aid 
needs.  Both organizations are collaborating cl osely in strengthening emergency needs assessment 
capacity and on improved methodologies used in Cr op and Food Supply Assessment Missions.  The 
new Crop and Food Security Assessment Guidelines (to be published soon), jointly elaborated by 
FAO and WFP, place greater emphasis, inter alia , on:  
• better use of remote sensing data at both national and regional levels; 
• understanding the complex interactions be tween public and private sectors;  and 
• the role of markets and, in particular, th e links between effective demand and commercial 
imports. 
  
   G/AG/GEN/76
 Page 5 
Cereal imports of LDCs and NFIDCs (1998/99 to 2007/08) - Information as of  October 2007 
           
  1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 
                  estimate f'cast 
           
Import Bill (US $ million)           
LDCs 2514 2157 2141 2569 3489 3703 4444 4294 5472 7515 
NFIDCs 4931 4196 4678 4882 5469 6198 7053 7128 9148 12634 
LDCs & NFIDCs 7445 6354 6819 7451 8957 9902 11498 11422 14620 20148 
% change over 1998/99-2000/01 8.3 -7.5 -0.8 8.4 30.3 44.1 67.3 66.2 112.7 193.2 
           
Total volume imported (000 tonnes)           
LDCs 16965 16819 16022 17395 21363 18737 21760 20215 19964 20016 
NFIDCs 35766 31857 34039 34597 32191 31781 36815 36372 36209 38097 
LDCs & NFIDCs 52731 48676 50061 51991 53555 50518 58575 56587 56173 58113 
% change over 1998/99-2000/01 4.4 -3.6 -0.8 3.0 6.1 0.1 16.0 12.1 11.3 15.1 
           
Food aid (000 tonnes)           
LDCs 3550 3709 4007 2934 3950 3561 3224 2765 2585 2384 
% of total imports 20.9 22.1 25.0 16.9 18.5 19.0 14.8 13.7 12.9 11.9 
% change over 1998/99-2000/01 -5.4 -1.2 6.7 -21.9 5.2 -5.2 -14.1 -26.4 -31.2 -36.5 
NFIDCs 1050 944 1198 949 624 395 457 330 266 267 % of total imports 2.9 3.0 3.5 2.7 1.9 1.2 1.2 0.9 0.7 0.7 
% change over 1998/99-2000/01 -1.4 -11.2 12.6 -10.8 -41.4 -62.8 -57.1 -69.0 -75.0 -74.9 
LDCs & NFIDCs 4600 4654 5205 3883 4573 3957 3681 3095 2851 2650 
% of total imports 8.7 9.6 10.4 7.5 8.5 7.8 6.3 5.5 5.1 4.6 
% change over 1998/99-2000/01 -4.6 -3.4 8.0 -19.4 -5.1 -17.9 -23.6 -35.8 -40.8 -45.0 
           
Commercial imports (000 tonnes)           
LDCs 13414 13110 12015 14461 17414 15176 18536 17450 17379 17632 
NFIDCs 34716 30912 32841 33647 31567 31385 36358 36042 35944 37830 
LDCs & NFIDCs 48130 44022 44856 48108 48981 46561 54894 53492 53322 55463 
% change over 1998/99-2000/01 5.4 -3.6 -1.8 5.3 7.3 2.0 20.2 17.1 16.8 21.4 
           
Per unit import cost  (US $/tonne) 1/           
LDCs 148.2 128.3 133.6 147.7 163.3 197.6 204.2 212.4 274.1 375.4 
NFIDCs 137.9 131.7 137.4 141.1 169.9 195.0 191.6 196.0 252.6 331.6 
LDCs & NFIDCs 141.2 130.5 136.2 143.3 167.3 196.0 196.3 201.8 260.3 346.7 
% change over 1998/99-2000/01 3.8 -4.0 0.2 5.4 23.0 44.1 44.3 48.4 91.4 155.0  
  G/AG/GEN/76 
Page 6 Cereal imports of LDCs and NFIDCs (1998/99 to 2007/08) - Information as of  October 2007 
           
