Few subjects manage to dominate the world news for so long as the spiralling cost of crude oil and food prices. According to the latest estimates given at the Rome summit of world leaders last week, the sharp rise in food prices alone can push as many as 100 million more people into hunger. This mind-boggling figure is in addition to the 850 million who are already hungry. It is a most distressing situation that calls for urgent global attention. However, with so many conflicting interests at stake, this is easier said than done.
A report produced for the Rome meeting said biofuels was not only adding to the global food price crisis but also posed a risk for peasants, pushed off their land to make way for energy crops. The US believes biofuels account for only two to three per cent of the total food price rise but many others sharply disagree with this, putting the figure to over 60 per cent. This represents a huge difference.
However, according to the report prepared for the summit, the recent hikes in world food prices have not been caused mainly by biofuels but by poor harvests, low stocks and rising demand in Asia for food and fodder. As the world dissects the reasons for the explosion in prices, millions of people face hunger.
The crisis hits the developed world too as many have to dig deeper into their pockets to buy essential food. Malta, which has to import most of the food it consumes, is feeling the pinch as well.
In fact, according to a European Union report issued last week, the island has had the second highest rise in food prices in the eurozone over a 12-month period, up to April. The rise was of 9.7 per cent, compared to 6.2 per cent in the eurozone, more than twice the inflation rate for the period. This, and the continuing rise in the price of crude oil, will certainly give the new Finance Minister, Tonio Fenech, a lot to think about as he sets out to have his pre-budget consultation meetings.
Unsurprisingly, the minister has expressed concern at the evolving situation but has immediately ruled out compensation to make up for the price rise, arguing that this would hit the economy badly.
He is right, of course, first because it would add costs to industry at a time when it is struggling to remain competitive and, second, because, in the allowance given in the last budget to make up for the rise in the cost of living, the government incorporated an additional amount to make up for the rise in food prices that had been expected to come about in the months following the presentation of the budget. The problem now is whether or not that rise is sufficient to make up for the actual sharp hike in prices.
The fact that prices in Malta are rising at a higher rate than in the eurozone suggests that there may be situations that ought to be urgently corrected.
The Finance Minister has said they were looking deeply into the matter through the competition authorities and, if it resulted that there is any wrongdoing, they would have no option but to intervene.
Clearly, the matter ought to occupy first place in the government's agenda today.