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G8 summit to wrestle with '3F crisis'
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Iimpact of surging oil, food prices

"The impact of surging oil and food prices is being felt globally but is most acute for import-dependent poor and middle-income countries confronted by balance of payments problems, higher inflation, and worsening poverty," a new IMF study warns.

It warns that the jump in oil and food prices has pushed some developing countries to the "tipping point", putting governments in a difficult position of balancing the interests of the poor and economic growth.

The G8 finance ministers also noted in their joint statement that elevated commodity prices, especially those of oil and food, pose a serious challenge to stable growth worldwide.

Since the beginning of this year, oil prices have soared some 40 percent, staying above 140 US dollar a barrel currently. Several Asian countries have slashed fuel subsidies, raising prices for millions of consumers.

The world is also grappling with an emerging food crisis as prices of rice and other agriculture products rise. The price hikes have set off riots and protests from Africa to Asia and elevated fears of a global food crisis.

Ways to tackle oil,food hikes

To rein in soaring oil and food prices, it is necessary to find out the root causes of the hikes, but countries concerned have so far offered different explanations apparently due to their divergent interests. That is the reason why it is so difficult for them to write a joint "prescription", analysts say.

Even within the G8 club, their views differ greatly. France, Germany and Italy place greater blame on speculators for the oil price hike, while US Treasury Secretary Henry Paulson cited the unbalanced supply and demand as the main cause.

In a bid to seek consensus, the G8 has even called for an investigation involving the IMF into the recent wild swings in energy prices.

On the cause of surging food prices, a sharp difference remains between developed countries and most of the developing countries.

In recent years, the United States, the European Union and Brazil have actively promoted biofuel production, mostly with corn, rapeseed and sugarcane.

Many countries, arguing that cars have grasped a substantial amount of "food" from human beings, call on the biofuel producing countries to slash the huge subsidies for this sector.

However, the US has denied that its development of bio-fuels led to the shortage of global food supply, insisting that bio-fuel production has a very "limited" effect on food prices.

But the IMF notes in its recent study that rising biofuel production in advanced economies has boosted food demand. In particular, rising corn-based ethanol production has accounted for about three-quarters of the increase in global corn consumption in2006-07.

"This has not only pushed up corn prices, but also prices of other food crops," said the agency.

Many analysts note that high food prices have exacerbated global poverty, and that the G8, the rich club of countries, is obligated morally to take actions to tackle the problem.

(Xinhua News Agency July 7, 2008)

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