  1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 
                  estimate f'cast 
           
Wheat export price (US $/tonne)           
US no.2 hard winter 120 112 128 127 161 161 154 175 212 305 2/ 
% change over 1998/99-2000/01 -0.3 -6.6 6.8 5.6 33.7 33.9 28.1 46.1 76.2 154.1            
Wheat ocean freight rates (US $/tonne)           
F r o m  U . S .  G u l f  p o r t s  t o :            
   Egypt 9.3 13.7 15.0 15.0 16.7 37.0 46.5 31.9 50.3 78.3 2/ 
   Bangadesh 18.8 18.5 18.3 18.5 22.5 48.5 65.4 45.5 57.8 86.5 2/ 
   Rotterdam 9.4 12.6 13.1 11.0 12.5 28.3 34.5 20.8 32.3 59.5 2/ 
   Average 12.5 14.9 15.5 14.8 17.2 37.9 48.8 32.7 46.8 74.8 
   % change over 1998/99-2000/01 -12.8 4.2 8.1 3.7 20.3 165.1 241.3 128.8 227.1 422.7 
 
Source:  FAO . 
Totals computed from unrounded data.   1/ Based on per unit cost of total imports. 
2/ Average July-October. 
  G/AG/GEN/76 
 Page 7 
 
 
  II. CONTRIBUTION BY THE REPRESENTATIVE OF THE INTERNATIONAL 
MONETARY FUND (IMF) 
 The International Monetary Fund (IMF) welc omes this opportunity to update the Committee 
on our initiatives at both the global and country leve l in favor of least-developed countries (LDCs) 
and net food-importing developing countries (NFIDC s). As before, I would like to place these 
initiatives in the context of th e NFIDCs' recent economic perform ance and of developments in 
primary commodity markets.  A. RECENT
 ECONOMIC  DEVELOPMENTS  IN NFIDCS  AND  PRIMARY  COMMODITY  
MARKETS  AND  OUTLOOK  FOR  2008 
 According to the October 2007 World Economic Outlook  (WEO), the global economy 
continued to expand vigorously in the first half of  2007.  Strong growth in China, India, and Russia 
accounted for half of global growth over the past year, while robust expansions also continued in 
other emerging market and developing countries, including low-income African countries.  Among 
the advanced economies, growth in the euro area a nd Japan slowed in the second quarter of 2007 after 
two quarters of strong gains and the housing downtur n continued to act as a drag on growth in the 
United States.  Inflation has been contained in the advanced economies, but has risen in many 
emerging market and developing countries due to food and energy prices.  In the face of continuing 
turbulent conditions in financial markets, global grow th in 2008 is expected to moderate from the very 
high rates of the previous two years (Table 1).  Against the background of strong growth among emerging market and developing countries, however , economic prospects for NFIDCs in 2008 remain 
favorable. 
  In 2007, GDP growth in NFIDCs is projected at 6.7 per cent, compared to 8.1 per cent for all emerging markets and developing countries, reflect ing an increase in NFIDC exports of goods and 
services by 7.2 per cent in volume terms.  
 
 In 2008, GDP growth in NFIDCs is expected to  rise slightly to 6.8 per cent due to stronger 
export volumes and strong domestic demand.  NFIDC trade is projected to grow at a rate only slightly 
below that of emerging markets and developing co untries as a whole.  NFIDC import volumes are 
projected to rise by 10.8 per cent, with export volumes growing by 8.8 per cent.  Inflation in NFIDCs is expected to moderate to 7.8 per cent from 9.4 per cent in 2007, due in part to developments in oil 
markets and a moderation in food price growth. 
  Turning to food prices, as of November 2007 the IMF price index of food commodities rose by over 20 per cent year on year in U.S. dollar terms, reflecting a combination of factors:  
• Strong demand for biofuels .  Higher biofuels production in the United States and the 
European Union has increased demand for corn , other grains, rapeseed oil, and other 
edible oils.  The expansion in biofuels production has also buoyed other food prices 
by encouraging farmers to switch from othe r crops to corn for biofuels.  Higher 
animal feed prices have, in turn, contribute d to higher meat, poultry, and dairy prices. 
• Increased demand from emerging markets .  Strong growth in demand for food in 
China and India has also supported international food prices.  
• Other supply shocks.  Adverse weather around the world has reduced global wheat 
stocks to 26-year lows.  In addition, an outbreak of 'blue ear' disease in China 
significantly reduced pork stocks in Chin a and pushed up domes tic meat prices. G/AG/GEN/76 
Page 8  
 
