By Charles Mangwiro

MAPUTO, May 9 (Reuters) The Arab Bank for Economic Development in Africa (BADEA) said on Friday it will provide African farmers with financial assistance to help boost yields as the continent reels from rising global food prices.

BADEA Director General Abdelaziz Khelef said the bank would help the world's poorest continent reduce food shortages.

"We are working with almost all African countries to give them soft loans, particularly the rural world to increase agricultural productivity as one way of alleviating high food prices in the short term," he told Reuters in an interview.

Prices of staple foods have risen more than 40 percent in the last year and many developing countries have seen shortages, hoarding and riots, prompting the United Nations to warn of malnutrition and social unrest.

"We are insisting that rural development should be given high priority in the future across Africa," said Khelef.

He was in the Mozambican capital Maputo to attend an annual meeting of the African Development Bank, where African finance ministers, donors and economists are expected to discuss the global food crisis.

BADEA, created to strengthen economic, financial and technical cooperation between Arab and African countries, plans to increase total commitments by $225 million to $900 million under its 2005-2009 five-year plan.

Crops are fetching far higher prices in markets worldwide, but farmers in poor countries have not seen their incomes rise as a result, international officials have said.

Anger over high food prices has sparked protests and disturbances in several African countries, including Mozambique, Senegal and Cameroon.

Khelef warned that Africa was especially vulnerable to food price hikes despite vast natural resources.

"Growth is officially pegged at between 6 and 6.5 percent, but in actual fact it is around five percent because there is no local demand," he said. African countries could benefit from China's relentless investment drive in the continent but they must drive their own growth.

"There is a lot of investment coming from Asia and all over the world, which is supposed to be the engine of development," said Khelef. "But everything produced in Africa is exported. Africa needs to develop for itself given the vast potential in natural resources."

(Editing by Michael Georgy and Mark Trevelyan)

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