Financial crisis to affect agricultural production: FAO

Financial crisis to affect agricultural production: FAO


New Delhi: Amid the international financial crisis, the United Nations Food and Agricultural Organisation (FAO) has warned that falling food prices and reduced access to credit are likely to hit agricultural production, threatening global food security.

“The combination of falling agricultural prices and reduced access to credit may have a knock-on impact on agricultural production, with very serious implications for global food security," the FAO said in its recently released Food Outlook.

The more critical and likely impact of the global meltdown will be on credit, whose non-availability is widely recognised as one of the major constraints to agricultural development in the developing countries, and the rationing of which is likely to be more serious than any interest rate effects, it said.

Taking lessons from the 1996 Asian financial crisis, the FAO suggested that countries and investors should meet their commitments on the development of agriculture in the developing countries as agriculture would act as a ‘buffer´ and help cushion greater losses incurred in other sectors of the economy.

However, the impact of the global credit crunch on the financial position of developing countries will depend not only on their growth rates but also their borrowing situation and reliance on international credit, the FAO noted.

It further said that the impacts of the financial crisis would be felt in developing countries at the macro-level, with potentially negative effects on agriculture and food security.