WORLD TRADE ORGANIZATION
ORGANISATION MONDIALE DU COMMERCE
ORGANIZACIÓN MUNDIAL DEL COMERCIOG/AG/GEN/64
5 December 2003
(03-6447)
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* made by  the representatives of the Food and Agriculture
Organization (FAO), the Internationa l Grains Council (IGC), the In ternational Monetary Fund (IMF)
and the World Bank at the meeting of the Committee on Agriculture on 20 November 2003 (Agenda
Item Part II.B refers).
Comité de l'agriculture
EXERCICE ANNUEL DE SURVEILLANCE DE LA SUITE DONNÉE À LA DÉCISION
MINISTÉRIELLE SUR LES MESURES CONCERNANT 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 de s contributions* faites par les représentants de l'Organisation des
Nations Unies pour l'alimentation et l'agriculture (F AO), du Conseil international des céréales (CIC), du
Fonds monétaire international (FMI) et de la Banque mondiale à la réunion du Comité de l'agriculture
du 20 novembre 2003 (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 cont ribuciones* formuladas por los representantes
de la Organización de las Naciones Unidas para la Agricultura y la Alimentación (FAO), el Consejo
Internacional de los Cereales (CIC), el Fondo Mo netario Internacional (FMI) y el Banco Mundial en
la reunión del Comité de Agricultura celebrada el  día 20 de noviembre de 2003 (véase el punto B de
la Parte II del orden del día).
                                                     
* In English only/En anglais seulement/En inglés solamente.G/AG/GEN/64
Page 2
STATEMENT BY THE REPRESENTATIVE OF THE FOOD
AND AGRICULTURE ORGANIZATION (FAO)
This Statement provides a brief overview of FAO's latest assessment of developments in the
global cereal supply and demand balance, food aid and cereal import bills of the LDCs and theNFIDCs.
World supply/demand situation for cereals
The FAO's latest forecast for global cereal production  in 2003 points to 2 per cent increase
from 2002 in spite poor crops in CIS and much of Europe.  Recoveries in North America and
Australia coupled with bumper crops in North Africa and several countries in Asia are behind the rise
in global cereal production.  World cereal utilization  by the close of the marketing seasons in 2004 is
forecast to expand by one per cent.  While cereal food consumption is forecast to increase by 1.5 per
cent, driven by modest increases expected from the developing countries, total cereal feed utilization
is expected to remain unchanged from the previous season.  However, since aggregate global
production will remain significantly lower than expected utilization, global cereal stocks  are forecast
to contract by another 20 per cent, leading to total cereal stocks-to-use ratio dropping to 19 per cent,the lowest level in the past two decades.  The anticipated massive decline in global cereal stocks in
2004 is being driven mostly by large reductions in China, India and several countries in Europe that
have resulted mainly from smaller production levels.  The forecast drop of around 53 million tonnes
in wheat inventories would account for the bulk of the anticipated contraction in world cereal stocks,
followed by an expected reduction of around 21 m illion tonnes in global coarse grain stocks and
20 million tonnes in rice inventories.
World cereal trade and prices
The main emerging feature this season has been the sharp drop in world cereal trade , mostly
driven by smaller wheat purchases by the EU.  The decline in trade has also been reflected in price
movements since the start of the season. In recent weeks, however, tighter supplies in Europe and the
weakening of the value of the US dollar have prov ided some support to the US wheat prices although
fundamentals in the futures market continue to be characterized by weak demand and strongcompetition among the major exporters (all except the EU).  In late October, expectation of higher
demand in China pushed up wheat futures prices, but the surge proved short-lived as hopes for large0100200300400500600700800
2000 2001 2002 2003 2004
Rice Coarse Grains Wheatmillion tonnesWorld Stocks of Cereals
1 7001 7501 8001 8501 9001 9502000
1 993 1 995 1 997 1 999 2001 2003World Cereal Production and Utilization
(1 993-2003)million tonnes
ProductionUtilization
forecastG/AG/GEN/64
Page 3
purchases by the country subsequently faded. In coarse grain markets, stronger demand for US
sorghum and European feed barley as well as tighter exportable supplies of maize in China resulted in
some upward movements in prices since mid-October. International rice prices have continued to rally
since August, and the FAO Export Price Index (1998–00=100) rose from 85 in August to 87 in
September and 88 in October.  This strengthening was apparent in all rice categories except for thelower quality Indica rice.
FAO Price Indices for Rice
1998-2000=100
606570758085909510 010 5
Oct-02
Dec-02Feb-03
Apr-03
Jun-03
Aug-03
Oct-03Aromatic
Japonica 
Indica: High
Quality
Indica: LowQuality
Cereal food aid
Based on the latest information supplied by WFP to FAO, total cereal food aid shipments in
2002/03 (July/June) rose to 8.6 million tonnes, up 1.2 million tonnes from the reduced level in2001/02.  The increase was mostly associated to high er shipments of wheat as food aid to Iraq.  Food
aid during the current marketing season in 2003/04 is likely to remain close to the previous season's
level although total import requirements by Iraq and Afghanistan are expected to be smaller this
season because of improved cereal supply conditions in both countries.  Overall, the number of
countries experiencing food emergencies currently stands at 38, with 23 in Africa, 8 in Asia, 5 inLatin America and 2 in Europe.  Most Countries facing food emergency problems are among the LDC
and NFIDC categories .Wheat
 ( U.S. No.2 Hard Winter, fob)
12 014 016 018 0200
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2002 2003US $/tonneWorld Imports of Cereals
05010 015 0200250
97/98 98/99 99/00 2000/01 2001 /02 2002/03 2003/04Wheat Coarse Grains Ricemillion tonnes
forecast
Maize
(U.S. No. 2 Yellow, fob)
809010 011012 0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov DecUS $/tonne
2002 2003G/AG/GEN/64
Page 4
Cereal import bills of LDCs and the NFIDCs
The combined cereal import bill of the
Least-Developed Countries  (LDCs) and the
Net-Food Importing Developing Countries
(NFIDCs) is forecast at about US$7.3 billion
in 2003/04, down almost 10% from 2002/03
but still above the preceding 4 years.  The
decline in their cereal import bill in 2003/04
is mostly associated with a sharp reduction in
total imports (quantity) which are forecast to
fall from a near record level of around52 million tonnes in 2002/03 to 48 million
tonnes in 2003/04.  This reduction is mostly
driven by higher cereal outputs among several
countries in Africa and Asia.  On the other
hand, international cereal prices haveremained firm while freight rates increased
sharply over the past few months.
