Managerial Finance Introduction

Posted on December 01, 2011 by Admin
Managerial Finance Introduction

Managerial Finance Introduction

923 million people across the world are hungry. The Food and Agriculture Organization of the United Nations estimates that progress made towards reaching the Millennium Development Goals has been reversed. The proportion of hungry people in the developing world is increasing, and meeting the internationally agreed hunger reduction goals by 2015 seems an enormous challenge.

Why are Food Prices Rising?

UN Assistant Secretary General John M. Powell named the four main causes for high and volatile food prices around the world at his recent visit in Yemen as he promised emergency food aid to the impoverished country (Yemen Times, 2/12/09).

Causes for higher prices:

  • the increase of the cost of fuel and fertilizers
  • natural disasters (drought in Australia) and humanitarian crises (Somalia, Kenya, Gaza)
  • an increase in demand for food staples from China and India
  • the fluctuation in the price of oil

On a regional level Yemen is a good example how volatile oil prices and higher food prices effect the poor. The country is often overlooked since it borders the much richer Saudi Arabia.

Declining Oil Revenues and Rising Food Prices in Yemen

There were flash floods in southern Yemen last year that killed hundreds and displaced thousands of people. A constant influx of refugees from Somalia and Ethiopia arrived by boats on Yemen's southern shore. Mohammed al-Maitami, head of the Federation of Yemen Chambers of Commerce, estimates that the number of people under the poverty line has increased to 55 percent of the population, up from just 40 percent a few years ago. One in three Yemenis now suffers from chronic hunger.

Until the 1960s Yemen could feed its people, with millennia-old terraced farms working off wells and rainwater, often channeled through aqueducts. Since then the population has increased more than fivefold, and the country has changed into a food-importing country. It now imports 90 percent of its wheat and all its rice. The oil sector provides 90 percent of Yemen's export earnings and 75 percent of government revenue. As oil exports fall, the revenue to import food is shrinking. Yemen is threatened with a major food crisis that could destabilize the country.