Archive for the ‘flour’ Category

Severe economic crisis threatens Pakistan’s stability

October 14, 2008

By Saeed Shah, McClatchy Newspapers

ISLAMABAD, Pakistan — A worsening economic crisis in Pakistan is pushing millions more people into poverty, and experts fear that it could help Islamic extremists recruit new converts.
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A Pakistani money-changer counts US dollars in Islamabad on ... 
A Pakistani money-changer counts US dollars in Islamabad on October 8, 2008. Already nearly broke when the global financial crisis took hold, Pakistan now faces further woes that could take the nuclear-armed nation’s security situation closer to the edge, experts said.(AFP/File/Aamir Qureshi)
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The crisis began early this year, as democracy was restored after more than eight years of military rule. Now Pakistan’s hard currency reserves have shrunk to $3.5 billion , and without an international rescue package, America’s key ally in the fight against al Qaida is likely to default on foreign debt repayments in the next two months, economic experts said.

Inflation is running at 25 percent, according to official figures, electricity is in short supply, and Pakistan’s currency, the rupee, has been devalued 25 percent against the dollar. Investor confidence has fallen so low that on Monday, police had to surround the Karachi Stock Exchange to protect it from angry investors. The Exchange already had lobbied the government unsuccessfully to be allowed to close for two weeks.

Terrorist acts by Islamist insurgents have accelerated capital flight and discouraged foreign direct investment. Depositors are lined up at banks to withdraw their money or to send it abroad.

“The canvas of terrorism is expanding by the minute,” said Faisal Saleh Hayat , a member of parliament and a former interior minister under Pervez Musharraf , the U.S.-backed former president. “It’s not only ideological motivation. Put that together with economic deprivation and you have a ready-made force of Taliban , al Qaida , whatever you want to call them. You will see suicide bombers churned out by the hundred.”

“In Pakistan , there are a huge proportion of people just above the poverty line. A slight shock in their income can push them below the poverty line,” said Sadia Malik , director of the Mahbub ul Haq Human Development Center in Islamabad , the capital. “This is the kind of shock that would have pushed a huge number of people into the poverty trap,”

The prices of wheat, rice and milk have more than doubled in the last year. The price of flour used to make roti bread, the food staple, has jumped from 12 rupees ( 15 cents ) a kilo last year to 28 rupees ( 35 cents ). Economists warn that prices would spiral even higher if Pakistan defaulted on its foreign debt.

Before the crisis, an estimated that 56 million Pakistanis, around a third of the population, already were living below the poverty line….

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http://news.yahoo.com/s/mcclatchy/20081013/
wl_mcclatchy/3071426_1

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Perils in The Price Of Each Grain of Rice

April 3, 2008

By David Ignatius
The Washington Post
Thursday, April 3, 2008; Page A17

You may have missed the front-page article in the New York Times last Saturday, with the one-column headline written in clipped newspaperese: “High Rice Cost Creating Fears of Asia Unrest.” But this little story could be an early warning of another big economic problem that’s sneaking up on us.

The new danger is global inflation — most worryingly in food prices, but also in prices for commodities, raw materials and products that require petroleum energy, which includes almost everything. Prices for these goods have been skyrocketing in international markets — at the same time the Federal Reserve and other central banks have been hosing the world with new money in their efforts to avoid a financial crisis.

That’s an explosive mixture. It risks a kind of inflation that would trigger panic buying, hoarding and fears of mass political protest. Actually, this is already happening in Asia, according to the Times.

The price of rice in global markets has nearly doubled in the last three months, reports the Times’s Keith Bradsher.
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Fearing shortages, some major rice producers — including Vietnam, India, Egypt and Cambodia — have sharply limited their rice exports so they can be sure they can feed their own people.

Bradsher summarizes the evidence that food shortages and inflation are fueling political unrest: “Since January, thousands of troops have been deployed in Pakistan to guard trucks carrying wheat and flour. Protests have erupted in Indonesia over soybean shortage, and China has put price controls on cooking oil, grain, meat, milk and eggs. Food riots have erupted in recent months in Guinea, Mauritania, Mexico, Morocco, Senegal, Uzbekistan and Yemen.”

World Bank President Robert Zoellick rang the alarm bell in a speech yesterday. He noted that since 2005, the prices of staples have risen 80 percent. The real price of rice rose to a 19-year high last month, he said, while the real price of wheat hit a 28-year high.

Zoellick warned that this inflation is having political repercussions: “The World Bank Group estimates that 33 countries around the world face potential political and social unrest because of the acute hike in food and energy prices.” To cope with the topsy-turvy economy, Zoellick made an innovative proposal that countries running a surplus, such as Saudi Arabia and China, devote 1 percent of their “sovereign wealth” funds to investment in Africa‘s poor countries. That could yield up to $30 billion in development spending.

Now, cut to the Federal Reserve. At a time when global inflation is raging, you might expect that the central bank’s first priority would be to dampen inflationary expectations in the United States. But because of its worries about a financial meltdown, the Fed has been doing the opposite — drastically cutting interest rates in an effort to unclog the financial markets. The cheap money didn’t stop the Wall Street bank run — it was the Fed’s bold plan to absorb subprime debt that did that — but it may well add fuel to the inflation fire.

Related:
Lowly Rice Grain Impacts Global Economy

Vietnam and India move to limit rice exports

Inflation and Food Shortages?

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http://www.washingtonpost.com/wp-dyn/content/article/2008/04/02/AR2008040202997.html?hpid=opinionsbox1