Economists Warn Rise in Food Prices Will Lead to Social Unrest

'Governments must take action'

June 27, 2008
By Osama Habib
Daily Star staff, Beirut

BEIRUT: Leading economists on Thursday warned of spreading social unrest across the Arab world due to the food-price crisis if governments fail to address the problem. "The food-price crisis is quite serious and the Arab countries must pay more attention to these issues to avoid social unrest in some of these states," Ibrahim Saif, a senior economist at Carnegie Middle East Center, told reporters at the Press Club.

Riots have already broken out in several Arab states such as Egypt, Jordan and Yemen, prompting governments to either increase minimum wages or improve social benefits.

"We should admit that some of the recommendations of the IMF and World Bank have led to these problems," said economist Kamal Hamdan.

Hamdan was alluding to the recommendations to lift the subsidies on wheat and oil in some of the Arab countries to reduce budget deficits and liberalize their economies.

"Skyrocketing food prices in 2007 have made basic staples like rice, wheat and corn no longer affordable to lower-income groups throughout the world. Arab countries, which import most of their food, found themselves in difficult circumstances with limited options in the short run," Saif said.

He stressed that despite outbreaks of violence, some of the governments in the region managed to contain popular frustration by increasing wages and rationing subsidies.

"Protests have not been as severe as they were in the 1980s and 1990s for several reasons. One of the reasons was that many Arab governments provided limited and temporary relief such as tax reductions and improvement of safety nets," Saif said.

Protests were particularly heavy in Jordan in 1989 as demonstrators railed against government policies perceived as worsening the plight of the poor in the face of increasingly unaffordable food proces.

Saif warned that this time around, the food-price crisis is far from over in the Arab world.

He added that the Gulf Cooperation Council, which depends heavily on oil as a source of revenue, has been able to contain the negative effects of the food-price crisis through various measures such as raising public-sector wages and offering more social benefits to citizens.

"However, most of the non-oil-producing countries like Egypt, Jordan, Yemen and Lebanon are sill feeling the effects of the food-price crisis," Saif said.

He added that non-oil-producers have found it more difficult to mitigate the impact of the price increases.

Citing some examples, Saif pointed out that in Egypt, 32 million out of the country's 80 million inhabitants live on less than $2 a day, while the price of staple foods in Jordan increased by 60 percent in a year.

"However, the country did not see a repeat of food riots of 1996 but rather more peaceful protests," he said.

Hamdan said the prices of food in Lebanon have jumped by more than 30 percent since the beginning of this year.

"The food crisis has reached alarming levels in Lebanon and if the government fails to act now then the situation will get out of hand," he said.

"Arab governments need to shift their policies to address the core problems of the agricultural sector and excessive energy consumption. At the national level, each country needs to revisit its agricultural policies by providing incentives such as tax breaks, easy loans and the introduction of efficient techniques that increase domestic production and create jobs," Saif said.

http://www.dailystar.com.lb/article.asp?edition_id=1&categ_id=3&article_id=93558