West African cotton states facing an economic crisis due to a 30 percent drop in world prices should pass on the pain to farmers and not resort to subsidies, International Monetary Fund (IMF) has announced.
Large African cotton producing nations like Benin, Burkina Faso, Chad and Mali have over 10 million people dependent on the crop. In a bid to over turn the tide facing farmers in Benin and Mali, their Governments have already agreed to pay their farmers above-market prices for the 2004-2005 harvest. In case of Burkina Faso, the Government has ended up using rainy day fund to support domestic prices.
According to IMF Managing Director Rodrigo Rato, all this will put a drag on the economies leading to increased fiscal deficits and possibly higher borrowing, undermining the stability of their economies and threatening other spending priorities. Rato made this observation while on a visit to this region.
"It is likely that most of the trend decline in cotton prices will be permanent," Rato told a conference of major African producers in Benin.
International Monetary Fund
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