Fuel and food factor

The commission's growth report — released on Wednesday — says such higher prices provide strong incentives to economise on demand and expand supply.

They should also spur technological improvements, such as raising agricultural productivity in Africa or improving energy efficiency in advanced economies.

Based on this, the report recommends that subsidies and price controls be avoided, if possible.

It stresses, however, the need to develop more effective safety nets and redistribution mechanisms to protect people who are vulnerable to sudden shifts in prices.

Actions recommended to combat food price rises include an end to food exporters restricting exports, more effective safety nets, and a restoration of international trade in food with a removing of restrictions on exports.

The report also urges that policies favouring biofuels over food be reviewed and if necessary reversed and that reserves and inventories be accumulated to relieve temporary shortages.

On global imbalances and governance, the report says United States savings rates are still low, China's reserve accumulation has not slowed, and its trade surplus, once modest, is now rising rapidly.

Currencies that track the dollar (or the yuan) have largely accompanied the American currency on its descent, in defiance of their underlying fundamentals.

According to the report, the challenge is to match the decline in the US's trade deficit with a reduction in excess saving in developing countries.

On sub-Saharan Africa, the report says the region is enjoying its fastest growth for decades — around six percent a year — thanks to better macroeconomic management, aid, higher prices of commodity exports, and an efficient and accountable leadership in many countries.

But, despite Africa's resumed growth, its growth rate since the 1980s has fallen short of the rest of the developing world by five percentage points, so poverty persists.

The region has made rapid progress in primary education and in fighting malaria and Aids, but it still faces challenges in delivery of public services, infrastructure, governance, and inclusiveness.

Some 23 African countries are unlikely to reach the millennium development goals.

African countries with natural resources are growing quickly thanks to the hike in commodity prices.

The challenge is how to use this boom to reduce the region's dependency on commodities, and how to face food shortages, a problem that might worsen as the climate warms.

Botswana is one of the only 13 countries that have been successful in achieving sustained high growth.

South Africa, Rwanda, Ghana, Uganda and Madagascar are countries that, having achieved macroeconomic stability, can now afford to think about long-term growth.

The report calls for industrialised economies to grant African countries time-bound trade preferences to manufactured exports to help them overcome the disadvantages of being "late starters", and to finance the expansion of Africa's tertiary education to make up for Africa's brain drain.

Some of the report's main recommendations specific to Africa include:

— Increasing agricultural productivity and output;

— Reducing the cost of doing business through simplification of administrative procedures;

— Continuing progress in elementary school enrolments, improving quality of education, and committing more resources to secondary and tertiary education, ensuring the inclusion of girls;

— Encouraging regional cooperation and integration — key for landlocked countries;

— Giving all citizens/sectors access to secure channels for saving and credit;

— Adopting best practices in the area of the exploitation of natural resources, such as setting up a fund for resource rents, which pays out a percentage of the total each year for the benefit of the citizens; and

— Continuing to focus on macroeconomic stability and responsible fiscal policies.

Sapa