  In terms of specific items in the IMF index in 2007: 
 
• Grain prices rose by 34 percent during the first 11 months of 2007, with wheat prices 
up by 64 percent to record highs. The increas e occurred in the context of a weakening 
dollar and supply constraints amidst robust demand. Corn was the exception, rising 
just 4 percent (after a 25 percent increase in 2006) due to a record U.S. crop. 
• Prices of edible oils - in particular soybean oil and palm oil - have all risen sharply to 
record-highs, reflecting strong demand from emerging markets and, to a lesser extent, biodiesel producers.  A reduction in plante d soybean acreage in the United States to 
make room for corn contributed to this development. 
 Looking forward, we expect food price growth to moderate in 2008, but with global food 
demand remaining strong it will take longer for the supply response to push prices lower.  Wheat 
prices, and possibly rice prices, are the most likely to  rise in the near term, while edible oil prices may 
also rise further in the coming months.   B. IMF
 INITIATIVES  IN FAVOR  OF LDCS  AND  NFIDCS  AT THE  GLOBAL  POLICY  
LEVEL 
 The IMF is one of many agencies working co llectively to bring the Millennium Development 
Goals (MDGs) to fruition.  The IMF's main contri bution is in promoting the macroeconomic and 
financial stability that are crucial to  poverty reduction and economic growth.  
  Against this background, the IMF has been a firm  and consistent advocate of open trade as an 
engine for economic growth and p overty reduction.  For developi ng countries, especially the least-
developed, closer integration into the worl d trading system can bring immense benefits. 
  The IMF remains committed to supporting the Doha Round negotiations and to encouraging 
its members to bring the Round to a successful c onclusion.  An ambitious  Doha Round agreement 
would boost the long-term growth potential of the world economy, in developed and developing 
countries alike.  It would help keep protectionist  initiatives at bay and l essen incentives to negotiate 
bilateral trade agreements, which ri sk jeopardizing the non-discrimination principle at the heart of the 
multilateral system.   In the IMF's view, trade liberalization must be embraced by all countries.  The Fund has 
demonstrated the distortionary effects of agricultu ral subsidies, with a particular emphasis on the 
largest markets.  However, equal emphasis also needs to be placed on developing countries.  Too often development interests seem to be equated with  the right to exclude oneself from global markets. 
This does not accord with experience, which suggest s that active trade integration offers the best 
hopes for spurring economic growth.  The empirical wo rk to date illustrates that gains from trade 
liberalization could disproportionate ly favour developing countries, given that barriers to trade by and 
among these countries are often higher than in their more developed counterparts.   
  The IMF is committed to helping countries ta ke advantage of the opportunities of open trade 
and to cope with adjustment costs.  The IMF also actively participates with other multilateral 
organizations in the Aid for Trade initiative.  In  the IMF's view, Aid for Trade is an important 
complement to an eventual Doha Round agreemen t, but cannot substitute for the market opening and 
other benefits that would fl ow from an ambitious round.  
  G/AG/GEN/76 
 Page 9 
 
 
  C. EVOLVING   ROLE  OF THE  IMF  IN FAVOR  OF LDCS  AND  NFIDCS 
 Considerable efforts have been made in the l ast two years to make the IMF's engagement in 
low-income countries more flexible and focused on its core areas of expertise and comparative 
advantage, as called for in the IMF's Medium-Term Strategy (MTS).  
 
