IMF weighs flexible funding to ease food crisis

WASHINGTON (Reuters) - The International Monetary Fund is revising an existing lending instrument that disburses funding as quickly as possible to countries struggling with soaring food prices, a senior official said on Tuesday.

Mark Plant, deputy director of the IMF's policy development and review department, said the revised Exogenous Shocks Facility (ESF) would be considered by the fund's board in June.

"The modified facility will provide more rapid and effective shocks financing and be a streamlined version of the structure of financing instruments for low-income countries," Plant told an IMF publication.

"But I would underscore that the ESF is available now, if any country needs immediate help," he added.

While the facility was designed to help countries affected by shocks from events such as commodity price changes, natural disasters or conflict, most countries affected by the higher food prices have instead opted to increase loans under existing financing arrangements.

Plant said the IMF was in discussion with 10 to 15 poor countries on possible financial help to address balance of payments problems stemming from rising food and fuel prices.

"In other words, the fund can help fund import costs," Plant said, adding: "At the same time, teams will very carefully assess the emergency measures put in place in their countries to make sure that they adequately target the most vulnerable."

While signs of possible food shortages have been visible for some time, no one could have expected that financial market turmoil and an oil price increase would occur at a time when food supplies were at historical lows.

He said governments were currently faced with tough policy choices and economic implications related to higher food costs, including how quickly to pass on higher food prices, how to prevent rising price increases from leading to permanently higher inflation expectations, and how to deal with balance of payments and fiscal financing gaps.