As in the previous season, export subsidies
and credits appear to be of limited importanceto LDCs and NFIDCs.  In addition, cereal
food aid shipments to LDCs/NFIDCs in
2003/04 are expected to remain similar to
2002/03.  Food aid continues to be a very
important source of supply for LDCs forwhich it accounts for about 23% of their total
cereal imports.  In the case of the NFIDCs,
food aid in cereals is less important,
accounting for roughly 2% of their total
cereal imports, which is also considerably less
than ten years ago.0369121518
92/93 94/95 96/97 98/99 00/01 02/03
LDC NFIDC OthersDestination of total cereal food aid deliveries 
million tonnes
05101520253035
93/94 95/96 97/98 99/00 01 /02 03/04LDC NFIDCShare of food aid in total cereal imports 
percentage
0246810
93/94 95/96 97/98 99/00 01 /02 03/04
LDC NFIDCCereal import bill
US$ billion
0102030405060
93/94 95/96 97/98 99/00 01 /02 03/04Commercial Imports Food AidTotal cereal imports in LDC and NFIDC 
million tonnesG/AG/GEN/64
Page 5
Cereal imports of LDCs and NFIDCs (1993/94 to 2003/04) - Information as of November 2003
1993/94 1994/95 1995/96 1996/97 1997/98 1998/ 99 1999/00 2000/01 2001/02 2002/03 2003/04
estimate f'cast
Import Bill (US $ million)
LDCs 1437 2275 2567 2107 2581 2277 1886 1933 2259 2755 2359
NFIDCs 3597 4398 6213 5596 5243 4627 4024 4460 4485 5312 4986
LDCs & NFIDCs 5034 6673 8780 7703 7824 6903 5910 6392 6744 8067 7345
% change over 1993/94-1994/95 -14.0 14.0 50.0 31.6 33.7 17.9 1.0 9.2 15.2 37.8 25.5
Total volume imported (000 tonnes)
LDCs 11768 14559 13572 12119 15690 16895 16323 15756 16895 18847 16435
NFIDCs 27598 28021 28746 30148 34092 35866 32460 34592 33968 33330 31437
LDCs & NFIDCs 39366 42580 42318 42267 49782 52761 48783 50348 50863 52177 47872
% change over 1993/94-1994/95 -3.9 3.9 3.3 3.2 21.5 28.8 19.1 22.9 24.1 27.3 16.8
Food aid (000 tonnes)
LDCs 3427 4222 3214 2534 2501 3549 3647 3913 2943 3724 3724
% of total imports 29.1 29.0 23.7 20.9 15.9 21.0 22.3 24.8 17.4 19.8 22.7
NFIDCs 2321 1431 836 590 610 1049 943 1196 918 582 582
% of total imports 8.4 5.1 2.9 2.0 1.8 2.9 2.9 3.5 2.7 1.7 1.9
LDCs & NFIDCs 5748 5653 4049 3123 3111 4598 4590 5109 3861 4306 4306
% of total imports 14.6 13.3 9.6 7.4 6.2 8.7 9.4 10.1 7.6 8.3 9.0
Commercial imports (000 tonnes)
LDCs 8341 10338 10359 9585 13189 13346 12676 11843 13952 15122 12710
NFIDCs 25277 26589 27910 29558 33482 34817 31517 33396 33050 32748 30855
LDCs & NFIDCs 33619 36927 38269 39143 46671 48163 44193 45239 47001 47871 43566
% change over 1993/94-1994/95 -4.7 4.7 8.5 11.0 32.3 36.5 25.3 28.3 33.3 35.7 23.5
Per unit import cost  (US $/tonne) 1/
LDCs 122.1 156.2 189.2 173.9 164.5 134.8 115.5 122.7 133.7 146.2 143.5
NFIDCs 130.3 157.0 216.1 185.6 153.8 129.0 124.0 128.9 132.0 159.4 158.6
LDCs & NFIDCs 127.9 156.7 207.5 182.3 157.2 130.8 121.2 127.0 132.6 154.6 153.4
% change over 1993/94-1994/95 -10.1 10.1 45.8 28.1 10.4 -8.1 -14.9 -10.8 -6.8 8.6 7.8
Wheat export price (US $/tonne)
US no.2 hard winter 143 157 216 181 142 120 112 128 127 161 1472/
% change over 1993/94-1994/95 -4.7 4.7 43.6 20.6 -5.4 -20.3 -25.3 -14.6 -15.6 6.8 -2.2
Wheat ocean freight rates (US $/tonne)
From U.S. Gulf ports to:
Egypt 15.1 18.7 16.8 12.8 11.7 9.3 13.7 15.0 15.0 16.7 22.02/
Bangadesh 21.5 23.8 21.7 20.0 20.2 18.8 18.5 18.3 18.5 22.5 34.02/
Rotterdam 10.4 15.3 13.0 11.0 9.6 9.4 12.6 13.1 11.0 12.5 19.62/
Totals computed from unrounded data
1/ Based on per unit cost of total imports 
2/ Average July-October
Source: FAOG/AG/GEN/64
Page 6
FAO RICE CONFERENCE: RICE IN GLOBAL MARKETS AND SUSTAINABLE
PRODUCTION SYSTEMS, 12-13 February 2004
May I also take this opportunity to draw your  attention to the forthcoming Rice Conference to
be held on 12-13 February 2004 in FAO Headquarter in Rome.  The United Nations GeneralAssembly designated 2004 as the International Year of Rice (IYR) and to celebrate the event, FAO has
organized a major international conference to examine developments in the global rice industry so as
to mobilize the international community to conf ront existing challenges and opportunities related to
food security, sustainable development and poverty alleviation.  The Conference is open to
representatives of governments, non-governmental and private sector organizations, research
institutions, universities, the media and any ot her interested parties.  FAO Rice Conference will
immediately follow another important FAO event:  the Joint Session of the Intergovernmental Groupon Rice and the Intergovernmental Group on Grains, on 10-11 February.
