9 June 2016: Experts and UN Member States have identified best practices and policy recommendations to cushion against the adverse impact of excessive commodity price volatility on sustainable development. The discussion took place during a High-Level Dialogue on Commodities, organized by UN General Assembly (UNGA) Mogens Lykketoft. The Dialogue focused in particular on trends and prospects in commodity-dependent developing countries (CDDCs). The Dialogue took place on 16 May 2016, and the President circulated a summary of views expressed on 9 June.

The summary highlights that many CDDCs are least developed countries (LDCs) and the majority are located in Africa, Latin America and the Caribbean, and Asia. It also reports that: prices in agriculture, oil and minerals have been declining since 2011; the negative effects of commodity prices result in worsening fiscal positions, increasing debt vulnerability and sovereign risk, deteriorating current account balances and depletion of current reserves; as a partial result of commodity price decreases and declines in revenues, government budget deficits in Africa from 2010 to 2015 doubled on average to 6.9%; and the International Monetary Fund (IMF) predicts CDDCs’ growth prospects will further decline from 6% to 3%.

The text notes that: commodity dependence affects most developing countries; prices will continue to fluctuate, so countries must save during commodity booms and spend during downsides, as well as diversify into high value services and expand demand through regional trade agreements; hedging is good for price risk management, but it requires expertise and institutions to be present and appropriately used; research by the UN Conference on Trade and Development (UNCTAD) has found that speculation in commodities markets exacerbates price volatility; regional food reserves, increased regional trade, and regional infrastructure banks to support infrastructure development play an important role in increasing food security; new agricultural development strategies that diversify into non-farm activities, and better integrate small, medium, and large farmers into rural-urban, regional and global supply chains are also needed; and commodity exchanges require active and thoughtful policies combined with access to extension services, finance, farm support, and attention to gender impact.

The summary observes that countries were encouraged to integrate commodity policies into overall national development policies, particularly through UNCTAD’s “commodities policies review.” Participants also suggested that countries formalize informal markets, empower agriculture ministries in political leadership for agriculture-led development, not finance or interior ministries, and tax natural resources revenues to set up effective mechanisms to finance social protection.

Finally, participants highlighted international tools for supporting countries, such as: the IMF Tool Kit for assessing countries’ diversification status; the Organization for Economic Co-operation and Development (OECD) Policy Dialogue on Natural Resources-Based Development; the Agricultural Market Information System (AMIS); and the Joint Organizations Data Initiative for oil and gas data transparency (JODI). [Summary of the High-Level Dialogue on Commodities]