The International Monetary Fund released on Tuesday its first analysis report on the impact of the surge in food and fuel prices. The report points out that the food and fuel prices surges have greatly raised the policy challenges associated with reducing poverty, ensuring food safety and maintaining economic stability. Our Washington correspondent shanshan has the story.

Report:

The analysis report released by the International Monetary Fund, or IMF, in its Washington Headquarters on Tuesday is the first broad assessment of its kind. It examines the impact of the surge in food and fuel prices on the balance of payments, budges, prices, and poverty of 150 countries from 2006 to 2008. The report finds that the global economy is in the midst of the broadest and most buoyant commodity price boom since the early 1970s. Against the backdrop of strong global growth in 2004 to 2007, prices of many commodities have been booming. Oil prices in particular have risen from 30 dollars a barrel in early 2003 to over 140 dollars this week, some 35 percent above the earlier record high in real terms in 1979. Prices of food commodities only started booming in 2006, much later than those of oil, metals and other minerals, and are generally still far below their 1970s highs.

Dominique Strauss-Kahn, Managing Director of IMF, points out the major challenge faced by many countries.

"It's a very difficult challenge. All countries have different situations. But even the situation may vary, the challenge is universal, which is to feed the hungry on one hand and maintain the hard-won macroeconomic stability on the other hand."

Patricia Alonso-Gamo is the assistant director of IMF's Policy Development and Review Department. She says the price increases in oil and food have put many countries at risk.

"We see that a lot of countries are at risk of a very high impact. Thirty-seven low income countries and 25 middle income countries that have less than 3 months reserves after a combined food and fuel shock. The oil affects the balance of payments much more. That's understandable because on average fuel imports are two and a half times the size of food imports for low-income countries and about double for middle-income countries. If we turn to the consequences on inflation, it's been widespread and dramatic. We'll see that opposite to the impact on balance of payment, it's the food that drives the inflation more than the fuel."

Gamo points out the situation varies greatly among different countries. Examining from a country-by-country perspective, some countries suffer greatly from the food and oil price hikes, while others, as fuel exporters, have benefited from it. However, the price surges have dealt a heavy blow on the global economy.

Sanjeev Gupta, senior advisor with IMF's Fiscal Affairs Department, says many governments have taken a number of measures to reduce negative effects.

"A broad range of measures have been taken, which include reduction in fuel and food taxes and tariffs, increases in universal subsidies, expansions in targeted programs, and increases in wages and pension."

The future trend of the oil and food prices is a major concern of the world, which has been included in the report. Thomas Helbling, advisor with IMF's Research Department, says the outlook is quite uncertain.

"Looking forward, food and oil prices will ease moderately from recent highs. With this general direction, the extent of easing will vary across commodities. Wheat prices, for example, have come down for 30% from the peak in March this year on expectations of better harvest. But corn and soybean prices stay high because of harvest concerns. In the medium term, the easing will be more substantial for food prices."

Managing director Kahn says, addressing the fuel and food crisis requires broad cooperation involving countries affected, international organizations and donors.

"There is no one-size-fits-all answer. Different situations require different answers. Of course, the fund has not worked alone. It's part of the multilateral community, we need multilateral response. Our role is to ensure right medium term policy responses and to provide financing when it's necessary to help in case of balance of payments problems."

Shanshan, CRI news, Washington.