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ISBN: 978-0-8213-9451-9

eISBN: 978-0-8213-9523-3

DOI: 10.1596/978-0-8213-9451-9

The painting on the cover is by Sue Hoppe, an artist based in South Africa. Titled “Resolution,” the painting explores the idea that people who seem irreversibly divided and with little in common can unite if they focus on what they have in common instead of what divides them. Hoppe’s work examines war, conflict, and the plight of children and women in Africa, but is also inspired by nature and architecture. To learn more about Sue Hoppe and her work, visit www.southafricanartists.com/home/SueHoppe.

Cover design by Debra Naylor of Naylor Design

Photo credits: page xvi: Masuru Goto/World Bank; clockwise for pages 10–11, beginning at top: Liang Qiang / World Bank, Curt Carnemark / World Bank, Curt Carnemark / World Bank, and Steve Harris / World Bank; page 15: Curt Carnemark / World Bank; page 16: Curt Carnemark / World Bank; page 19: Curt Carnemark / World Bank; page 21: John Isaac / World Bank; page 23: John Isaac / World Bank; page 25: Curt Carnemark / World Bank; page 27: Curt Carnemark / World Bank; page 28: Michael Foley; page 62: Arne Hoel/World Bank; page 94: Shehzad Noorani/World Bank; page 116: Alex Baluyut/World Bank; page 136: Michael Foley.

Contents

• Foreword

• Acknowledgments

• Abbreviations and Acronyms

• Overview

• Progress toward the MDGs

• 1 Poverty and Food Price Developments

• 2 Nutrition, the MDGs, and Food Price Developments

• 3 Growth and Macroeconomic Adjustment in Developing Countries

• 4 Using Trade Policy to Overcome Food Insecurity

• 5 Aid and International Financial Institutions

• Appendix: Classification of Economies by Region and Income, Fiscal 2012

• Boxes

• 1 The MDG target of halving extreme poverty—reached in 2010

• 1.1 Crisis in the Horn of Africa

• 1.2 How rising food prices affect the citizens of Dar es Salaam

• 1.3 How many more are poor because of higher food prices?

• 1.4 Actions by women made the most difference but were invisible to policy makers

• 1.5 World price impacts across regions

• 1.6 Sustainable increase in food production is required to simultaneously fight global hunger and reduce the pressure on biodiversity

• 1.7 Ethiopia’s food security programs

• 1.8 Building foundations for social safety net systems

• 1.9 Managing supply and price risks for maize in Malawi

• 1.10 Linking changes in productivity and climate to poverty: the use of Envisage and GIDD for long-term scenario building

• 2.1 Impact of higher food prices and undernutrition on the MDGs

• 2.2 The impact of the 2007–08 food price spike on a rural community in northern Bangladesh

• 2.3 Malnutrition and chronic disease in India

• 2.4 Consequences of early childhood growth failure over lifetimes in Guatemala

• 2.5 The global SUN movement

• 2.6 Community-based growth promotion programs

• 2.7 Breaking the low-priority cycle: how nutrition can become a public sector priority for Sub-Saharan African governments

• 2.8 The implications of various spending and financing decisions on the MDGs of a low-income country using MAMS

• 2.9 Nutrition security in Haiti after the earthquake of 2010: priorities and first steps

• 3.1 Dealing with shocks: Risk management and contingent financing instruments

• 3.2 Fiscal policy responses to food price shocks

• 3.3 Food price volatility and monetary policy

• 4.1 Russia’s export ban on grains

• 4.2 Government imports of maize during the Southern Africa food crisis

• 4.3 The Middle East and North Africa region faces high trade costs in food

• 4.4 Quantifying the effects of non-tariff measures on trade in African food staples

• 4.5 Open border policies for trade in food

• 4.6 Defragmenting Africa: What will stimulate regional trade integration?

