WORLD TRADE  
ORGANIZATION  G/AG/GEN/78 
15 December 2008 
 (08-6145) 
Committee on Agriculture Original:   English 
  
 
ANNUAL MONITORING EXERCISE IN RESPECT OF THE FOLLOW-UP TO THE 
MINISTERIAL DECISION ON MEAS URES CONCERNING THE POSSIBLE 
NEGATIVE EFFECTS OF THE REFORM PROGRAMME ON  
LEAST-DEVELOPED AND NET FOOD-IMPORTING  
DEVELOPING COUNTRIES 
 
  Attached are copies of contributions by th e representatives of the Food and Agriculture 
Organization of the United Nations (FAO), the Inte rnational Grains Council (IGC), the International 
Monetary Fund (IMF) and the UN Conference on Trade and Development (UNCTAD) at the meeting 
of the Committee on Agriculture on 4 De cember 2008 (Agenda Item 2.B refers). 
 G/AG/GEN/78 
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I.
 CONTRIBUTION BY THE REPRESENTATIVE OF THE FOOD AND 
AGRICULTURE ORGANIZATION (FAO) .........................................................................2  
II. CONTRIBUTION BY THE REPRESEN TATIVE OF THE INTERNATIONAL 
GRAINS COUNCIL (IGC)......................................................................................................6  
III. CONTRIBUTION BY THE REPRESEN TATIVE OF THE INTERNATIONAL 
MONETARY FUND (IMF) .....................................................................................................7  
IV. CONTRIBUTION BY THE REPRESENTATIVE OF THE UN CONFERENCE ON TRADE AND DEVELOPMENT (UNCTAD) ...............................................................13
 
 
_______________ 
  
I. CONTRIBUTION BY THE REPRES ENTATIVE OF THE FOOD AND 
AGRICULTURE ORGANIZATION (FAO) 
1. Agricultural prices have always been volatile , but sharp increases in global agricultural 
commodity prices during 2006 and 2007 have focused unprecedented attention on the state of food and agriculture at the global, regi onal and national levels.  The impact of soaring food prices has been 
most severe on net food-importing developing countries (NFIDCs) and Least-Developed Countries (LDCs) as the share of food in their total expenditures is much higher than that of industrialized countries. 
2. Since June 2008, international prices of many agricultural commodities have started to fall 
and early indications do not preclude further dec lines in the coming months.  The FAO Food Price 
Index (FFPI) that had climbed to a record 219 point s in June 2008 had fallen to a nine-month low of 
188 points by September 2008.  Despite this recent fa ll in prices, the FFPI is still up 11 points from its 
value in September 2007 and as much as 51 pe r cent above the level in September 2006. 
3. For LDCs and NFIDCs (Net Food-Importing De veloping Countries) combined, food-import 
expenditures, in value terms, are forecast to reach US$22,182 million (as against US$9,846 million in 
2002/03) or an increase of about 125 per cent over the last  five years.  In the case of LDCs, the import 
bill is expected to be US$7,526 million as agai nst US$3,644 million or an increase of 106 per cent; 
and for NFIDCs, imports are expected to reach US$14,656 million as against US$6,202 million or an 
increase of 136 per cent over the last five years.   These figures are still provisional because FAO's 
food import bill forecasts are conditional on developmen ts in international prices and freight rates. 
4. The high levels of food import bills for the NF IDCs and LDCs are likely to continue for a 
variety of reasons, including the following:  
(a) The high world market price of cereals.  For example, the July-October 2008 average 
price of US no.2 hard winter wheat was 91 per cent higher than five years earlier. 
(b) The increase in the volume of imported foodstuffs.  The combined volume of 
agricultural imports by LDCs and NFIDCs in  the marketing year 2008/09 is forecast 
by FAO to be about 18 per cent greater than that of 2002/03.  
(c) The huge increase in freight rates.  The Ju ly-October 2008 average ocean freight rate 
from U.S. Gulf ports to key import destinations was more than 350 per cent higher than the level of five years earlier.  G/AG/GEN/78 
 Page 3 
 