For registration and more information about the Conference please visit the International
Year of Rice on-line site at: www.rice2004.orgG/AG/GEN/64
Page 7
CONTRIBUTION BY THE REPRESENTATIVE OF THE
INTERNATIONAL GRAINS COUNCIL FUND (IGC)
Under the Grains Trade Convention, 1995  the International Grains Council has continued
its regular monitoring of world grains markets.  In 2003, commercial markets remained adequately
supplied with wheat and coarse grains, although stocks were being drawn down, particularly in China
and the CIS.  During the first half of the calendar year United States wheat export prices were on a
falling trend, on the expectation of larger crops in most exporting countries and of somewhat lower
import needs after good crops in North Africa, Near East Asia and Brazil.  But poor harvests in
Europe and the CIS, leading to sharply reduced export supplies from those regions, coupled with the
weakening value of the US dollar against other currencies, contributed to a partial revival in worldwheat prices later in the year.  Coarse grains export prices, especially of maize (corn), were much less
variable than those of wheat.  They were at their lowest in the middle of the year but, despite a record
US crop, subsequently strengthened in sympathy w ith oilseed markets and the expectation of reduced
exports by China and Argentina in 2004.  Towards the end of 2003 grain import costs were affected
by sharply rising freight charges, largely a consequence of strong demand for minerals and soyabeansin Far East Asia.
For its part, the Food Aid Committee, which administers the Food Aid Convention, 1999 ,
has kept under review the food situation in developing countries as well as donor Governments'
responses to current food emergencies.  Preliminary data on members' food aid shipments in 2002/03(July-June) suggest that FAC members collectively sh ipped 7.9m tons of food aid (wheat equivalent)
to eligible recipients, well above the combined minimum obligation of 4.9m tons, and that a further
€130m of grain and other food aid products was supplied against commitments expressed in value
terms.G/AG/GEN/64
Page 8
STATEMENT BY THE REPRESENTATIVE OF THE
INTERNATIONAL MONETARY FUND (IMF)
Recent IMF Initiatives in Favor of Least-Developed Countries and
Net Food-Importing Developing Countries
Mr. Chairman, the International Monetary Fund (IMF) has been a regular participant in the
Committee's annual monitoring exercise of the Marrakesh Ministerial Decision regarding least-
developed countries (LDCs) and net food-im porting developing countries (NFIDCs).  Today, I would
like to highlight briefly IMF initiatives undertaken at both the global and country level in favor
of these countries.   However, before I turn to the main purpose of my statement, I would like to place
these initiatives in the context of the NFIDCs' recent economic performance as well as developmentsin primary commodity markets.
I. RECENT ECONOMIC DEVELOPMENTS IN NFIDCS AND PRIMARY
COMMODITY MARKETS
Mr. Chairman, according to our latest World Economic Outlook (WEO), recent economic
data in some advanced economies, the United States in particular, and forward-looking indicators,
especially in financial markets, point to a strengthening of global growth in the second half of 2003
and in 2004 , an improvement over the generally weak level of economic activity in the first half of
this year (Table 1 of the Attachment).  In light of this improved global environment, economic
prospects for NFIDCs in 2004 are generally favourable, especially given the poor performance in2003.
In 2003, GDP growth in NFIDCs is projected to decline to 0.6 per cent compared to an
overall GDP growth of 5 per cent for developing countries as a whole, reflecting a contraction of
NFIDCs' exports of goods and services by 0.4 per cent in volume terms, inadequate investment, andrelatively high average inflation.
In 2004, GDP growth in NFIDCs is expected to pick up strongly to 4.5 percent . NFIDCs'
trade is projected to grow somewhat faster than that of advanced economies, broadly in line with
developing countries as a whole.  The volume of NFIDCs' imports is projected to increase by 7.8
percent, while export volume is expected to grow by 6.9 per cent.
However, overall growth in most developing countries, and particularly in NFIDCs, will
remain well below the level needed to achieve the enduring reduction in poverty called for
under the Millennium Development Goals (MDGs).   I t  w i l l  b e  n o  s u r p r i s e  t o  t h i s  a u d i e n c e  t h a t
further progress on trade liberalization will be an important factor for future growth.  Industrial
country barriers impose significant costs on the developing world, but developing countries' own trade
barriers impose even greater costs on their economies.
Turning to developments in international food prices  – in recent months, prices for most
agricultural commodities have experienced a recovery.  After reaching its lowest level since
September 1980 in October 2001, the IMF overall index of non-fuel commodity prices has shown a
slow trend recovery.  By October 2003, the index was 20 per cent above its value in October 2001
(Charts 1-3 of the Attachment).  During the two year period ending October 2003, overall food prices
increased by 16 per cent, cereal prices by 18 per cent and beverages by  24 percent, in dollar terms.
On specific food items:
• Notwithstanding the upward trend, cereal prices  fell markedly from last year's
drought-induced peaks, adversely affecting the cereal-producing regions of theUnited States, Canada, and Australia.  Cereal prices are now near their five–year
average price levels in SDR terms.G/AG/GEN/64
Page 9
• Cocoa prices  eased on account of stronger-than-expected production.  Moreover,
anticipated disruptions to exports from Côte d'Ivoire, the world's largest cocoaproducer, did not materialize.
• Cotton prices  are 46 per cent above the level at this time last year, partly due to a
substantial increase in demand by China.
• While the effects of last year's drought have begun to wear off, coffee prices continue
to hover above historical lows, having stabilized in recent months due to crop
destruction and increased export retention in some coffee-producing countries.
• Olive oil, soybean oil, palm oil, and coconut oil prices  have increased by 41, 21, 19,
and 12 percent, respectively, over the last year.  Soybean prices have been driven upby a large increase in demand by China due to weather-related threats to production.