• 5.1 Examples of independent initiatives to improve aid effectiveness

• 5.2 Better statistics for all: Monitoring the millennium development goals

• 5.3 The World Bank has made significant progress on the aid effectiveness agenda, but there is room for improvement

• 5.4 CGIAR: Improved collaboration and harmonization to strengthen delivery

• 5A.1 Food price hikes and nutrition: The United Kingdom’s response

• 5A.2 EU initiatives on agriculture, food security, and nutrition

• Figures

• 1 Global progress toward the MDGs varies

• 2 Food prices spiked again for the second time in three years

• 1.1 Food, grain, agricultural, and energy price developments

• 1.2 The impact of higher food prices on poverty differs across socioeconomic groups

• 1.3 Countries’ vulnerability to global food price shocks tracked by share of cereal imports in domestic consumption and food share in household expenditure

• 1.4 Demand responsiveness to food price declines as per capita income increases

• 1.5 Ratio of cereal production to consumption in 2010 and 2025

• 2.1 Mean height for age, relative to WHO standards, by region

• 2.2 Percentage of stunted children and overweight women in selected Latin American countries

• 2.3 Benefit-cost ratios of various interventions

• 2.4 Impact of policy responses to food import price shock for food net importer

• 3.1 GDP per capita growth

• 3.2 Global current account imbalances

• 3.3 Low-income countries: Imports, exports, and current account balance, including FDI

• 3.4 Official reserves

• 3.5 Commodity price indexes

• 3.6 Fiscal deficits in emerging and low-income economies

• 3.7 Monetary policy loosening in emerging market and low-income countries

• 3.8 Average year-on-year growth in money and the money gap in emerging market countries

• 3.9 Macroeconomic policy mix

• 3.10 Quality of macroeconomic policies in low-income countries, 2005 and 2009–11

• 3.11 Commodity prices and macroeconomic movements, 2007–12

• 3.12 Selected macroeconomic indicators for low-income countries, 2007–12

• 3.13 Tail-risk scenarios for low-income countries

• 3.14 Composition of the Consumer Price Index basket in low-income and OECD countries

• 4.1 Most cereal production is consumed domestically and not traded

• 4.2 Food trade matters most for low-income countries

• 4.3 Trade in key cereals is dominated by just a few countries

• 4.4 Net-food-importing regions lose from higher food prices while net-exporting regions gain

• 4.5 The most frequent users of trade-restrictive measures on food products are G-20 countries

• 4.6 Some countries have also sought to lower domestic food prices by temporarily lowering trade restrictions

• 4.7 Producer support to farmers in most developed countries has fallen but is rising in emerging economies

• 5.1 DAC members’ net ODA bilateral disbursements

• 5.2 DAC ODA as a share of GNI 140

• 5.3 Net ODA disbursements to low- and middle-income countries and by region

• 5.4 Net ODA received per capita by groups of countries ranked by MDG targets met or on track to be met by 2015

• 5.5 Share of committed ODA to food, nutrition, and agriculture by donor

• 5.6 Composition of committed ODA and commitments by donors in year 2010

• 5.7 ODA commitments by income group

• 5.8 ODA from Brazil, Russia, India, China, and South Africa

• 5.9 Changes in sources of estimated global concessional developmental flows

• 5.10 Country programmable aid

• 5.11 CPA flows to developing regions

• 5.12 CPA received by number of MDG targets achieved or on track

• 5.13 CPA by low- and middle-income countries, 2003–13

• 5.14 Eurobarometer surveys

• Maps

• 3.1 As global growth slows, growth outcomes across countries converge

• 3.2 With higher commodity prices, few countries are able to maintain price stability

• Tables

• 1.1 Common coping responses to food, fuel, and financial crises in 13 countries

• 1.2 Pass-through of international rice prices to local prices in selected Asian countries

• 1.3 Price volatility across products in the countries of Sub-Saharan Africa

• 1.4 Major drivers of world cereal prices

• 1.5 Higher consumption growth of corn has offset slowing growth in rice and wheat, while increases in area planted to food offset slowing yield growth

• 1.6 Policy measures adopted in 81 selected countries in response to 2006–08 price spike

• 1.7 Fiscal implications of policy responses to 2006–08 price spike, selected countries