 
  (d) The declining volumes of food aid.  Food ai d for NFIDCs and LDCs  is estimated to 
account for 5.8 per cent of their total cereal  imports in 2008/09, compared to nearly 
8.6 per cent five years earlier.  
(e) The need to replenish stocks and expected  increases in utilization despite a favourable 
global production outlook. 
(f) The low level of exportable supplies,  resulting from utilization outstripping 
production for several crops in a number of major exporting countries. 
5. However, these are not the only constraints f aced by many poor countries to attain food 
security.  Weather-related reduced cereal harvests, a nd wars and civil strife in several countries 
(particularly in Africa) could result in severe f ood shortages in the 2008/09 marketing year and would 
require emergency food assistance.  Among the c ountries facing reduced cereal harvests, the most 
seriously affected are:  Zimbabwe, Swaziland and Lesotho in Africa; and the Democratic People's 
Republic of Korea in Asia.  Among the countries affect ed by war and civil strife, the most seriously 
affected are Somalia, Ethiopia and the Darfur region of Sudan. 
6. Of course more countries are facing food problems other than those mentioned here.  More 
detailed and up-to-date information can be found in  the latest issue of the FAO Crop Prospects and 
Food Situation Report.  This report is the other ma jor publication, besides Food Outlook, produced by 
the FAO’s Global Information and Early System (GIEWS).  
7. 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  Crop and Food Suppl y Assessment Missions.  
  G/AG/GEN/78 
Page 4  
Cereal imports of LDCs and NFIDCs (1998/99 to 2008/09) - Information as of  October 2008 
            
  1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 
                   estimate f'cast 
            
Import Bill (US $ million)            
LDCs 2507 2138 2124 2554 3472 3644 4363 4089 5703 9959 7526 
NFIDCs 4932 4198 4680 4883 5470 6202 7055 7041 8917 17385 14656 
LDCs & NFIDCs 7439 6336 6804 7437 8942 9846 11418 11130 14620 27344 22182 
% change over 1998/99-2000/01 8.4 -7.6 -0.8 8.4 30.4 43.5 66.5 62.3 113.1 298.6 223.4 
            
Total volume imported (000 tonnes)            
LDCs 16938 16722 15934 17306 21263 18438 21438 19760 20409 20252 20863 
NFIDCs 35771 31865 34051 34602 32197 31789 36823 36383 35548 41954 42148 
LDCs & NFIDCs 52709 48587 49985 51908 53460 50227 58260 56143 55957 62206 63011 
% change over 1998/99-2000/01 4.5 -3.6 -0.9 2.9 6.0 -0.4 15.5 11.3 11.0 23.4 25.0 
            
Food aid (000 tonnes)            
LDCs 3550 3709 4007 2934 3950 3557 3266 3162 2460 2271 3021 
% of total imports 21.0 22.2 25.1 17.0 18.6 19.3 15.2 16.0 12.1 11.2 14.5 
NFIDCs 1050 944 1198 949 623 390 456 341 517 632 632 
% of total imports 2.9 3.0 3.5 2.7 1.9 1.2 1.2 0.9 1.5 1.5 1.5 
LDCs & NFIDCs 4600 4654 5205 3883 4572 3947 3722 3503 2977 2903 3653 
% of total imports 8.7 9.6 10.4 7.5 8.6 7.9 6.4 6.2 5.3 4.7 5.8 
            
Commercial imports (000 tonnes)            
LDCs 13388 13013 11927 14372 17313 14880 18172 16598 17949 17981 17842 
NFIDCs 34721 30920 32852 33653 31574 31400 36367 36042 35031 41322 41516 
LDCs & NFIDCs 48109 43933 44780 48025 48888 46280 54539 52640 52980 59303 59358 
% change over 1998/99-2000/01 5.5 -3.7 -1.8 5.3 7.2 1.5 19.6 15.4 16.2 30.0 30.1 
            
Per unit import cost  (US $/tonne) 1/            
LDCs 148.0 127.8 133.3 147.6 163.3 197.7 203.5 206.9 279.4 491.8 360.8 
NFIDCs 137.9 131.7 137.4 141.1 169.9 195.1 191.6 193.5 250.9 414.4 347.7 
LDCs & NFIDCs 141.1 130.4 136.1 143.3 167.3 196.0 196.0 198.2 261.3 439.6 352.0 
% change over 1998/99-2000/01 3.9 -4.0 0.2 5.4 23.1 44.3 44.2 45.9 92.3 223.5 159.1 
            
Wheat export price (US $/tonne)            
US no.2 hard winter 120 112 128 127 161 161 154 175 212 361 3112 
% change over 1998/99-2000/01 -0.3 -6.6 6.8 5.6 33.7 33.9 28.1 46.1 76.2 200.7 159.0  
   G/AG/GEN/78
 Page 5Cereal imports of LDCs and NFIDCs (1998/99 to 2008/09) - Information as of  October 2008 
            
  1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 
                   estimate f'cast 
            
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 85.4 74.5 2/ 
   Bangladesh 18.8 18.5 18.3 18.5 22.5 48.5 65.4 45.5 57.8 97.5 92.8 2/ 
   Rotterdam 9.4 12.6 13.1 11.0 12.5 28.3 34.5 20.8 32.3 70.7 65.5 2/ 
   Average 12.5 14.9 15.5 14.8 17 .2 37.9 48.8 32.7  46.8 84.5 77.6 
   % change over 1998/99-2000/01 -12.7 4.4 8.3 3.9 20.5 165.5 241.8 129.2 227.6 492.0 443.4 
 