For 2004, the IMF projects that non-fuel commodity prices will increase by 2 per cent.
Within that category, food prices would decrease by 1 per cent and cereal prices by 2.5 per cent.  In
the longer run, upward pressure on commodity prices is expected due to liberalization of trade inagriculture and the removal of agricultural support.  As some NFIDCs are large net exporters of
cotton, rice, sugar, and beef, they would gain from liberalization of trade in these commodities.
However, liberalization would also mean NFIDCs ha ving to pay more for imports of wheat, maize,
and milk.
II. IMF INITIATIVES IN FAVOUR OF LDCS AND NFIDCS AT THE GLOBAL
POLICY LEVEL
Mr. Chairman, at the global policy level, the IMF has been a tireless advocate of open
trade , open trade as a driving force of economic growth and a higher standard of living in all
countries; especially in developing countries and the less-developed among them.
On the eve of, and during Cancún, the IMF highlighted the importance of a successful
outcome for the world economy and demonstrated a clear commitment to help achieve this objective.The IMF announced a new trade initiative  that would tailor Fund support specifically to the concerns
of certain developing countries, in particular LDCs and NFIDCs, for which countries a multilateral
agreement could generate a temporary balance of payments need, caused, for instance, by erosion of
preferences, loss of tariff revenue, or other factors.
1  Specifically, the IMF announced that it would
commit to providing financial support, either in the context of new or existing Fund-supportedprograms, to those members facing a near-term net negative impact on the balance of payments from
the round.  It would also offer additional financial help in circumstances where the actual impact of
trade liberalization turned out to be greater than an ticipated.  The readiness of the IMF, together with
the OECD and the World Bank, to help countries manage any adjustment pressure from more open
trade was reaffirmed in a joint declaration by the heads of these agencies on the eve of the MinisterialConference.
2
Since Cancún, the IMF has urged members to rise above entrenched negotiating
positions  and create the necessary conditions for a successful conclusion to the round.  At the Annual
Meetings in Dubai in September, the world's Finance and Development Ministers urged a speedy
resumption of the round, with focus on the issues of importance to all countries - open markets, fairaccess, and the reduction of trade-distorting subsidies in all areas, notably agriculture.  They reiterated
the crucial importance of removing obstacles and moving forward without delay, and called on all
                                                     
1 See Ms. Krueger's address at:  http://www.imf.org/external/np/speeches/2003/091003.htm
2 See http://www.imf.org/external/np/sec/pr/2003/pr03140.htmG/AG/GEN/64
Page 10
countries to play their part.  As a measure of the importance they attached to these issues, they asked
the Fund and the Bank to prepare a report on the vital importance to the development agenda of an
early resumption of the trade talks.  They also agreed that a copy of this report should be sent to all
Heads of State, Trade Ministers and Finance Ministers, along with an accompanying letter from the
Managing Director and the President of the World Bank.
The Bank-Fund letter to Heads of State, which was sent on 11 November 2003, reiterated
the fundamental point that, far from being a "con cession", trade liberalization was a key step in
promoting opportunity and productivity for any society that adopted it.  Furthermore, expanding
trade by collectively reducing barriers was the single most powerful tool that countries, working
together, could deploy to reduce poverty and raise living standards and ultimately achieve the MDGs.
The Bank-Fund letter suggests that progress can be made if the negotiations are based on the
following elements:
• Early, concrete, and ambitious commitments on agriculture , including reductions in
border protection, a time-bound phase-out of the various forms of export subsidies,and a curbing of trade-distorting domestic support;
• A willingness by all countries - developed and developing - to be fully engaged in the
process and to take on substantive obligations concerning market access  in
manufactures, agriculture, and services trade;
• Flexibility with regard to new regulatory obligations , particularly the Singapore
issues; the first step toward flexibility is to consider each issue separately and to
examine the best way of spreading best practice in these areas.
III. IMF INITIATIVES IN FAVOR OF LDCS AND NFIDCS AT THE COUNTRY LEVEL
Mr. Chairman, in addition to its global policy message, the IMF has been working intensively
over the last few months on identifying the issues faced by countries facing exogenous shocks,
which include many LDCs and NFIDCs, and designing assistance to aid them .  In discussing
what the IMF is already doing and intends to do in this area, I would like to start with two general
observations:
• First, exogenous shocks, such as natural disasters, terms-of-trade shocks, and
conflicts or crises in neighboring countries, can have a significant adverse impact
on developing countries' growth, poverty, macroeconomic stability, and debt
sustainability.   Low-income countries are particularly vulnerable to exogenous
shocks, as they have a higher incidence of shocks compared to other developing
countries and tend to suffer greater damage relative to GDP when shocks occur.
While some shocks are temporary and reversible, others may reflect more permanent
trends.  In practice, however, it is difficult to predict the duration and severity of ashock at its outset.
• Second, countries can mitigate the impact of shocks through better preparation
and better policy responses, supported by the timely availability of external
financial assistance.   However, many low-income countries have limited capacity to
build up cushions of reserves and fiscal resources as a buffer against shocks.  In
addition, market insurance to manage shock risk is frequently expensive orunavailable to these countries.  Timely external financial assistance can play an
important role in helping countries mitigate the effects of such shocks.  Recent
research indicates that external assistance is unusually effective following a shock,
and prevents diversion of other resources away from development purposes. ExternalG/AG/GEN/64
Page 11
financial assistance in these cases is provided most appropriately in the form of grants
to avoid a further build-up of debt.
The Fund is already providing assistance to its members, including LDCs and NFIDCs,
through three key channels : surveillance, financial support, and technical assistance.  Out of the
array of seven financial facilities currently available to our members, three are of particularimportance for NFIDCs:
• Poverty Reduction and Growth Facility  (PRGF).  Loans under the PRGF are
concessional and based on the country-owned Poverty Reduction Strategy Paper(PRSP).  Currently, 21 LDCs are drawing on Fund financial resources under the
PRGF.
• Stand-By Arrangements  (SBA).  Purchases under the SBA are not concessional and
designed to address short-term balance of payments problems.  Currently, four
NFIDCs have an SBA in place.