• 1.8 Main measures to limit the growth and volatility of world cereal prices

• 1.9 Poverty forecast, 2015–25

• 2.1 The annual per capita cost of various nutrition interventions is very low

• 3.1 Global output

• 3.2 Net financial flows

• 5.1 Decadal changes in bilateral official development assistance

• 5.2 Composition of committed ODA to nutrition, food, and agriculture

• 5.3 Key characteristics of BRIC financing

• 5.4 Aid fragmentation by income group and fragile and conflict-affected states

• 5.5 Progress toward Paris Declaration targets

• 5.6 Multilateral development bank progress on Paris Declaration survey indicators

• 5.7 CPA by region

• 5A.1 Responses from the international donor community to recent food price spikes

Foreword

Every year, the Global Monitoring Report (GMR) gauges progress across the Millennium Development Goals (MDGs), so we can better understand whether we are delivering on basic global needs. These needs include affordable, nutritious food; access to health services and education; and the ability to tap natural resources sustain-ably—whether clean water, land for urban expansion, or renewable energy sources. We assess how well the world is doing by looking at income poverty, schooling levels, the health of mothers and children, and inroads in treating HIV/AIDS, malaria, and tuberculosis, as well as assessing how the international development community delivers aid. We also try to measure levels of malnutrition and hunger in the world. Food prices can affect all these indicators.

For these reasons, the Global Monitoring Report 2012 takes the theme of “Food Prices, Nutrition, and the Millennium Development Goals.” This year’s edition highlights the need to help developing countries deal with the harmful effects of higher and more volatile food prices.

In 2007–08 and again in 2011, soaring food prices held back millions of households from escaping poverty. Poor people in cities remain especially vulnerable to higher food prices, as do households headed by women. Higher food prices also affect the quantity and quality of nutrition—a critical factor for children in the first two years of life, when even a temporary reduction in nutritional intake can affect long-term development. This loss of nutrition can, in turn, set back a whole generation.

The GMR details some of the solutions for making countries and communities more resilient in the face of food price spikes. Strategies include using agricultural policies to encourage farmers to boost production; using social safety nets to improve resilience; strengthening nutritional policies to manage the implications of early childhood development; and designing trade policies to improve access to food markets, reduce food price volatility, and make productivity gains.

The implications of high and more volatile food prices vary widely at the regional and country levels. Large net importers of food—such as those in the Middle East, North Africa, and West Africa—face higher import bills, reduced fiscal space, and greater transmission of world prices to local prices for imported rice and wheat. Higher prices hurt consumers, who need to spend a greater share of their income on food, as is the case in much of Africa and Asia. Larger net exporting countries, such as those in Latin America, Eastern Europe, and Central Asia, stand to benefit. But they may also face internal pressure to help households that need to spend a large share of their budgets on food. The sequencing and prioritization of policy initiatives depends critically on a country or region’s initial situation.

Going forward, all of us—including traditional donors, new donors, philanthropists, and NGOs—must do better in fighting hunger, particularly by making more resources available for basic nutrition. For a start, this means including nutrition interventions in projects and programs when and wherever possible. At the same time, we need to design more effective policies, strengthen account-ability, and ensure that recipients can absorb vital assistance.

The GMR’s assessment of progress on the MDGs offers grounds for optimism. Global targets for overcoming extreme poverty and access to safe drinking water have been reached well ahead of schedule. Goals related to primary school completion rate and gender equality in primary and secondary education also appear within reach. Other goals, however, require a real push, particularly regarding child and maternal mortality, and access to improved sanitation facilities. MDG gaps are starker when the focus is on individual countries and achievements per region, where disparities persist.

Macroeconomic performance will play a critical role in meeting the MDGs. Progress that was made possible by the relatively strong economic growth of developing countries prior to the global financial crisis has been set back. The recent weakening of the global economic environment has implications for overcoming poverty in emerging and developing economies, and it is important that the advanced economies undertake the necessary macroeconomic policies to bring about strong and stable global growth.

A key concern lies with the low-income countries, where macroeconomic policy buffers—such as fiscal, debt, and current account positions—have not yet been rebuilt to levels before the crisis. If they have to confront another sharp global slowdown or another surge in food or fuel prices, these countries would start from a weaker position.