Source:  FAO . 
Totals computed from unrounded data.   
1/ Based on per unit cost of total imports. 2/ Average July-October. 
 G/AG/GEN/78 
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  II. CONTRIBUTION BY THE REPRESENTATIVE OF THE INTERNATIONAL 
GRAINS COUNCIL (IGC) 
8. The sharp rises in world prices of grains and other food commodities seen in 2007 and in the 
first half of 2008, coinciding with a period of st eeply higher ocean freight rates, represented a major 
threat to the food security of many countries and we re discussed in the June meetings of both the 
International Grains Council (IGC) and Food Aid Co mmittee.  Within the context of international 
market prices and trade, the Council undertook to ex amine some of the issues,  especially the greatly 
increased volatility of some markets and the possible impact of exporter and importer measures on trade.  Since then, the falls in export prices of most grains and in transportation costs, in some cases to 
their lowest for many years, have again highlighted the difficulty of achieving greater market stability.  
The steep downturn in prices partly resulted from bigger than expected 2008 harvests but also 
reflected declines in other commodities and the rapidly worsening global financial crisis.   
9. The substantially increased costs of  providing food aid to recipi ents, including those affected 
by the very high prices, again highlighted the im portance of the quantitative commitments contained 
in the Food Aid Convention, 1999 (FAC).  Because of the importance attached to their respective 
annual FAC obligations, several donors announced add itional budgetary initiatives in order to secure 
the required quantities for food aid operations to assist needy affected populations.  While full 
information on the past year's operations is not yet av ailable, nearly all donors were able to meet their 
obligations under the Convention within the specifi ed time frame.  In all, about 6 million tonnes
1 of 
food was provided under the FAC in the year endi ng June 2008, some 1.5 million less than in the 
previous year but above the combined minimum FA C commitments.  A full report on FAC operations 
in 2007/08 will be issued shortly, and the WTO Secret ariat will be sent more details of aid supplied to 
recipients in Net Food-Importing Developing Count ries.  Full details of previous years' FAC 
operations are available on the Food Aid Committee or IGC websites ( www.foodaidconvention.org  
and www.igc.org.uk ).    
10. Because of the importance attached by don ors to meeting the food assistance needs of 
vulnerable populations, particularly in Least-D eveloped and in Net Food-Importing Developing 
Countries, members of the Food Aid Committee are holding informal discussions prior to the start of formal negotiations of a new convention with a view  to making this important instrument even more 
effective in the light of today’s requirements.  In  view of the current negotiations taking place within 
the Doha Development Round, members of the F ood Aid Committee recognise that they will not be 
able to launch a formal process to replace the present Convention until the final outcome of the Round 
is known, particularly with regard to its provisi ons on food aid disciplines.  FAC member s are also 
considering ways of improving the effectiven ess of the current Convention, where necessary 
reviewing and amending its Rules of  Procedure.  These informal meetings are taking place in London 
in early December and, when the Committee meets in its 99
th Session on 9 December, it hopes to be 
able to map out more clearly the route towards a new convention, which will include consultation 
with all stakeholders, including recipient countries, ot her international organisations and civil society.  
Meanwhile, members will consider another extension of  the current Convention, due to expire in June 
2009.  At this meeting members, together with representatives from international organisations such 
as WFP, will consider current and future food aid operations in the light of the food situation, 
including current emergencies, and exchange inform ation on how they expect to mobilise their aid as 
efficiently as possible. 
 
