POLICY RESPONSES
In the policy paper prepared for the weekend IMF and World Bank meetings in Washington, the bank said food prices are set to stay high in 2008 and 2009, and then decline as supply and demand respond to high prices.
World Bank President Robert Zoellick said he feared the higher food prices would reverse declining poverty levels in some countries. Last week, Zoellick also called for a global response to tackle the food crisis.
"As an international community we must rally not only to offer immediate support, but to help countries identify actions and policies to reduce the impact on the world's most vulnerable," Zoellick said on Wednesday.
The Bank suggested that the least disruptive policy response to dealing with higher prices was for countries to introduce or expand cash transfer programs to the poor.
"These support the purchasing power of the poor without distorting domestic incentives to produce more food, and without reducing the incomes of poor food sellers," it said.
To tackle domestic food insecurity, it also said countries should cut tariffs and taxes on key staple foods, which could provide some relief to consumers, albeit at a fiscal cost.
It said food export bans were detrimental to food importers and dampened incentives by farmers to increase production.
The World Bank said there had been a sharp surge in domestic food price inflation especially in Sri Lanka (34 percent), Costa Rica (21 percent) and Egypt (13.5 percent).
It said so far countries were seeking its help with assessing economic and social implications of rising food costs, as well as possible policy responses.
The bank said it was too early to say gauge the extent to which countries may need World Bank loans to fill funding gaps caused by rising food prices.
The development agency said high food prices highlighted the need for the World Bank and other donors to increase investments in agriculture. The bank has already said it will increase lending to Africa's farming sector and back private-sector initiatives in this area.
