Record food prices inflame poor
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Record food prices might fan social unrest and fuel inflation beyond North Africa, delegates at the World Economic Forum said yesterday, after thousands of people took to the streets of Cairo to denounce President Hosni Mubarak.
“This protest won’t end in North Africa; it will spread in many countries because of high unemployment and increasing food prices,” Hamza al-Kholi, the chairman and chief executive of Saudi Alkholi Group, a holding company investing in industrials and real estate, said in Davos.
Risks of global instability were rising as governments facing budget crunches cut subsidies that help the poor cope with surging food and fuel costs, the head of the UN World Food Program said two days ago.
World food costs rose to a record in December on higher costs for sugar, grain and oilseeds, the UN reported on January 4, contributing to the uprising that ousted Tunisia’s Zine El Abidine Ben Ali after 24 years as president. Protests have spread to Egypt, Algeria, Morocco and Yemen.
An index of 55 food commodities tracked by the UN’s Food and Agriculture Organisation gained for a sixth month to 214.7 points, above the previous high of 213.5 in June 2008.
Higher commodity prices were “leading to riots, demonstrations and political instability”, said New York University economics professor Nouriel Roubini. “It’s really something that can topple regimes.”
In Egypt, three people set themselves on fire and thousands protested against President Hosni Mubarak’s government. Authorities banned protests and tightened security to prevent demonstrators from repeating Tuesday’s rally.
In Algeria, three were killed and 420 injured at rallies against high food prices and a lack of public housing. Jordanian opposition groups have held peaceful protests against the government, and in Yemen yesterday thousands gathered outside the main university in the capital Sana’a demanding that President Ali Abdullah Saleh step down.
Rising food and energy prices were fuelling inflation across emerging markets and posed one of the biggest threats to the recovery, Roubini said.
India and China would be forced to raise interest rates, threatening to choke the growth that was driving global expansion, International Monetary Fund special adviser Min Zhu said. – Bloomberg