                                                      
1 Wheat equivalent.  G/AG/GEN/78 
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  III. CONTRIBUTION BY THE REPRESENTATIVE OF THE INTERNATIONAL 
MONETARY FUND (IMF) 
11. Net Food-Importing Developing Co untries have faced many economic pressures over the year 
since our last discussion, with a rapid run-up in fo od prices followed by a fall in prices as global 
growth began to slow.  We welcome the Committee's attention to this broad issue and appreciate the 
timing of the present meeting.  We would like to u se this opportunity to update the Committee on IMF 
initiatives at both the global and c ountry level in favor of least-developed countries (LDCs) and net 
food-importing developing countries (NFIDCs).  I will begin by placing these initiatives in the context of the external environment that the NFIDCs face,  the developments in primary commodity markets, 
and the recent economic performance of the NFIDCs  themselves.  Among the main messages:  
(i) food prices remain high despite recent declines,  and (ii) the rise and then fall in food prices over 
2007 and 2008 weakened macro economic fundamentals in many countries, leaving them more susceptible to financial contagion and th e consequent slowdow n in global growth. 
A. R
ECENT ECONOMIC DEVELOPMENTS IN NFIDC S AND PRIMARY COMMODITY MARKETS AND 
OUTLOOK FOR 2009 
12. After an unsustainable boom in recent years, gl obal financial markets have entered a vicious 
cycle of asset deleveraging, price declines, and investor redemption.  Credit spreads have spiked to distress levels and major equity indices have dropp ed sharply.  Emerging markets have come under 
severe pressure, as financial withdrawals have led to widespread currency depreciation and larger 
drops in equity prices.  Activity is decelerati ng sharply across the globe, including increasingly in 
emerging and developing economie s, and consumer and producer  confidence have fallen.  
13. In 2008, real GDP growth in NFIDCs is projected  at 6.4 per cent, compared to 6.6 per cent for 
emerging markets and developing countries as a whole, si milar to the differential seen in recent years.  
This already reflects some slowing (Table).  W ith global growth slowing and commodity prices now 
falling but remaining elevated, growth in NFIDCs is  expected to decline to 5 per cent, a slow-down 
that is broadly similar in magnitude to that in emerging markets and developing economies as a 
whole.  Notwithstanding slowing growth, inflation in  NFIDCs is expected to increase to 15 per cent 
next year, largely reflecting second-round effects of  the run-up in food prices in late 2007 and early 
2008. 
14. Turning to food prices, weakening activity and demand for commodities have been 
depressing commodity prices across the board.  Food prices have fallen by around 30 per cent from 
their mid-year peak, but they are still some 10 per cen t above the levels recorded in early 2007.  The 
food price declines reflect not only weakening glob al activity, but also the resolution of weather-
related supply disruptions in the current crop year , increased production more generally - as farmers 
have responded to price incentives - and th e removal of some export restrictions.  
15. In the first ten months of 2008, the IMF food price index fell by 10 per cent.  In terms of 
specific items, developments were as follows: 
(a) Grain prices  fell by 13 per cent during the first te n months of 2008, but remain well 
above the average 2007 level, given still low inventories.  Within grains, wheat prices fell by 35 per cent over this period, primarily because of favourable crop outcomes.  Corn prices remained broadly unchanged, as both demand (biofuels) and crop production increased. In contrast, rice pri ces rose by 60 per cent, reflecting the 
lagging adjustment to the rise in prices of  other cereals in 2007 (some of which are 
close substitutes).  G/AG/GEN/78 
Page 8  
 
  (b) Edible oils prices  fell by around 20 per cent in the first ten months of 2008.  As 
demand for edible oils tends to respond more  strongly to income developments than 
does demand for other foods, their prices have been more sensitive to weakening global growth prospects.  
16. Looking forward, lower energy prices will likely lead to some further easing of food prices, 
both through the direct effects of lower fertilizer an d fuel prices and the indirect effects of slowing 
growth for transportation fuels on biofuels demand.  As demand fo r food generally is less income-
elastic than is that of other commodities, food pr ices overall are likely to be less sensitive to changes 
in global growth prospects than are prices of other commodities.  However, the high fuel and fertilizer 
prices through mid-2008 may temporarily weigh on supply in 2009. 
B. T
HE FOOD PRICE SHOCK : ECONOMIC EFFECTS AND THE IMF  RESPONSE . 
17. The effects of higher food prices on the balan ce of payments, budgets, and domestic prices 
intensified over the past year.  The shock was co mpounded by a simultaneous oil price shock, which 
also pushed up agricultural input prices.  Many lo w- and middle-income countries have experienced a 
substantial weakening of their balance of payments  and an acceleration of inflationary pressures that 
increased underlying macroeconomic vulnerabilities.  Although food and fuel prices have eased from 
recent peaks, they remain high and in many developi ng countries continue to damage the prospects of 
growth, economic stability, and poverty reduction. 
(a) Direct impact.  The impact of food and fuel prices on the balance of payments is 
substantial.  For a group of about 30  low-income food importing countries, we 
estimate that the cumulative (January 2007—September 2008) impact of the food 
price shock has risen to 1 per cent of annual GDP.  For a group of more than 50 net 
fuel importers, the cumulative impact of th e fuel price shock is equivalent to over 
3 per cent of GDP. 
(b) Vulnerabilities.  As of early November 2008, we estimate that about 50 developing 
countries have official reserve positions be low the equivalent of three months of 
import coverage, while about 40 had experi enced a drop in reserves coverage of ½ 
month or more since the start of 2008.  Th ese developments reflect in considerable 
part the dual shocks to food and fuel prices, as well as the deteriorating global 
environment.  
(c) Fiscal strains.  Many countries have also felt a fiscal impact, with responses to 
mitigate the impact of higher prices having cost 0.7 per cent of GDP on average as of 
September 2008.  This typically reflects a combination of tax cuts and/or higher 
subsidy outlays in response to the shocks.  However, with worsening budget positions, some countries are losing room to respond to the challenges posed by the deteriorating global environment.  
(d) Inflation peaked over the summer and is expect ed to decline somewhat by end-year in 
most countries.  However, countries must remain vigilant about second-round 
inflationary effects, which, should they become entrenched and result in sustained 
higher inflation, would prove directly harmful to the poor. 
18. Looking forward, despite the price ease we expect  many countries to remain vulnerable.  The 
outlook is further aggravated by the current financial crisis and the global slowdown.  
19. These findings reinforce the importance of adop ting appropriate policies to maintain macro 
economic stability and to protect the poor.  Countries face difficult choices as they seek to facilitate  G/AG/GEN/78 
 Page 9 
 
