(Bloomberg) -- Peru’s poor require “massive” government support to tackle a growing food crisis amid the highest annual inflation rate in a quarter century, central bank board member Jose Tavara said in an interview.
Consumer prices jumped 8.1% last month from a year prior, well above the 2% target and the biggest such increase since 1998. Inflation has triggered rioting in recent months and new protests are expected again next week.
The government needs to provide cash handouts, help communal kitchens and boost social programs while also considering long-term reforms, Tavara said.
“Inflation hits the poorest households because they spend a greater proportion of their income to buy food,” Tavara said. “In the cities the poorest are suffering.”
Peru has committed to spend 3.2 billion soles ($845 million) on measures to contain inflation and soften its impact on the needy. Those plans include a tax exemption on diesel purchases, fertilizer subsidies and aid for community kitchens. Put together, the expenditures amount to four times the normal social program budget for one year, according to Finance Minister Oscar Graham.
Read more: Peru’s Central Bank Rules Out Aggressive Key Rate Increases
Those measures are not enough for truckers who are threatening an indefinite strike starting June 27, potentially leaving the capital with food shortages.
Meanwhile, many farmers do not believe fertilizers that the government promised to buy and distribute will arrive on time after the purchase was canceled this week due to irregularities in the tender process.
“There are variables that are out of our control, and that leads to uncertainty,” Tavara said regarding inflation. “We are in a territory of pure speculation.”
Tavara declined to comment on Peru’s monetary policy.
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