 The IMF has refined its advice on appropriate macroeconomic policies in the context of the 
planned scaling-up of aid to low-income countri es.  IMF-supported programs and the underlying 
policy advice now encourage a full and effective spe nding of all aid, while the decision on how much 
to spend should take a medium-term perspective, based on a country’s macroeconomic stability, absorptive capacity, and debt sustainability.  
 
 The IMF continues to work closely with othe r development partners to ensure that the 
Poverty Reduction Strategy (PRS) process provides an  effective framework for coordinating actions 
by countries and their development partners to fo ster growth, reduce poverty, and progress toward the 
MDGs.  In October 2007, the IMF clarified the parame ters of its role in the PRS process, based on the 
principles of the MTS.
  In this context, the role of the staff in supporting country efforts to improve 
macroeconomic policies and manage the macro-economic impact of aid inflows, and in collaborating 
effectively with other development partners, was set out.   In addition to these recent initiatives, other channels through which the IMF assists its low-
income members include policy advice, financing, debt relief, technical assistance, and training, 
adapted to a country’s special circumstances: 
 
• Policy advice is provided through surveillan ce (Article IV consultations), Financial 
Sector Assessment Programs (FSAP), the Review of Standards and Codes (ROSCs), and the Policy Support Instrument (PSI).  The latter instrument, introduced in 
October 2005, is available to low-income countries that desire an IMF-endorsement 
of their policies but which do not necessarily want or need IMF financial assistance.  
At end-November-2007, six countries had a PSI in place, four of which are NFIDCs.  
• The IMF's main instrument for financial support to LDCs is the Poverty Reduction 
and Growth Facility (PRGF), centered around countries' own poverty reduction 
strategies (PRS) and prioritizing economic policies to foster growth.  At end-November 2007, 23 low-income countries ( 15 of which are NFIDCs) were drawing 
on Fund financial resources under the PRGF (a t an interest rate of 0.5 per cent). 
• For low-income members without a PRGF arra ngement that face external shocks, the 
IMF can also provide financing through a new window introduced under the PRGF Trust in 2005, the Exogenous  Shocks Facility (ESF).  The ESF complements existing 
facilities available to low-income member s facing shocks, such as increases in 
support under the PRGF;  the Compensatory Financing Facility (CFF);  and subsidized emergency assistance for natural disasters (the Emergency Natural 
Disasters Assistance, or ENDA) and post-conflict countries (under the Emergency 
Post-Conflict Assistance (EPCA) policy).  In support of trade liberalization, the IMF has established the Trade Integration Mech anism (TIM), a policy to enhance the 
predictability of access to IMF resources for members faced with balance-of-
payments shortfalls resulting from trade lib eralization measures undertaken by other 
countries.  The TIM has been used by three LDCs and NFIDCs thus far (Bangladesh, 
the Dominican Republic, and Madagascar). 
• The IMF has granted sizable debt relief through the Enhanced Highly Indebted Poor 
Countries (HIPC) Initiative for 22 countries (14 NFIDCs) and the Multilateral Debt G/AG/GEN/76 
Page 10  
 