 
  the inevitable economic adjustment.  Most will need a combination of price adjustment, involving real 
depreciation and pass-through of world market pri ces, and fiscal adjustment to offset the higher 
budgetary costs. 
20. An approach involving tailored domestic  responses, donor support, and multilateral 
cooperation remains appropriate.  Given the risks of second-round effects on inflation and weakening 
external positions, monetary and ex change rate policies will have to  guard against inflationary and 
balance of payments pressures, which may intens ify.  The scale of any fiscal policy response will 
have to reflect each country’s macroeconomic situ ation and its available fiscal space.  External 
support, preferably grants in the case of LICs, rema ins vital to ease the burden of adjustment and to 
limit effects on real incomes and poverty. 
21. As spelled out in more detail below, the IM F has so far provided additional financial 
assistance to 15 affected countries.  We ha ve reformed the Exoge nous Shocks Facility  to provide 
more rapid and streamlined assistance, and we c ontinue to assist members through macroeconomic 
policy advice and technical assistance, as well as w ith financial support.  The IMF was an active 
participant in the UN Food Task Force. 
C. IMF  INITIATIVES IN FAVOUR OF LDC S AND NFIDC S AT THE GLOBAL POLICY LEVEL  
22. The IMF is one of many agencies working collectively to help bring the Millennium 
Development Goals (MDGs) to fruition.  The IMF's ma in contribution to this effort is in promoting 
macroeconomic and financial stability - a cruc ial foundation for poverty reduction and economic 
growth.  For developing countries, especially the l east-developed, closer integration into the world 
trading system brings immense benefits; against this background, the IMF has been a firm and 
consistent advocate of open trade as an engine  for economic growth and poverty reduction.  
23. The IMF strongly supports the Doha Round nego tiations and we encourage members to bring 
the Round to a rapid conclusion.  Substantially reduced bound tariff rates and farm support ceilings 
would sharply reduce the risk that a widespread protectionist response would exacerbate and prolong 
the global economic turmoil.  Ambitious new liber alization, moreover, would boost growth potential 
of developed and developing countries alike, and is thus also critical at this juncture.  Concluding the 
Round would also reduce incentives to negotiate bila teral trade agreements, which are encroaching on 
the non-discrimination principle that is at the heart of the multilateral system.  As countries contemplate additional flexibility in their ne gotiating positions, we encourage developed and 
developing countries alike to weigh fully the benef its they receive from liberalizing their own trade 
measures, as well as from enhanced and secure access to the markets of others.  
24. Many developing countries need targeted assistance to get the most from the opportunities of 
open trade, and the IMF remains committed to help ing these countries build additional trade capacity.  
The IMF participates actively with other multilateral organizations in the Aid For Trade initiative and 
is a core agency in the Enhanced  Integrated Framework (EIF) for the least-developed countries.  We 
see Aid for Trade as an important complement to  further nondiscriminatory (MFN-based) world trade 
liberalization and, foremost, a c onclusion to the Doha Round.  
D. E
VOLVING  ROLE OF THE IMF  IN FAVOR OF LDC S AND NFIDCS 
25. The IMF has sought to respond rapidly to the changing needs of LDCs and NFIDCs over the 
past year.  High volatility in commodity prices, the financial crisis, and now a marked deceleration of 
economic growth around the world ha ve necessitated increased IMF financing under more flexible G/AG/GEN/78 
Page 10  
 