We have made important progress in pushing forward toward meeting the MDGs—but the year 2015 is just around the corner. We have three years to ensure that billions more people will have the opportunity to benefit from the global economy. The need for cooperation on focused steps to achieve these goals has never been greater.

Robert B. Zoellick

President

The World Bank Group

Christine Lagarde

Managing Director

International Monetary Fund

Acknowledgments

This report has been prepared jointly by the staff of the World Bank and the International Monetary Fund. In preparing the report, staff have collaborated closely with partner institutions—the African Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, the Inter-American Development Bank, the Organisation for Economic Co-operation and Development, the Food and Agriculture Organization, the European Union, the UK Department for International Development, and various NGOs, such as Oxfam International and Save the Children. The cooperation and support of the staff of these institutions is gratefully acknowledged.

Jos Verbeek was the lead author and manager of the report. Lynge Nielsen led the team from the IMF. The principal authors and contributors to the various parts of the report include Mohini Datt, Annette I. De Kleine Feige, Ian Gillson, Rasmus Heltberg, Maros Ivanic, Bénédicte de la Briere, Hans Lofgren, Maryla Maliszewska, William J. Martin, Jose Alejandro Quijada, Eric V. Swanson, and Sergiy Zorya (World Bank), and Sibabrata Das, Stefania Fabrizio, Yasemin Bal Gunduz, Svitlana Maslova, and John Simon (IMF). Sachin Shahria assisted with the overall preparation and coordination of the report. The work was carried out under the general guidance of Justin Yifu Lin and Hans Timmer at the World Bank. Supervision at the IMF was provided by Hugh Bredenkamp and Brad McDonald.

A number of other staff and consultants made valuable contributions, including the following from the World Bank: Abebe Adugna, Harold Alderman, Lystra N. Antoine, Jean Francois Arvis, John Baffes, Saswati Bora, Andrew Burns, Grant Cameron, Gero Carletto, Iride Ceccacci, Shaohua Chen, Loriza Dagdag, Christopher Delgado, Asli Demirgüç-Kunt, Leslie Elder, Neil Fantom, Ariel Fiszbein, Delfin Sia Go, Anna Herforth, Masako Hiraga, Hans Hoogeveen, Alma Kanani, Norman Loayza, Alessandra Marini, Dominique van der Mensbrugghe, Menno Mulder-Sibanda, Israel Osorio-Rodarte, Martin Ravallion, Anna Reva, Bruce Ross-Larson, Julie Ruel Bergeron, Cristina Savescu, William Shaw, Meera Shekar, Yurie Tanimichi Hoberg, Robert Townsend, Jonathan Wadsworth, and Ruslan Yemtsov.

Contributors from other institutions included: Duncan Green and Richard King (Oxfam); Naomi Hossain (Institute of Development Studies); Kate Dooley and Daphne Jayasinghe (Save the Children); Fredrik Ericsson, Kimberly Smith, and Suzanne Steensen (OECD); Indu Bhushan (Asian Development Bank); Amy M. Lewis (Inter-American Development Bank); Jennifer Keegan-Buckley and Jean-Pierre Halkin (European Union); Chris Penrose-Buckley (DFID); Murat Jadraliyev (EBRD); Anita Taci (EBRD); and Patricia N. Laverley (Africa Development Bank).

Guidance received from the Executive Directors of the World Bank and the IMF and their staff during discussions of the draft report is gratefully acknowledged. The report also benefited from many useful comments and suggestions received from the Bank and Fund management and staff in the course of its preparation and review.

The World Bank’s Office of the Publisher managed the editorial services, design, production, and printing of the report, with Aziz Gok-demir anchoring the process. Others assisting with the report’s publication included Denise Bergeron, Susan Graham, Stephen McGroarty, and Santiago Pombo-Bejarano.

The report’s dissemination and outreach was coordinated by Indira Chand and Merrell Tuck-Primdahl, working with Vamsee Kanchi, Malarvizhi Veerappan, and Roula Yazigi.

Abbreviations and Acronyms

All amounts are presented in U.S. dollars, unless otherwise indicated.