  Reduction Initiative (MDRI) for 24 countries ( 17 NFIDCs).  Debt relief under the two 
initiatives is expected to reduce the debt burden of HIPC countries by almost 90 per cent.  Between 2000 and 2006, debt service paid by these countries declined by 2.7 
percentage points of GDP, freeing resour ces for poverty-reduci ng spending, which 
increased by the same magnitude.  
• The joint comprehensive IMF-World Bank Debt Sustainability Framework (DSF), 
adopted in 2005/06, aims to help low-in come countries (LICs) maintain long-term 
debt sustainability.  The borrowing space created by debt relief, combined with 
expectations of scaled-up aid and in creased private and other non-traditional 
financing flows, offers valuable opportun ities but also raises new policy challenges. 
The DSF supports LICs in their efforts to use these expanded financial resources to 
meet their large investment needs while avoiding future debt problems.  Debt 
sustainability analyses (DSAs) identifying the degree of debt distress risk as well as 
potential sources of debt-related vulnerab ilities are prepared jointly by Bank and 
Fund staffs.  To date, 124 DSAs have been prepared for 67 LICs. 
• The Fund is helping LICs build capacity to design and implement sound borrowing 
policies.  Strong public debt management is a key requirement for long-term debt 
sustainability, and improving debt manageme nt capacity in LICs is an urgent 
necessity, particularly as access to new sources of less concessional financing is increasing.  The IMF and the World Bank, in collaboration with other technical assistance providers, are developing guidance and technical tools to help LDC policymakers design medium-term debt mana gement strategies that are consistent 
with macroeconomic stability, support debt  sustainability, and minimize sovereign 
balance sheet vulnerabilities.  A pilot tec hnical assistance program implementing that 
approach is expected to start in early 2008 in 5-6 LICs. 
• The provision of technical assistance, particularly to improve public expenditure 
management systems, remains a central element of the IMF’s engagement with LDCs.  
 As indicated above, the IMF assists its low-inco me members in adjusting to commodity price 
shocks in a variety of ways.  In the context of  its program and surveillance work, the Fund also 
provides policy advice to countries on how to manage th ese shocks.  It is important to note that while 
a number of countries have indeed faced commodity price shocks, in net terms, a large number of 
low-income countries have seen terms of trade gain s, with price increases for petroleum and imported 
food products offset by increases in export prices. 
 
 Let me conclude by indicating that the Fund looks forward to expandi ng its engagement with 
low-income member countries in the period ahead.   G/AG/GEN/76 
 Page 11 
 
 
   
 
 
           
2005 2006 2007 2008 2007 2008
         World output  4.8 5.4 5.2 4.8 -- -0.4
Advanced economies  2.5 2.9 2.5 2.2 -0.1 -0.6
Other emerging market and developing countries  7.5 8.1 8.1 7.4 0.1 -0.2
  Net Food Importing Countries 2/  6.8 7.4 6.7 6.8 -0.2 0.4
  Purely Net Food Importing Countries 3/  6.2 7.2 6.3 6.2 0.2 0.4
  Africa  5.6 5.6 5.7 6.5 -0.7 0.3
  Developing Asia  9.2 9.8 9.8 8.8 0.2 -0.3
    China  10.4 11.1 11.5 10.0 0.3 -0.5
    India  9.0 9.7 8.9 8.4 -0.1 --
    ASEAN-4 4/  5.1 5.4 5.6 5.6 0.2 -0.1
  Middle East  5.4 5.6 5.9 5.9 0.5 0.4
  Western Hemisphere  4.6 5.5 5.0 4.3 -- -0.1
    Brazil  2.9 3.7 4.4 4.0 -0.1 -0.2
  Central and eastern Europe  5.6 6.3 5.8 5.2 -- -0.2
  Commonwealth of Independent  
    States 5/  6.6 7.7 7.8 7.0 0.2 -0.1
    Russia  6.4 6.7 7.0 6.5 -- -0.3
    Excluding Russia  6.9 9.8 9.4 8.1 0.6 0.4
Memorandum  
World growth based on market  
    exchange rates  3.3 3.8 3.5 3.3 -0.1 -0.4
World trade volume (goods and services)  7.5 9.2 6.6 6.7 -0.3 -0.6
Imports  
  Advanced economies  6.1 7.4 4.3 5.0 -0.4 -0.9
  Other emerging market and developing countries  12.1 14.9 12.5 11.3 -0.2 0.1
    Net Food Importing Countries  14.0 10.5 12.9 10.8 1.0 -0.4
    Purely Net Food Importing Countries  13.3 11.5 12.3 9.8 1.9 -0.6
Exports  
  Advanced economies  5.8 8.2 5.4 5.3 -0.1 -0.9
  Other emerging market and developing countries  11.1 11.0 9.2 9.0 -1.6 -0.2
    Net Food Importing  Countries  8.7 3.9 7.2 8.8 -2.9 2.4
    Purely Net Food Importing  Countries  7.4 3.3 4.1 4.2 -1.5 -0.1
Commodity prices (U.S. dollars)  
Oil 6/ 41.3 20.5 6.6 9.5 7.4 1.6
Nonfuel (average based on world  
   commodity export weights)  10.3 28.4 12.2 -6.7 -2.3 1.1
Consumer prices  
Advanced economies  2.3 2.3 2.1 2.0 0.1 -0.2
Other emerging market and developing countries 7/  5.2 5.1 5.9 5.3 0.5 0.6
  Net Food Importing Countries  8.2 8.0 9.4 7.8 0.2 0.4
  Purely Net Food Importing Countries 7.4 6.6 8.2 7.2 0.4 0.8
Six-month London interbank  
  offered rate (LIBOR, percent)  
On U.S. dollar deposits  3.8 5.3 5.2 4.4 -0.2 -0.8
On Japanese yen deposits  0.1 0.4 0.9 1.1 0.1 -0.1
On euro deposits  2.2 3.1 4.0 4.1 0.2 0.3
         