  financing arrangements.
2  IMF financial support is helping count ries to manage these impacts. For the 
NFIDCs, this support is provided principally through: 
(a) New PRGF arrangements.  New (concessional) PRGF arrangements have been 
approved for four countries in connection w ith the food and fuel price shocks.  The 
PRGF is the main instrument for IMF financial support for LDCs.  A PRGF 
arrangement supports an economic progr am centered around the country's own 
poverty reduction strategy (PRS) and prioritiz ing economic policies to foster growth. 
(b) Augmentation of existing PRGF arrangements.   More countries are making use of 
increased access under existing PRGF arra ngements, which provide a readily 
available vehicle for covering unexpected balance of payments financing needs.  
Eleven countries have received such a ugmentations, in amounts totalling over $260 
million. 
(c) Exogenous shocks facility (ESF).   The ESF3 is intended to provide quick access to 
concessional financial support for low-inco me countries that do not have a PRGF 
arrangement in place and that face short- term, shock-related financing needs.  
Modifications to the ESF in September 2008 provide for more rapid financing and 
streamlined requirements.  Several count ries have already expressed interest in 
assistance under the ESF. 
26. The IMF continues to work closely with develo pment partners to ensure that the Poverty 
Reduction Strategy (PRS) process provides an eff ective framework for coordinating actions by 
countries and their development partners to foster  growth, poverty reduction, and progress toward the 
MDGs.  Underlying policy advice now encourages a full and effective spending of  aid.  The decision 
on the level and pace of spending should take a medium-term perspective, based on a country's 
macroeconomic stability, absorptive cap acity, and debt sustainability.  
27. In addition to these recent initiatives, channels through which the IMF assists its low-income 
members include policy advice, financing, and debt relief, as well as technical assistance and training: 
(a) Policy advice is provided through surveillan ce (Article IV consultations), Financial 
Sector Assessment Programs (FSAPs), Reviews of Standards and Codes (ROSCs), and the Policy Support Instrument (PSI).  The latter instrument, introduced in 2005, is 
available to low-income countries that may not want or need IMF financial 
assistance, but seek IMF-endorsement of their policies.  As of November 2008, PSIs had been approved for six members, four of which are NFIDCs.  
(b) Substantial progress has been made in the implementation of the HIPC Initiative.  
More than three quarters of eligible c ountries (33 of 41) have passed the decision 
                                                     
 
2 In the context of its program and surveillance work, the Fund also provides policy advice to countries 
on how to manage these shocks. While many countries have indeed faced adverse commodity price shocks, in 
net terms, a large number of low-income countries have  seen terms of trade gains, with price increases for 
petroleum and imported food products offset, for them, by increases in export prices. 
3 The ESF complements existing facilities available to low-income members facing shocks, such as 
increases in support under the PRGF; the Compensatory  Financing Facility (CFF); and subsidized emergency 
assistance for natural disasters (the Emergency Natura l Disasters Assistance, or ENDA) and post-conflict 
countries (under the Emergency Post-Conflict Assistance (EPCA) policy). To further support trade reform, the 
IMF has established the Trade Integration Mechanism (TIM ), a policy to enhance the predictability of access to 
IMF resources for members faced with  balance-of-payments shortfalls resulting from trade liberalization 
measures undertaken by other countries. The TIM has been used thus far by Bangladesh, the Dominican 
Republic, and Madagascar.  G/AG/GEN/78 
 Page 11 
 
 
  point and qualified for HIPC Initiative assistance.  Of those, 23 countries have 
reached the completion point and qualified for irrevocable debt relief under the HIPC 
Initiative and MDRI.  Assistance in the am ount of US$117 billion (in nominal terms) 
has been committed to the 33 post-decisi on-point HIPCs, mostly under these two 
initiatives.  This represents on average a bout 50 per cent of the 2007 GDP of these 
countries.  Upon full delivery of debt relie f, their debt burden is expected to be 
reduced by about 90 per cent. 
(c) Maintaining long-term debt sustainability, including beyond the completion point for 
HIPCs, remains a challenge in LICs.  Pe rsistent vulnerabilities, for instance to 
exogenous shocks, highlight the need for these countries to implement sound 
borrowing policies and strengthen their cap acity in public debt management, two 
areas where the IMF, together with the World Bank, has increased its assistance to 
low-income members.  A key step w as the introduction in 2005 of the debt 
sustainability framework, which is used by an increasing number of creditors to 
inform their lending decisions.  Technical assistance is also provided to low-income 
members on debt sustainability and debt ma nagement, particularly on the design and 
implementation of medium-term debt management strategies 
28. Let me conclude by indicating that the Fund lo oks forward to expanding its engagement with 
low-income member countries in the period ahead. G/AG/GEN/78 
Page 12  
 
  Overview of the World Economic Outlook Projections 
(Annual percent change unless otherwise noted)  
 
   
Current Projections  Difference from October 
2008 projections 
 2006 2007 2008 2009  2008 2009 
        
World output 5.1 5.0 3.7 2.2  -0.2 -0.8 
Advanced economies 3.0 2.6 1.4 -0.3  -0.1 -0.8 
Emerging and developing countries 7.9 8.0 6.6 5.1  -0.3 -1.0 
  Net Food Importing Countries 1/ 7.6 7.2 6.4 5.0  -0.2 -0.4 
  Purely Net Food Importing Countries 2/ 7.2 6.7 6.2 4.4  -0.1 -0.2 
  Africa 6.1 6.1 5.2 4.7  -0.7 -1.3 
  Developing Asia 9.8 10.0 8.3 7.1  -0.1 -0.6 
    China 11.6 11.9 9.7 8.5  -0.1 -0.8 
    India 9.8 9.3 7.8 6.3  -0.1 -0.6 
    ASEAN-5 3/ -- -- -- --  -0.1 -0.7 
  Middle East 5.7 6.0 6.1 5.3  -0.3 -0.6 
  Western Hemisphere 5.5 5.6 4.5 2.5  -0.1 -0.7 
    Brazil 3.8 5.4 5.2 3.0  -- -0.5 
        
