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ADB Helping Bangladesh Cope with Rising Food Prices

News Release | 22 July 2008

MANILA, PHILIPPINES - The Asian Development Bank (ADB) is extending a $170 million loan to Bangladesh to cope with the current food crisis.

The loan is part of broader food security package being extended by international agencies and the Government of Bangladesh totaling $1.29 billion.

The Emergency Assistance for Food Security Project, which is supported by ADB and other multilateral agencies, will ensure access to food supply for those hardest hit by recent natural disasters in Bangladesh and the rapid increase in food prices.

Bangladesh, a net importer of food grains, was severely affected by two floods and a devastating cyclone in the second half of 2007, causing a rice production shortfall of 1.2 million tons and adversely affecting the food security of an estimated 25 million people. Rapidly increasing food prices further worsened the situation, seriously affecting the poor and vulnerable and fixed income earners.

"The Project will provide short-term transitional support to help the Government meet unexpected high expenditures for safety net programs based on the needs assessment conducted jointly with other development partners" said Rezaul K. Khan, Economist for ADB's Bangladesh Resident Mission.

The Government's safety net programs target ensuring better access to food for 5 million poor and vulnerable people. The programs include providing food supplies for sale in the open market, vulnerable group feeding, food assistance and food for work.

ADB is also issuing a $600,000 grant to help the Government improve its ability to plan and undertake medium- and long-term interventions to improve food security.

Bangladesh is the first developing member-country to receive ADB support after the announcement made during the institution's 41st Annual Meeting in May by ADB President Haruhiko Kuroda of the provision of up to $500 million in immediate budgetary support to the hardest hit countries in Asia and the Pacific, and an increase in lending for agriculture and rural development to more than $2 billion in 2009.

Food prices in the world market have reached record highs. The price of rice in the international market has nearly tripled to $963 per ton in May from a year earlier, while wheat prices have almost doubled to $349 a ton during the same period. In Bangladesh, the retail price in April of coarse rice rose 61% from last year, while wheat prices are up 56%.

Soaring food prices have led to serious hardship for the poor, who allocate about 70% of their total spending on food. The trend in food prices has also intensified inflationary pressure and is expected to worsen income inequality.

In Bangladesh, food inflation now stands at 12%. Out of the country's total population, 40% are now living below the poverty line. The country's per capita gross domestic product currently stands at $554.