• Compensatory Financing Facility  (CFF).  The CFF, which is intended to assist
countries experiencing a balance of payments need due to a temporary shortfall inexport earnings or an increase in the cost of cereal imports, has not been used since
1999.  I shall come back to the CFF in a few seconds as this instrument is often cited
in the discussions on NFIDCs.
The IMF has an important role to play in  providing countries with macroeconomic
policy advice on how to prepare for shocks and how to respond once a shock hits.  Recently, the IMF
Executive Board agreed that more systematic attention should be paid, in both surveillance and
program contexts, to help countries devise policies to prepare better for shocks.  Steps are already
being taken in this regard.
• The IMF is expected to play a greater role in helping countries devise policies to
respond to shocks , including help in selecting an appropriate mix of adjustment and
financing.  The Fund can also play an important catalytic role by alerting donors when
a country may have unaddressed needs for financing, particularly in the case of "silent
crises", such as commodity price shocks.
• While grant assistance is generally more appropriate after a shock, the IMF could
provide fast-disbursing balance of payments assistance when there is an
immediate need and donor assistance is not immediately forthcoming, including
through the Emergency Natural Disaster Assistance.  However, most of these
instruments are currently only available on non-concessional terms.
• The IMF Executive Board has asked staff to consider guidelines on how the
Fund's response can be made more consistent in the context of PRGF programs ,
and to consider whether the terms of Fund instruments targeted toward shockfinancing can be made more appropriate for low-income countries.  These guidelines
are expected by end-2003, early 2004.G/AG/GEN/64
Page 12
Mr. Chairman,  I would like to conclude with one particular issue of relevance to LDCs
and NFIDCs, that is, the Fund review of the CFF, the Fund facility dealing with balance of
payments shortfalls due a temporary fall in export earnings or a rise in cereal import costs.  The
review will assess the lack of demand for the CFF in recent years, despite the occurrence of several
shocks that could have been expected to generate  some demand for the facility.  The CFF review will
consider options on how to modify the facility in li ght of the broader discussion on how to better deal
with exogenous shocks.  The CFF review is scheduled for Board discussion early next year.G/AG/GEN/64
Page 13
Attachments
Table 1.  Overview of the World Economic Outlook  Projections
(Annual per cent change unless otherwise noted)
Difference from
April
Current
Projections2003 Projections
1/
2001 2002 2003 2004  2003 2004
World output  2.4 3.0 3.2 4.1  -- --
Advanced economies  1.0 1.8 1.8 2.9  -0.1 --
Developing countries  4.1 4.6 5.0 5.6  -- -0.2
  Net Food Importing Countries 5/  4.0 2.3 1.6 5.3  -0.4 -0.9
  Purely Net Food Importing Countries 6/  2.9 1.3 0.6 4.5  -0.2 -1.1
  Africa  3.7 3.1 3.7 4.8  -0.2 -0.4
  Developing Asia  5.8 6.4 6.4 6.5  0.1 --
    China  7.5 8.0 7.5 7.5  -- --
    India  4.2 4.7 5.6 5.9  0.5 --
    ASEAN-4 2/  2.9 4.3 4.1 4.4  0.2 0.1
  Middle East and Turkey3/  2.0 4.8 5.1 4.6  -- -0.3
  Western Hemisphere  0.7 -0.1 1.1 3.6  -0.4 -0.6
    Brazil  1.4 1.5 1.5 3.0  -1.3 -0.5
         
Countries in transition  5.1 4.2 4.9 4.7  0.9 0.6
  Central and eastern Europe  3.1 3.0 3.4 4.1  -- -0.2
  Commonwealth of Independent         
    States and Mongolia  6.4 4.9 5.8 5.0  1.4 1.0
    Russia  5.0 4.3 6.0 5.0  2.0 1.5
    Excluding Russia  9.2 5.9 5.4 5.0  0.1 0.1
         
Memorandum         
World growth based on market         
    exchange rates  1.3 1.9 2.3 3.2  0.1 --
         
World trade volume (goods and services) 0.1 3.2 2.9 5.5  -1.4 -0.6
Imports         
  Advanced economies  -1.0 2.2 2.8 4.8  -1.9 -1.1
  Developing countries  1.6 6.0 5.1 7.8  0.4 -0.2
    Net Food Importing Countries 5/  4.2 -2.3 3.1 9.6  -0.1 0.4
    Purely Net Food Importing Countries 6/  3.8 -3.7 0.4 7.8  -1.6 -2.3
  Countries in transition  11.9 6.3 6.6 8.1  0.5 5.0
Exports         
  Advanced economies  -0.8 2.2 1.6 5.2  -2.2 -0.6
  Developing countries  2.7 6.5 4.3 6.9  0.6 -0.7
    Net Food Importing  Countries 5/  2.9 1.9 1.0 8.3  2.7 -4.8
    Purely Net Food Importing  Countries 6/  3.8 0.6 -0.4 6.9  2.8 -6.8
  Countries in transition  3.8 0.6 -0.4 6.9  -0.1 2.9
         
Commodity prices (U.S. dollars)         
Oil4/  -14.0 2.8 14.2 -10.5  -10.0 8.8
Non-fuel (average based on world         
   commodity export weights)  -4.0 0.6 5.0 2.4  ... ...
         
Consumer prices         
Advanced economies  2.2 1.5 1.8 1.3  -0.1 -0.4
Developing countries  5.8 5.3 5.9 4.9  0.1 -0.2
  Net Food Importing Countries  10.9 9 . 01 1 . 11 0 . 1  0.9 1.2
  Purely Net Food Importing Countries  5.1 5.8 8.8 9.2  0.3 1.1
Countries in transition  16.2 11.1 9.7 9.1  0.3 1.7
         
Six-month London interbank         
  offered rate (LIBOR, percent)         
On U.S. dollar deposits  3.7 1.9 1.3 2.0  -0.4 -1.5
On Japanese yen deposits  0.2 0.1 0.1 0.2  -- -0.1
On euro deposits  4.2 3.3 2.2 2.4  -0.1 -0.1G/AG/GEN/64
Page 14
Table 1.  Overview of the World Economic Outlook  Projections
(Annual per cent change unless otherwise noted)
 
   Note: Real effective exchange rates are assumed to remain constant at the levels prevailing during July 1-28, 2003.  