  Central and eastern Europe 6.7 5.7 4.2 2.5  -0.3 -0.9 
  Commonwealth of Independent         
    States 4/ 8.2 8.6 6.9 3.2  -0.3 -2.5 
    Russia 7.4 8.1 6.8 3.5  -0.2 -2.0 
    Excluding  Russia 10.2 9.8 6.9 1.6  -0.7 -4.6 
        
Memorandum        
World growth based on market         
  exchanges rates 3.9 3.7 2.6 1.1  -0.1 -0.8 
        
World trade volume (goods and services) 9.4 7.2 4.6 2.1  -0.4 -2.0 
Imports        
  Advanced economies 7.5 4.5 1.8 -0.1  -0.1 -1.2 
  Emerging and developing economies 14.9 14.4 10.9 5.2  -0.8 -5.3 
    Net Food Importing Countries 11.1 12.6 14.1 2.6  0.1 -5.6 
    Purely Net Food Importing Countries 11.6 13.2 15.5 0.7  0.2 -6.4 
Exports        
  Advanced economies 8.4 5.9 4.1 1.2  -0.2 -1.3 
  Emerging and developing economies 11.2 9.6 5.6 5.3  -0.7 -2.1 
    Net Food Importing Countries 3.1 5.1 3.6 2.9  -0.8 -3.4 
    Purely Net Food Importing Countries 2.0 2.3 3.8 2.2  -- -2.9 
        
Commodity prices (U.S. dollars)        
Oil 5/ 20.5 10.7 40.2 -31.8  -10.6 -25.5 
Nonfuel (average based on world        
  commodity export weights) 23.2 14.1 9.4 -18.7  -3.9 -12.5 
        
Consumer prices        
Advanced economies 2.4 2.2 3.6 1.4  -- -0.6 
Other emerging market and de veloping countries 5.4 6.4 9.2 7.1  -0.2 -0.7 
  Net Food Importing Countries 7.9 9.4 13.3 15.4  -0.2 0.6 
  Purely Net Food Importing Countries 7.0 9.1 13.2 17.0  -0.3 0.7 
        
Six-month London interbank        
  offered rate (LIBOR, percent) 6/        
On U.S. dollar deposits 5.3 5.3 3.0 2.0  -0.2 -1.1 
On Japanese yen deposits 0.4 0.9 1.0 1.0  -- -0.2 
On euro deposits 3.1 4.3 4.5 3.0  -0.3 -1.2 
        
Note :  Real effective exchange rates are a ssumed to remain constant at the levels  prevailing during 2 Oc tober–30 October 2008. 
1/ Afghanistan, I.S. of Cuba, Eritrea, Libe ria, Somalia, 'Timor-Leste, Dem. Rep. of',  and Tuvalu are not included in the aggreg ation due to 
insufficient data.  43 LDCs + 25 NFIDCs. 
2/  25 NFIDCs.  Cuba is not included in the aggregation. 
3/  Includes Indonesia, Malaysia, the Philippines, Thailand, Viet Nam. 4/  Mongolia, which is not a member of the Commonwealth of I ndependent States, is included in this group for reasons of geograp hy and 
similarities in economic structure. 
5/  Simple average of prices of U.K. Brent, Dubai, and West Te xas Intermediate crude oil.  The average price of oil in U.S. dol lars a barrel 
was $71.13 in the assumed prices based on future markets are $99.75 in 2008 and $68.00 in 2009, respective. 
6/  Six-month rate for the United States and Japan.  Three-month rate for the euro area. 
  G/AG/GEN/78 
 Page 13 
 
