Skip to main content

Face Time with Angel Gurria

  • Story Highlights
  • Secretary general of the OECD, Angel Gurria sits down with John Defterios
  • He talks to MME about the global problem of food price inflation
  • Gurria offers opinions about how best countries can approach the growing problem
  • Next Article in World Business »
Decrease font Decrease font
Enlarge font Enlarge font

(CNN) -- While governments across the region grapple with the rising cost of food, groups like the Organization for Economic Co-operation and Development (OECD) are working to create strategies to address the problem.


Angel Gurria, secretary general of the OECD talks about food price inflation

Marketplace Middle East's John Defterios (JD) sits down with secretary general of the OECD, Angel Gurria (AG), and begins by asking him what can be done to combat rising consumer prices.

(AG): Clearly the problem is with all commodities - it's with oil, it's with metals, it's with food and demand is coming from developing countries which are increasing their purchasing power. But it is also coming from biofuels. That means some of the food is being burnt instead of being eaten by animals, individually by people directly or indirectly.

Then of course there is also this demand in the markets where the commodities have become a store of value. So, they substitute more traditional financial assets because people feel more comfortable and safer buying some futures of oil, metals or corns or soybeans or whatever than maybe buying a piece of debt.

(JD): It's quite fascinating to watch the response from the Middle East. Bar Saudi Arabia, the other central banks in the region don't seem to have the monetary tools to deal with the challenge right now. Is that a fair comment?

(AG): The problem is that these countries import all these things and when these things suddenly double their value, clearly, there is going to be an impact on inflation. At the same time these are developing countries. It's difficult to suddenly cut down on the projects, cut down on the infrastructure, etcetera because it's badly needed, but they're going to have to obviously take this into account. Some of them as you say do not have the monetary tools and therefore cannot respond by monetary policy by increasing interest rate, for example.

(JD): As you know on this program we talk about sovereign wealth funds because of the money coming out of the Middle East and the Gulf in particular. The dialogue has improved. Can you reach a common ground within the next six months on the general principles to move forward?

(AG): The issue is too important to put a deadline on it, too important to be urgent, too important to rush it. However, we divided the job a little bit and the IMF is working on the expected conduct from the wealth funds themselves, basically talking about some expected best practices, transparency, et cetera. We should do better, I think the dialogue is getting better, it's producing results. The memorandum of understanding between the United States, Singapore, and the United Arab Emirates, of a few days ago was a good sign of this general direction.

(JD): One of the final challenges is the perennially low dollar which makes some of these assets look very cheap. What's going to lead to a substantial change in mind over a dollar that's been weak for now three to four years?

(AG): The dollar is doing what a currency from a country that has a deficit in their external accounts should be doing, which is weakening. And that is helping to reduce the current account deficit of the United States.

(JD): If I can be Middle East specific here, a number of these currencies are linked to the dollar and they are growing very fast and the US is slowing down. Is it time to break this link, the dollar link to the Gulf currencies, as a result of what we're seeing in growth?


(AG): Very frankly I think that if the oil was put into any other currency, then there would be an automatic adjustment and it would cost the same amount that it is costing today - in any currency in which you want to express it. This is simply because what you have is a problem of supply and demand.

This is why it went up and this is the same reason why all the other commodities are going up. Whether you choose to break the peg or not, really is not as important; they're basically oil-based economies and the oil is expressed in dollars but you can express it in any other currency; it would simply have a different sign to it but the underlying value would be the same. E-mail to a friend E-mail to a friend

  • E-mail
  • Save
  • Print