   
    
   
   
   
    
    
   (Annual percent change unless otherwise noted)  Table 1. Overview of the  World Economic Outlook   Projections
Current ProjectionsDifference from July
2007 Projections 1/
Note: Real effective exchange rates are assumed to remain constant at the levels prevailing during August 22-September 19, 2007 . 
1/ Using updated purchasing-power-parity (PPP) weights, summarized in the Statistical Appendix, Table A of the September issue of the World Economic Outlook.  
2/ Afghanistan, I.S. of, Cuba, Eritrea, Liberia,  Martinique, Somalia, 'Timor-Leste, Dem. Rep. of', and Tuvalu are not included  in the aggregation due to 
insufficient data. 43 LDCs + 25 NFIDCs 
3/ 24 NFIDCs. Cuba is not included in the aggregation.  
4/ Includes Indonesia, Malaysia, the Philippines, and Thailand. 
5/ Mongolia, which is not a member of the Commonwealth of Independent States, is included in this group for reasons of geograph y and similarities in economic  
structure. 
6/ Simple average of prices of U.K. Brent, Dubai, and West Texas Intermediate crude oil. The average price of oil in U.S. dolla rs a barrel was $64.27 in 2006;  the 
assumed price is $68.52 in 2007 and $75.00 in 2008. 
7/ Excludes Zimbabwe. G/AG/GEN/76 
Page 12  
 
  III. CONTRIBUTION BY THE REPRESENTATIVE OF THE UN CONFERENCE ON 
TRADE AND DEVELOPMENT (UNCTAD) 
 During the Uruguay Round negotiations on agriculture, there was concern that the 
implementation of the Agreement on Agriculture (AoA ), and particularly the implementation of the 
commitments on the reduction of export subsidies, could have negative (short-term) impacts on least 
developed countries (LDCs) and net food importin g countries, mainly through increases in food 
import bills resulting from expected agricultural prices rises. With a view to minimizing this concern, 
the member States of the World Trade Organization (WTO) agreed "the Decision on Measures concerning the Possible Negative Effects of the Re form Programme on least developed countries and 
net food-importing developing countries" as a part of the Uruguay Round Agreements.
2 
 