   1/Using updated purchasing-power-parity (PPP) weights, summarized in the Statistical Appendix, Table A.   
   2/Includes Indonesia, Malaysia, the Philippines, and Thailand.       
   3/Includes Malta.         
   4/Simple average of spot prices of U.K. Brent, Dubai, and West Texas Intermediate crude oil. The average price of oil in U.S . dollars a
barrel was $24.96 in 2002; the assumed price is $28.50 in 2003, and $25.50 in 2004.
   5/ 49 LDCs + 21 NFIDCs
   6/ 21 NFIDCsG/AG/GEN/64
Page 15Chart 1.  Indices of Non-Fuel Commodities, Cereals, Wheat and Maize, January 1996 - October 2003
405060708090100110120130140
Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03Non-Fuel Primary Commodities
Index of Wheat; U.S. number 1 HRW, fob Gulf of Mexico
Index of Maize; U.S. number 2 yellow, fob Gulf of Mexico
Cereals index of Wheat, maize, and nominal price quote riceJanuary 1996 = 100G/AG/GEN/64
Page 16 Chart 2.  Indices of Non-Fuel Commodities, Cocoa, Coffee and Cotton, January 1996 - October 2003
30507090110130150170190
Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03Non-Fuel Primary Commodities
Coffee index of Other milds and robusta
Index of Cotton, Liverpool Index A, cif Liverpool
Index of Cocoa, ICO price, cif U.S. & European portsJanuary 1996 = 100G/AG/GEN/64
Page 17
Chart 3.  Year-on-Year Percent Changes of Select Commodities, October 2003
-26%-21%-18%-13%-11%-11%11%12%13%19%21%26%30%34%36%36%41%41%51%
-41%-23%12%
11%12%13%18%20%23%23%29%40%46%62%
-60% -40% -20% 0% 20% 40% 60% 80%BananaCocoaWheatBarleyHidesSugar, WorldSoftwood SawnFine WoolTeaAustralian CoalFishmealAmerican Natural Gas, U.S.Coconut OilAluminumBeefArabica CoffeePalm OilGoldSoybean OilPorkTinUraniumRussian Natural Gas, EuropeCopperSouth African CoalSoybeansOrangeLeadSoybean MealOlive OilCottonRubberNickel
Note:      Commodities selected by month based on an absolute percent change of 10%.
Source :  IMF Staff-G/AG/GEN/64
Page 18
CONTRIBUTION BY THE REPRESENTATIVE OF THE
WORLD BANK
This contribution will focus on two main areas.  First, it outlines how the World Bank could
assist NFIDCs to mitigate any shocks that would come from structural changes in the global markets
for food products as a result of the Doha Round.  Second, it provides some comments on a proposal to
establish a Revolving Fund to finance food imports.
World Bank Assistance
The World Bank's comments to the last Monitoring Exercise discussion provided a
comprehensive analysis and review of our support towards this issue.  First a general point on World
Bank assistance.  Our support is determined through country-level dialogue and set out in Country
Assistance Strategies.  These reflect the Poverty Reduction Strategies prepared by partner
Governments.  PRSPs are increasingly becoming the primary policy tool through which the poverty
linkages between overall macro and micro-policies are formed and explained.  Including trade policyissues in this dialogue will improve communications inside and outside government on trade,
strengthen and improve trade policies from a poverty-reduction perspective, and as a result help
authorities develop more informed negotiating positions.  Any World Bank assistance to the NFIDCs
in response to shocks in food prices would need to be discussed and imbedded in Country Assistance
Strategies and Poverty Reduction Support Strategies.  This could best be done by specifying clearly
what would be the Bank's and the government's responses in the case of food price (and other) shocks.
Looking forward, there are several concrete ways in which the World Bank could assist
NFIDCs to mitigate any shocks that would come from structural changes in the global markets for
food products as a result of the Doha Round.  Such shocks would be : (1) gradual, as they would takeplace over the agreed implementation period;  (2) permanent;  and (3) foreseeable, once the final
agreement is set.  They could also, other things equal, produce balance of payment difficulties for
food importers.  These characteristics imply that the appropriate response to this kind of shock is
structural adjustment.  The magnitude of potential shocks should not be exaggerated, however; most
studies conclude that even very deep liberalization would produce increases in the prices of basic
foodstuffs, especially cereals, on the order of magnitude of 5 – 20 per cent, and the actual
liberalization resulting from the Doha Round is not likely to be sweeping.  Furthermore, the seculartrend of prices for these products has been - and is likely to continue to be – downward. Nonetheless,
the Bank has tools available to give LDCs and NFIDCs some comfort that they will not be subjected
to food price shocks with no safety net.
The World Bank announced at the WTO Ministerial Meeting in Cancun a program of
enhanced assistance to help countries meet new commitments made in the Doha Round and to resolve
transition problems.  Through this programme, the Bank could assist countries in addressing shocks in
food prices through a full range of AAA (Analyti cal and Advisory Activities) work, including
conducting a set of comparative case studies, adjustment lending, and investment finance.  Countries
that would benefit from this should be id entified through the PRSP and CAS processes.
Adjustment lending would be appropriate in cases where countries face balance of payments
crises from food price spikes and  need policy reform.  The AAA and investment finance would be
aimed at, for example:
• Improving agricultural production systems, so local farmers could take advantage of
the higher world prices, thereby reducing reliance on imported food;G/AG/GEN/64
Page 19
• Restructuring food marketing systems to reduce costs and keep down prices for
consumers, while increasing the share of the final price captured by farmers.
• Reducing post-harvest losses, costs of storage, and transport costs by improving
warehouse facilities and infrastructure.  For a number of countries, a major source ofprice instability is the poor quality of storage facilities and high cost of storage.
