Developing countries have benefited greatly from higher commodity prices in past years and chalked up unparalleled growth rates above 6 percent, US Treasury Secretary Henry Paulson said on Sunday.
Paulson, addressing the World Bank spring meeting, said that despite the risks associated with the US economic slowdown, “developing countries are on track to record their sixth consecutive year of average growth in excess of 6 percent, an accomplishment unparalleled in recent history.”
Speaking against a backdrop of growing concern over sharp rises in food costs for the poor, Paulson said the gains in commodity prices had produced large beneficial shifts in the terms of trade for many developing countries.
Sustainable growth
For these countries, it “is essential to translate this boom into the foundations for higher sustainable growth,” he said.
On the other hand, for those that have suffered as a result of soaring commodity prices, such as for oil, Paulson said they “may need to implement better energy demand policies and targeted safety net programs.”
Such countries should also “resist the temptation of price controls and consumption subsidies that are generally not effective and efficient methods of protecting vulnerable groups.”
Rising commodity prices, especially for food, were put in the spotlight on Saturday when the head of the IMF warned they could lead to conflict if not tackled.
Dire consequences
“Food prices, if they go on like they are doing today ... the consequences will be terrible,” IMF Managing Director Dominique Strauss-Kahn said.
Robert Zoellick, head of the World Bank — whose mission is to promote development and so reduce poverty — called earlier this month for a “New Deal” on food.
Skyrocketing prices of rice, wheat, corn, cooking oil, milk and other foodstuffs come against a backdrop of a spreading global financial crisis, a US economy teetering on recession and currency market imbalances.
Paulson did not refer directly to these issues in his address but said that “a key challenge for the international financial institutions is to assist those countries whose growth is lagging.”
Trade helps economic growth and so “trade reforms are [a] critical means to lifting people out of poverty,” he said, referring to ongoing international liberalization talks.
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