Current Situation 
 
 In the current situation with (i) a new agre ement on agriculture being negotiated and an 
agreement on the elimination of all export subsidies by 2013;  (ii) c ontinuing population growth – it is 
expected that world’s population grows from 6 billi on people in 2000 to 7.5 billion people in 2020;  
and (iii) new challenges such as the proliferation of  the production of bio fuel that competes regarding 
the use of land with food production, looking at  the situation of LDCs and net food importing 
developing countries is highly relevant.  
 Given the fact that about 800 million people worldwide remain – according to FAO - 
undernourished and the fact that LDCs, for exampl e, spend a very high share of their foreign 
exchange on food imports, food insecurity3 and the potential impact of further trade liberalisation 
remains a persistent issue on the world's agenda - but not because of a shortfall in global food 
production. Nor is food insecurity only related to th e characteristic of a country of being a net-food 
importer.   
 In fact, analysing the linkage of the food-import structure and food insecurity proxies shows 
no correlation at the national level.
4  The result is robust not only when taking into account all 
countries, but also when analysing the LDC group or NFIDC group separately.  Many of the NFIDCs are food secure whereas on the other hand many count ries specialised in the production of agricultural 
goods are food insecure – among them many LDCs.   Two types of NFIDCs 
 
 There are two major types of NFIDCs. 
• One group of NFIDCs is not really specialized in the production of agricultural goods 
and/or food items and does not really have a comparative advantage in the production of them. 
• Another group – and this is the majority of LDCs – has a very high specialization in 
agriculture. 33% of their GDP is in agri culture and 70% of their workforce.  
 
                                                     
 
2 UNCTAD TD/B/COM.1/EM.11/2. 
3 The underlying concept of food security applied for the background analysis of this note, refers to the 
1996 World Food Summit, which states that "food security  exists when all people, at all times, have physical 
and economic access to sufficient, safe, and nutritious food  to meet their dietary need s and food preferences for 
an active and healthy life" (FAO, 1996).  Food insecurity can be analyzed at the global, national, regional, 
household, and individual levels. In this note we  refer to food security at the national level. 
4 Variables used for correlation analysis were total value of food exports minus total value of food 
imports in order to measure a country's trade position, following the definition of net-food importing countries 
from the WTO.  Food insecurity has been measured  using the prevalence of undernourishment in total 
population and caloric consumption per day.  G/AG/GEN/76 
 Page 13 
 
 
   The first group of countries does not have th e means to purchase their food from international 
markets and/or parts of the population is simply  to poor to buy sufficient amounts of good quality 
food.   But why do countries that have a comparative advantage in the production of agricultural 
goods often remain food insecure?  In these countries th ere are in addition to the shortage of foreign 
exchange other issues to look at.   Obviously, as food availability is the main source for achieving food security, the reasons for the lack of sufficient food supplies at the national leve l is the starting point of our analysis. Firstly, we 
note that growth of agricultural production in LDCs has not kept up with the growth levels achieved 
in other countries.   
Low productivity (growth) 
 Labour productivity is low and the productivity gap between LDCs, deve loping and developed 
countries is increasing.  
• Agricultural labour productivity in LDCs was just  46 per cent of the level in other developing 
countries and below 1 per cent of th e level in developed countries.  
• Labour productivity grew by only 18 per cent in LDCs between 1983 and 2003, by 41 per 
cent in other developing countries a nd 62 per cent in developed countries. 
(Source: UNCTAD LDC Report 2006) 
 
 One reason for this is that in many countries the agricultural workforce is growing faster than 
the pace at which arable land is brought into cultivat ion. Land produc tivity growth (yield per hectar) 
is also either very slow, stagnating or even nega tive such as for fibre crops, fruits, nuts and sugar in 
LDCs between 1980-1983 and 2000-2003.
5 And it has to be noted that - although in many NFIDCs 
there is a considerable unexpl oited potential in agriculture6 - the possibilities to extend the agricultural 
production have in many countries reached its limits. There is an increasing dependence on fragile 
lands.   Faster growing populations than agricultura l and food production in many NFIDCs is a 
dramatic situation. An intensification of agri cultural production through a variety of measures is 
necessary to increase the yield per farmer and per hectar. Here, the international community is needed. NFIDCs and especially the LDCs among them have a huge potential to catch up with other 
countries in terms of productivity in order to achieve  yield gains that others have seen in recent 
decades.  Agricultural subsidies 
 
 The continuing subsidisation of the agricultura l sector in many developed countries is another 
reason for a production below its potential in many NF IDCs.  While the subsidies reduce world prices 
which is good for consumers in net-food importing countries it adversely affects producers and also 
reduces the incentives in developing countries to  invest in modern agricultural techniques.
7  
 
