Victor Lledó March 3, 2011

Transcription

1 Victor Lledó March 3, The Development Partner Group consists of heads of mission in Mozambique of bilateral donors, the UN, and the international financial institutions. This document has not been approved by the IMF Executive Board.

2 Outline Food prices: recent increases and outlook Fuel prices: recent increases and outlook Food and fuel prices in Mozambique Road ahead: Exit strategy? Contingency plan? Both?

3 Food prices: recent increases Global food commodity prices have risen sharply over recent months and are now trading close to the peaks recorded in 2008 Price increases have been broad-based and led by a 60 percent surge in grains prices. Key grain prices, including corn and wheat, have risen sharply but they still remain some distance from their 2008 peaks. Other higher income elastic food groups are pushing past previous highs, however, including meat and seafood. IMF Food Price Index ( ) 1/ IMF Food Price Index Groups ( ) 1/ / U.S. dollar price index rebased at 2005= Cereals Seafood Meat Vegetable oils

4 Food prices: surge factors Weather related supply shocks : La Nina and Local -Wheat : droughts in Russia and Kazakhstan -Corn : bad summer in U.S. Sustained robust demand from emerging economies % demand growth in recent years Rebound on biofuels demand faster than antecipated. Low-inventories Export bans in Russia and Ukraine

5 Food prices: outlook Upward pressure likely to be temporary but market uncertainty about future prospects persists. Corn Price Prospects Wheat Price Prospects (U.S. cents a bushel) (U.S. cents a bushel) % co n fi dence i nterval 86% co n fi dence i nterval 68% co n fi dence i nterval Futures 90% co n fi dence i nterval 70% co n fi dence i nterval 50% co n fi dence i nterval Futures Jan -08 Sep -08 May-09 Jan -10 Sep -10 May (U.S. cents a bushel) Jan -08 Sep -08 May-09 Jan -10 Sep -10 May-11 Jan CCI Price Prospects 2/ Soybean Price Prospects 90% co n fi dence i nterval 70% co n fi dence i nterval 50% co n fi dence i nterval Futures Jan -08 Sep -08 May-09 Jan -10 Sep -10 May-11 Jan (Index points; Price = 500xIndex Points; January 2, 2008 = 100) % co n fi dence i nterval 86% co n fi dence i nterval 68% co n fi dence i nterval Futures Jan -08 Jul -08 Jan -09 Jul -09 Jan -10 Jul -10 Jan

6 Food prices: recent increases and outlook East Africa: Good maize harvests in Ethiopia, Tanzania and Kenya; strong sorghum harvests in Sudan. However sharp increase in maize and sorghum prices in Somalia (80% increase in December) Burundi price trending upwards due to poor harvest of beans and disease problems affecting cassava supply. Southern Africa: Maize prices remain low in most countries, including Zambia, Malawi and South Africa. However, both maize and rice prices have risen in Mozambique.

7 Fuel prices: recent increases, factors, and outlook Prices for both oil rose considerably in 2010, in response to strong global demand but also to supply shocks. Upward pressure on prices is expected to persist in 2011, due to continued robust demand and a sluggish supply response to tightening market conditions. Source: October 2010 World Economic Outlook.

8 Food and fuel prices in Mozambique Despite the spike in the international food prices, the imported food inflation in Mozambique was subdued due to the exchange rate during the same period. Maputo headline inflation (in percent, 12 months), Jan 2008 to Jan Total CPI Source: National Statistics Office (INE). Food CPI Non-Food CPI Products with major positive contribution to total price increases in 2010 Contribution (in %) Rice Coconuts Tomato Collard greens Living chicken "Carapau"fish", fresh, refrig. or frozen Lettuce Water bills Fresh fish, refrig. or frozen Pumpkin leafs Kerosene Gasoline Others Total Item Source: National Statistics Office (INE).

9 Food and fuel prices in Mozambique In 2010, the major non-food products that contributed significantly for the rise in inflation were gasoline/diesel fuels (average 39.1 percent increase) and water bills (average 34 percent). Government started unfreezing domestic fuel prices during the second quarter of 2010 for three consecutive monthly upward adjustments. As a result, total accumulated increases for diesel and gasoline prices, in absolute terms, were 64.9 and 73.2 percent, respectively. Price adjustments were unavoidable since fuel subsidies have been costly. Trends for selected fuel prices (MT/liter), Jan 2009 to Feb Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Gasoline Source: Ministry of Energy. Apr-10 Diesel Jul-10 Oct-10 Jan-11

10 Looking ahead: exit strategy, contingency plan, both? Both Good communication strategy Switch from second to first best measures Fiscal space is limited in light of inflationary pressures Short-term: -Reprioritize spending to make room for measures to protect the poor. Medium-term : - Better social protection systems - Increase agriculture production and productivity - Inclusive growth

11 Thank you!