By Gordon Bell
MAPUTO, May 15 (Reuters) - The African Development Bank agreed on Thursday to set up a facility to subsidise farmers battling high fertiliser costs and help them boost production as food prices surge.
The move was the latest in efforts to help Africans cope with sharply rising food prices that threaten to ignite inflation and damage economic growth.
Food costs have sparked riots and protests in many African countries, with the poor, who spend the bulk of their income on food, the hardest hit. Almost half of Africa's 900 million people live in poverty.
"I have to be categorical, some degree of fertiliser subsidy will have to take place," AfDB President Donald Kaberuka told reporters at the end of the group's annual meeting in Maputo.
"These will have to be market-smart subsidies. They will have to be targeted. This may require public finance (and) this may require support from international institutions."
The bank hoped to raise about $500 million in funding for the facility within six months.
Fertiliser prices had jumped to $1,100 a tonne in April from $245 a tonne in January, he said.
The fund was part of a series of measures announced in response to spiralling costs.
The AfDB recently raised by $1 billion its portfolio of agricultural loans to help boost farm output, bringing total funding to $4.8 billion, and offered up to $250 million to assist some countries deal with immediate financial problems.
The food crisis dominated proceedings at the meeting, with member countries of the continental lender urging international coordination to help solve a problem that has raised the risk of social unrest and instability in many poor nations.
POOR INCENTIVES
Kaberuka said the bank would also help governments boost spending on infrastructure to build better roads and ensure farmers got their produce to markets.
About 60 percent of African crops were routinely lost because farmers could not transport harvests in time, he added.
"For a long time agriculture in Africa suffered poor incentives, poor incentives for farmers ... low prices, impassable roads and international markets which were protected. Now the price incentives are there."
Despite the food crisis, Africa was making good progress in lifting millions out of poverty, he said.
The AfDB said in its annual economic report, released at the meeting, growth for the continent as a whole would rise to 5.9 percent, although this was boosted by robust expansion in oil-exporting countries.
"In 2000, we were growing at 3 percent (a year), the same as the rate of increase in the population (but) now growth is at 6 percent, double the increase in the population," he said.
Nigeria, one of Africa's top oil producers, pledged to replenish a trust fund -- financed by windfalls from high oil prices -- to help poorer nations.
International crude oil prices are near record levels of about $125 a barrel, further fuelling inflation in oil-importing countries and raising import bills.
The AfDB accepted Turkey's application to join the group at the meeting, bringing total membership, including 25 non-African members, to 78.
It also resolved to remain based in Tunisia for the next two years, at least. (Additional reporting by Wendell Roelf and Charles Mangwiro; Editing by Charles Dick)