Support needed 
 
 The international community is needed to im prove the agriculture infrastructure. However, 
the share of total ODA commitments to LDCs that  is targeted towards economic infrastructure, 
                                                      
5 UNCTAD LDC Report 2006. 
6 FAO 2002, see UNCTAD LDC Report 2006. 
7 UNCTAD 2006: The Persistence of Export Subsidies. G/AG/GEN/76 
Page 14  
 
  production sector and multisector decreased from nearly 50 per cent in 1992-1994 to 24 per cent in 
2002-2004; or, only 3 per cent of science-technology and innovation related aid is for agricultural 
research and only 2 per cent and 1 per cent for agri cultural education and training and agricultural 
extension, respectively.
8 Development aid seems not to be targeted  to push agricultural production in 
NFIDCs. The share of ODA to LDCs for investme nts in production and infrastructure is shrinking 
whereas the share of emergency aid is ever increasing.   
  There are positive signs, however. The World Ba nk has recently announced that they will 
strengthen its engagement in agricultural infrast ructure. The former UN Secretary General, Kofi 
Annan, has been appointed as the first chairman  of the partnership called "Alliance for a Green 
Revolution in Africa" that aims to boost productivit y and income of small-scale farmers in Africa. 
The Aid-for-Trade initiative hopefully brings addi tional resources as complementary measures to 
ensure that all developing countries would benef it from further agricultural trade liberalisation. 
  But despite these positive signs much more remain s to be done including in the context of 
WTO negotiations on agriculture and in improving th e effectiveness of the Marrakesh agreement.  
 
Long-term and short-term measures 
 
 It has to be distinguished betw een long and short-term measures.  
 
 In the longer term the solution for countries w ithout a comparative advantage in agriculture to 
avoid food insecurity is not to achieve self-suffi ciency in food production. This does not necessarily 
mean that agriculture will not play an important role in terms of employment or that those countries have legitimate interests in protecting certain vulnerable sectors but it may be too costly to 
concentrate on less competitive sectors. With respect  to long-term economic development, countries 
need to expand productive capabilities in those sectors in which they have a comparative advantage in 
the sense that they have relatively to others be tter conditions; perhaps expanding manufacturing or 
service sectors. Exports from processed goods and commodities, as well as service exports, have to 
generate the required foreign exch ange income for purchasing the required food imports. The question 
remains how NFIDCs, who often spend large parts of  their exchange revenues on food bills, which is 
a short-term consumption good, and not on long-term investment goods, can break out of this vicious 
circle.  
  Countries with a comparative advantage in pr oducing agricultural food products are likely to 
benefit from further specialization in their pr oduction. Measures and support to increase their 
productivity would be needed. 
 
 In addition to these long-term measures to impr ove the food security situation in NFIDCs ad 
hoc short-term measures must be available to cope w ith crises in a way that limits distortions of local 
markets. This makes the current negotiations on the provisions of food aid very important and 
sensitive.     
                                                     
 
8 UNCTAD estimates based on OECD/CRS database; UNCTAD LDC Reports 2006 and 2007.  G/AG/GEN/76 
 Page 15 
 
 
  Conclusion 
 
 Many NFIDCs are suffering from food insecurity.  As our analysis on the relationship between a country's position on agricultural trade and food insecurity has shown, the mere fact that a developing country is a food impor ter cannot alone explain the food in security situation prevailing in 
some of the NFIDCs. 
  Despite a concentration of the workforce in many NFIDCs in agriculture and a comparative 
advantage in that sector are the yields low.  In many NFIDCs there is no sign of a sufficiently high productivity growth to address current challenges. 
 
 The concentration of food insecurity in rura l areas suggests that no sustained reduction in 
hunger is possible without special emphasis on agricultu ral and rural development.  What is required is 
economic growth in rural areas as well as in the other parts. 
 
__________