Managing food and fuel price inflation needs fiscal space

Concerns with high and volatile prices of food and fuel remain at the centre of the policy agenda. Volatility of commodity prices continues to be influenced by fundamentals of demand and supply, but is exacerbated by the financialization of commodity markets. High global liquidity has played an important role in supporting the persistently high prices of oil and globally traded food commodities. The challenge was highlighted by the head of Food and Agriculture Organization of the United Nations (FAO), Mr. Jose Graziano da Silva, during the opening of the Ministerial Meeting on International Food Prices in October 2013: “International prices have declined but they are still above their historical levels. And prices are expected to remain volatile over the next years. Asia-Pacific countries are well aware of this fact. The region was severely affected by food and fuel price hikes during 2007-2008 and 2010-2011, slowing the progress in poverty reduction. ESCAP estimates show that, based on $1.25 a day per capita poverty line, additional 19.4 million people in the ESCAP region remained in poverty due to increased food and fuel prices in 2010.