• Restructuring and privatizing state-owned enterprises charged with food procurement
and distribution and improving public sector food security stockpiling policies.
Comments on a Revolving Fund to finance food imports
World Bank staff participated in the Inter-Agency Panel's discussions in 2002 on a proposal
to establish a Revolving Fund to finance food imports, one recommendation of which (paragraph
168b of the Panel's report
1) was to explore the feasibility of an ex ante mechanism.  Staff  reviewed
the proposal of the Chairman for a roundtable discussion (i) to explore the need for a safety net to
assist the LDCs and NFIDCs during the reform process leading to greater liberalization in agriculture,
including an examination of objective criteria and trigger mechanisms, and (ii) to identify appropriate
mechanisms within the framework of the Marrakesh Decision, taking into account their technical
feasibility, as well as their financial and institutional implications on potential donors andbeneficiaries.  Staff also reviewed the Background Paper drafted for the FAO roundtable discussion
on this subject on 2 May 2003
2 (hereinafter the "Background Paper"), and a paper commissioned by
DFID3 (hereinafter "Ruffer and Roe"), and submitted comments to that roundtable discussion4.
We submit the following comments as inputs into the WTO monitoring exercise on the
Marrakesh Decision, which will take place on 20 No vember 2003.  Since we believe that the proposal
in the Background Paper will serve as the point of departure for the monitoring exercise, the current
comments reflect the World Bank's earlier comments sent for the FAO roundtable, and expand on the
contribution that existing World Bank instruments could make to mitigating the problems of the net
food importing countries.
First, we commend the authors of the Background Paper for a careful and authoritative
analysis of the difficulties faced by private sector food importers in these countries in periods when
financing requirements rise above normal levels, and for a carefully thought out proposal to resolve
some of these difficulties.  The paper makes a very plausible case that the ceilings on credit todeveloping country importers constrain their ability to rapidly increase food imports in times of price
spikes or increases in local demand.  There are various ways that importers use to deal with these
situations, but these all raise local food prices.  The case would be more compelling if it were
quantified (e.g. by estimating imports foregone or extra financial costs incurred in episodes of food
price spikes).  We recognize of course that this kind of quantification is difficult, and would probably
require extensive survey data of importers, exporters, and banks.  We presume that this fell outside the
terms of reference for this study.  However, its absence makes it impossible to carry out any rigorouscost-benefit analysis of the proposal.
                                                     
1 "Report of the Interagency Panel on Short-term Difficulties in Financing Normal Levels of
Commercial Imports of Basic Foodstuffs", WT/GC/62/G/AG/13, 28 June 2002.
2 "Mechanisms for Financing Imports of Basic Foodstuffs by Net Food-Importing Developing
Countries and Possibilities for Improvements", drafted by Lamon Rutten and Frida Youssef of the UNCTADsecretariat, supported by Mohamed Elkeiy and Ton Schurink, with research financed by the FAO.
3 "Mechanisms to Implement the Marrakesh Decision: an Options Paper", T. Ruffer and A. Roe,
Oxford Policy Management, March 2003.
4 "Comments for the Roundtable Discussion on the Proposal of the NFIDCs and LDCs for an Ex Ante
Financing Mechanism for Food Imports, 19 May 2003".G/AG/GEN/64
Page 20
Second, we note that several of the observations made in the World Bank submission to the
Inter-Agency Panel remain relevant to the deliberations of the current Roundtable:
• Available evidence does not suggest that reforms resulting from the Uruguay Round
Agreement on Agriculture (URAA) caused structural increases in the world prices of
foodstuffs; to the contrary, world food prices have shown a secular declining trend,which does not appear to have been interrupted by the URAA.  This observation does
not imply that there is no need for the proposed fund, but it does imply that a direct
and mechanistic link to the URAA (as envisioned in the Marrakesh Decision) would
not be possible.
• Food insecurity is an individual, not a national, phenomenon.  It does not appear that
there would be a rationale grounded in equity concerns for providing special
assistance (e.g., subsidies) to the LDCs and NFIDCs, when many poor consumers inother countries would be hit equally hard or harder by food price increases.  It is also
not clear what kind of mechanisms could be designed to ensure that any aid to the
LDCs and NFIDCs is targeted to the appropriate population of poor consumers.  If it
were possible to design mechanisms to target them, then the aid could be given in the
form of food vouchers.  That said, it must be recognized that the benefits of evenuntargeted measures that reduce the magnitude of food price increases would flow
disproportionately to the poor, who spend a greater proportion of their incomes on
food.
• If the mechanism would involve subsidiz ing food imports, e.g. through subsidized
credit, it would have the effect of discouraging local food production and storage.  For
this reason, the Background Paper recommends against any explicit subsidy element
in the on-lending terms to traders, though it does apparently suggest that the rate to be
paid by the national window should be subsidized, with the resulting profits from the
spread used to subsidize food distribution to vulnerable groups or to deal with credit
risk.
• Criteria for countries' access to the fund - both long-term and year-to-year - would
have to be crafted carefully.  First, consider long-term eligibility.  It is not clear
which, even among the net food importing countries, would be net losers from an
agreement liberalizing trade.  Export revenues in many of these  countries would be
increased by the better market access resulting from an agreement, and prices of theirother imports might decline.  Second, triggers for year-to-year access would need to
be carefully defined. Automatically granting access based on an increase in import
bills for food would reward poor economic policy.  (Food subsidies and
macroeconomic mismanagement, together or separately, could trigger a sharp
increase in food imports).  Thus, if triggers were defined in this way, access wouldneed to involve some kind of policy review, which is a major issue concerning the
operation of the IMF Compensatory Financing Facility.  Access triggers would also
have to take into account the overall financing needs of the countries in question, not
food alone.  It would not make sense to give help to countries when their food import
bills are rising, if at the same time their export receipts are rising even more, e.g. from
oil export receipts.  Taking into account these shortcomings of triggers based on
variables over which the country itself has substantial control, there is a strongargument for using some more objective indicators as triggers, as the Background
Paper recommends.
