Ladies and Gentlemen,

Ongoing crisis

Let me start by expressing my profound thanks to Minister Tremonti for extending an invitation to me to take part in your meeting on development and food security. It is indeed an honour.

You were kind enough also to invite my predecessor at IFAD, Lennart Båge, to your meeting in February. Mr Båge used that occasion to highlight the mismatch between rising demand for food and the slow increase in supply. He pointed to the urgent need to boost agricultural production and productivity, and he pressed for greater political and financial re-engagement in the sector.

Four months since that meeting the food crisis is far from over. Although food prices have come down, they are still high by historical standards: food prices are 17 per cent higher than they were in 2006 and 24 per cent higher than in 2005. Furthermore, food prices show a high volatility reflecting underlying production concerns.   

The food crisis of last year and the global financial crisis this year have resulted in a worsening of global poverty. Various estimates indicate that up to 150 million people are thought to have fallen into poverty and hunger as a result of last year’s food and fuel crises. And this year’s financial crisis is believed to have pushed an additional 50 million people into poverty.

As you are all aware, the global financial crisis is beginning to have a severe impact on the economies of developing countries as export revenues fall, private capital flows diminish, and remittances decline.  The consequent pressure on government revenues is enormous.

In this situation of very limited fiscal space, governments have begun to cut back on expenditure, including investments in key sectors such as agriculture. Such cutbacks may appear prudent in the short-term but, as you will agree, cutting essential services and investment in agriculture will certainly result in greater food insecurity and slower economic growth.

Continuing need for investment

Under these conditions, I believe it is essential that the international community forges a new global partnership to ensure that essential investments in agriculture are protected to avoid a recurrence of a more serious food crisis that could threaten global food security in the future. I want to take the opportunity to thank the   membership for its endorsement of IFAD as demonstrated by the increased support for IFAD’s 8th replenishment.

I believe it is also important to emphasize that for many developing countries agricultural growth is not only necessary for food security but is, in addition, a fundamental engine of economic growth and poverty reduction. A number of studies have shown that GDP growth generated by agriculture is two to four times more effective in reducing poverty than growth in other sectors.

Moreover -- and what is often overlooked – is the fact that strong agricultural sectors and resilient rural communities provide powerful social safety nets. The recent ‘reverse migration’ in many countries has clearly shown the strength of rural communities in providing such safety nets.

In spite of the importance of the sector, governments over the past 2-3 decades have neglected the agricultural sector.  Domestically, government investment in agriculture in developing countries has fallen by about one third in Africa and by as much as two thirds in Asia and Latin America since the late 1970s. And international aid to agriculture has declined from around 20 per cent of all aid in the 1980s to less than 5 per cent in 2007.

The importance of the smallholder sector

For most developing countries, resolving the food security crisis, achieving rapid agricultural growth, achieving economic growth and reducing poverty essentially translates into the need for creating a dynamic smallholder agricultural sector.

There are between 450 and 500 million smallholder farms worldwide. They support over 2 billion people, or a third of humanity. And in many countries, particularly in Africa and Asia, smallholder farmers account for the bulk of agriculture production, farming about 80 per cent of the farmland. Unfortunately, they also represent the bulk of the poor – often falling victim to food shortages and malnutrition.  

So smallholder farmers are a fundamental part of the solution to improve agricultural production and ensure food security. With the right support, they can double or triple their production. And as I noted earlier, investment in smallholder agriculture is the most sustainable safety net against poverty and social turmoil, supporting rural families and communities, which are the backbone of social stability.

G8 role and initiative

In the three decades that IFAD has operated globally in support of smallholder agriculture, we have come to observe the enormous potential of the sector. IFAD has developed internal expertise and has channelled considerable resources to nearly all developing countries. It has financed many innovative projects and programs that have made significant contributions to food security and agricultural development

With support to smallholder producers along the entire value chain, IFAD projects have demonstrated the potential of dramatically improving the production capacities of smallholder farmers and improving rural food security. Resource constraints have however meant that we have not been able to scale up our interventions and replicate successful and effective strategies to the degree that we would have liked.

In this regard, we are heartened that the G8 countries are considering launching initiatives at the Summit this year to increase substantially the resources that will be made available for agricultural development in developing countries, focusing on smallholder agriculture. One such initiative is Innovation for Food Security by the Italian G8 Presidency. IFAD and the World Bank have been fully engaged in these developments.

Whatever form such an initiative may take, I would like to assure you that IFAD is ready to support it as we have actively supported other food security initiatives such as those of the UN Secretary General and the European Commission.  

We would like, however, to bring to your attention key lessons that we have learnt from IFAD’s experience both in our support of the efforts of developing countries and our support to international initiatives:

Successful agricultural development requires carefully planned and designed projects and programmes with the active participation of rural communities. Increased global support and new initiatives may therefore be more effective if channelled through existing institutions that have developed the requisite expertise. I believe the expertise, experience, and talent that these institutions have developed over the years can be effectively leveraged to scale-up support to agriculture

Further, in the light of the need to act quickly to meet the urgent needs of food security, we need to keep in mind that creating new institutional arrangements will undoubtedly take time. It may on the other hand be more effective to modify, where necessary, existing institutional arrangements to channel efficiently and effectively the additional resources that may be mobilized.

We have also learnt that effective interventions require close collaboration and coordination among institutions. Through cooperation both at the international and country levels, I believe we are in the process of improving the effectiveness and efficiency of our interventions. I believe these mechanisms can be effectively used in implementing the new initiatives.

Concluding remarks

Let me conclude by stressing our profound hope that in the light of the global food security challenge facing us today the G8 will indeed take a major initiative this year to support agriculture and smallholder development. As you know, when IFAD was established some three decades back, it was precisely in response to a major food crisis in the 1970s. One could even say that the Fund was the first ‘vertical fund’ created by the international community.

I would like to assure you that whatever initiative you decide to take, IFAD will be ready to support it and be ready to make available its considerable experience and expertise.

Lecce, Italy, 13 June 2009