 
  IV. CONTRIBUTION BY THE REPRESENTATIVE OF THE UN CONFERENCE ON 
TRADE AND DEVELOPMENT (UNCTAD) 
29. This was an exceptional year.  We have seen  unprecedented increases in the price of oil and 
food, especially of staples.  The financial crises that lead to a recession in many countries then 
contributed to the recent downward trend in commodi ty and oil prices, clawing back some of the 
earlier rises.  Although this is good news for net-importe rs the financial crisis also hampers inter-bank 
lending and trade financing.  This has adverse effects for poor countries seeking to finance food imports. 
30. Despite the most recent price decrease, agricu ltural commodity prices are still at a relatively 
high level.  Since fundamentals remain tight it is expected that agricultural commodity prices will 
remain at higher levels than those that were seen  before 2003.  This has s hort-term and medium-term 
implications for net food-importi ng developing countries (NFIDCs) and least-devel oped countries 
(LDCs). 
A. S
HORT -TERM EFFECTS  
31. According to a study by World Bank staff4 lead high food prices to increased poverty 
incidence since most households - even in rural areas - are net-f ood buyers and have to pay higher 
food prices.  A key question is how to best cope with these negative effects. 
32. Important short-term measures include cash or in-kind transfers to poor households which 
prevent these households from slipping into poverty or experiencing a deepening of poverty.  Food 
aid is necessary in emergency situ ations but should follow conditions to limit negative effects on local 
production. 
33. Furthermore, necessary short-term measures may include temporary subsidies for inputs in 
NFIDCs and LDCs in order to ensure that farmers, especially subsistence and small-scale farmers, are 
able to maintain and possibly e xpand current production levels.5 
B. MEDIUM -TERM EFFECTS  
34. The recent global food crisis can be seen as a wake-up call which can be turned into an 
opportunity by developing countries and the internat ional community to revitalize global agriculture 
production and trade. 
35. When supply is more flexible in the medi um term higher prices encourage agricultural 
production.  Net-commodity importing developing c ountries may begin to revive their commodity 
production.  However, so far produc tion expansion has been limited in  most poor countries, especially 
in most African countries.  
36. A major reason is low productive capacities in  both non-agriculture and agriculture 
commodities.  A number of NFIDCs and LDCs have a strong but underutilized potential in 
agricultural production.  Despite having a relatively large share of their working force in agriculture, 
they are often food insecure.  Therefore to enable  NFIDCs and LDCs to benefit from the opportunities 
that higher commodity prices offer they need to increase their productive capacities.  National policies 
                                                      
4 Ivanic, M. and Martin, W. (2008), 'Implications of higher global food prices for poverty in low-
income countries', Agricultural Economics . 
5 Some positive examples, such as the case of Malawi, have been reported (Herald Tribune, 
01.12.2007). The Agreement on Agriculture does provide room for such subsidies, e.g. Green Box support 
(Annex II AoA), development box support (Article 6.2 AoA) and de minimis  support. G/AG/GEN/78 
Page 14  
 
  as well as international communities' efforts need to  contribute. Aid has neglected agriculture and 
economic development more in  general for a long time.
6   
37. Increasing agricultural production in NFIDCs and LDCs to raise income and to reduce their 
dependency on food imports are thus  important development goals.  This does not mean, however, 
that countries need to become self-sufficient rega rding all food items.  Rais ing incomes and reducing 
the incidence of poverty are the most promising ways to reduce food insecurity.  There is no clear 
relationship between the incidence of food insecurity  in a country and its net-food trade pattern.  
Indeed it has been observed that poor population groups in net exporting countries suffer from food insecurity because of their in ability to afford food.  
38. The international trading system offers the opportunity to increase wealth and to reduce 
poverty by focusing on the production where comparative advantages exist.  To provide this 
opportunity the rules need to be fair and supportiv e for developing countries.  The Doha Round could 
be a major step to reform the agricultu ral trading system in that direction.
7  
C. MULTILATERAL TRADING SYSTEM AND DOHA ROUND  
39. Multilateral trade rules have an importa nt role in influencing food security.8  Tariffs and 
subsidies as well as food aid provisions impact on food security.  Although the immediate effect of a 
successful Doha Round on global agricultural prod uction is estimated to be small, it provides the 
opportunity to rectify existing imbalances.  Agricu ltural tariffs and domestic support, especially in 
developed countries, could be re duced and export subsidies elimin ated.  Special and differential 
treatment for developing countries would provide th em with the necessary flexibility.  This could 
strengthen the agricultural sector, for example in terms of production, in LDCs and NFIDCs.   
D. CONCLUSION  
40. The recent food crisis brought great challenges for LDCs and NFIDCs but higher agricultural 
prices also provide opportunities to strengthen the ag ricultural sector.  The agricultural sector has been 
neglected for a long time in both national and intern ational policies.  Support to low-income countries 
to increase their productive capacities and trade infr astructure needs to be augmented and committed 
for example under the aid for trade initiative.  Th e multilateral trading system organization should 
also contribute by concluding the Doha R ound and rectifying existing imbalances.  
 
 
__________ 
                                                      
6 UNCTAD LDC Reports 2002 - 2007. 
7 UNCTAD (2008), Trade and Development Board, Evol ution of the international trading system and 
of international trade from a deve lopment perspective, TD/B/55/4. 
8 UNCTAD (2008), Addressing the global food crisis, UNCTAD/OSG/2008/1