To these, we would add some further observations relevant to the discussions of the proposal
elaborated in the Background Paper.G/AG/GEN/64
Page 21
• While the Background Paper clearly and convincingly identifies constraints to the
operation of trade finance mechanisms for food imports, these constraints are not
unique to food markets.  They are in fact common to every kind of credit market in
developing countries, which is why credit is expensive and generally requires high
collateral.  To make a case for the proposal made here, given that donor funds arelimited, there would need to be a clear articulation of why resolution of this credit
constraint in food import markets should be given priority over its resolution in other
markets, and indeed, over other alternative uses of donor funds.
• The proposal itself (as described in detail in chapter 6 of the Background Paper)
appears to be reasonable at face-value, although there would need to be a carefulassessment of the details.  For example, as it recognizes, in setting the degree of risk
that is shared with the local banks, there is a tension between minimizing moralhazard (i.e., making sure the bank has an incentive to assume responsibility for a "due
diligence" assessment of borrowers' risk)  and making sure the scheme would increase
the bank's  incentives to finance imports.  The former argues for making the bank
assume a high share of the risk; the latter for a low share.  This trade-off would need
to be carefully considered.  Another crucial design detail would be the mechanism fordetermining who (within a qualifying countr y) would have access to the guarantees.
The ex ante financing mechanism is directed at private sector importers.  Presumably,
a large number of firms would like to import during a food price spike if  they had
special access to credit, and it is not clear that there is any workable way to select
among importers, especially since there would be pressure to make the decisionquickly while import prices are rising.  One mechanism could be government
designation of approved firms, but this could lead to cronyism and corruption.
Another would be selection by the internati onal fund secretariat, but it is not clear on
what basis this could be done quickly, especially with the small secretariat
envisioned.  The access could be auctioned, but this would raise the price of the creditand consequently raise the price of food.
• It is not clear that the technical assistance proposed (page 51) would be simple or
cheap to administer; it might in fact require more than the minimal secretariat theproposal envisages.
• Before a final decision is made, options other than that proposed in the Background
Paper should at least be explored.  The Ruffer and Roe paper mentions several,including a mechanism based on existing price risk management tools available on
international markets, and a scheme based on long-term supply contracts.  (They
consider others as well, such as the IMF's CFF and PRGF, but conclude that provision
of finance to the private sector is not consistent with the IMF's Articles ofAgreement.)  There is already a pilot program connecting small producers in
developing countries to international price risk management markets, operated by the
World Bank's Commodity Risk Management Group in the Agriculture and Rural
Development Department, with the International Task Force on Commodity Risk
Management as its steering committee.  This could in principle be expanded to help
consumers of imported food products deal with upside price risks, though these risk
management instruments are short-term (a year at most) and so only useful in dealingwith short-term price movements.  The group's modus operandi explicitly excludes
subsidies.  It operates at present as a small scale pilot program.G/AG/GEN/64
Page 22
Conclusions:
• Since it would not be possible to link the proposed fund in a direct way to the URAA,
the argument for its establishment in the context of the ongoing trade negotiationswould need to rest on the probable effects of the liberalization that will eventually
result from this process.  Available research does indicate that if there is significantreduction of import barriers, export subsidies, and domestic support, there will be
significant, though not enormous, structural increases in prices of many foodstuffs.
Depending on the commodity and the study, the effects on average prices of a
comprehensive liberalization have generally been estimated to run from 5 per cent to
20 per cent, with a few commodities higher.  This structural increase in average levels
would be accompanied by a reduction in volatility of prices. At this point, it is
uncertain how much liberalization will ind eed occur and over what time horizon, but
it would appear likely that the effects will not begin to be felt for several years, at the
earliest.
• Given that the financial sectors in developing countries in general face many of the
same problems as the shortcomings in the market for food import trade finance (e.g.
low credit limits, lack of collateral, reluctance of lenders to lend without collateral,high finance charges), both potential donors and beneficiaries of the proposed scheme
need to consider the question of whether it would be more cost-effective to tackle
these issues on a broader basis.  An argument for the narrower approach might rest on
some special characteristics of the food market or its significance for the poor,
although it should be recognized that this would not be a targeted intervention.  The
possibility that donor contributions to this facility might in essence substitute for (i.e.,
reduce) other forms of assistance must also be weighed.
• The design of the ex ante scheme proposed in the Background Paper has a number of
attractive features, including its reliance on, rather than displacement of, private
sector trade and finance mechanisms.  If it could be made to operate well, it couldeven have the concomitant benefit of increasing linkages between financial
institutions and traders in developing countries on the one hand, and international
financial markets on the other.  The use of exogenous indicators as triggers, as
recommended in the proposal, is also attractive, in that it would minimize the problem
of moral hazard and the need to carry out an extensive country policy review beforegranting the country's banks and importers access to the financing mechanism.  In our
view, there would remain some policy issu es, however, that might require some kind
of ex ante review to qualify for access to the mechanism.  It might be necessary, for
example, to ensure that there are no general food subsidies or price controls in place
that would artificially inflate the requirements for imports.  Perhaps this kind of
review could be carried out in a pre-qualification process, so that access would not be
delayed when it is actually needed.  Using external triggers would also exclude casesin which domestic shortfalls are caused by exogenous domestic factors (e.g. drought).
These cases could conceivably be included by having some kind of carefully crafted
double trigger involving not only external prices, but also domestic weather indicators
(or indicators of drought based on early warning systems), but the groundwork to
judge the feasibility of doing so has not yet been laid.
• The detailed design of the fund would clearly require more thought, including
addressing the issues raised above, before deciding if the scheme laid out in the
Background Paper is feasible.  In addition, Ruffer and Roe note that some LDCs may
not have the basic private sector institutions needed, and raise some other questions
that would need to be addressed.  Perhaps none of these are insuperable, but theyG/AG/GEN/64
Page 23
clearly require more thought.  In any case, before a final decision is made to move
eventually to a large-scale scheme, it would be prudent to carry out a pilot project
first.
• It is not possible on the basis of the available evidence to conclude whether the
benefits of the proposed scheme would exceed its costs.  This would require further
study, including quantification of the effects of the constraints on financing for food
imports.
__________