(Adds Moreno, Ayala comments, background, adds bylines)

By Adriana Garcia and Missy Ryan

WASHINGTON, May 27 (Reuters) - The Inter-American Development Bank will offer Latin American and Caribbean countries $500 million in loans to help them cope with soaring food prices, bank officials said on Tuesday.

The loans, expected to be approved shortly by the regional lender's executive board, aim to bolster farm productivity and help countries care for their most vulnerable citizens as the price surge deepens poverty and heightens political instability in some of the region's fragile countries.

"The risk for the region is very real. If nothing is done, the hard-won gains in the fight against poverty could be undermined," said Luis Alberto Moreno, the IADB's president.

While recent record prices for some crops have begun to subside, the United Nations predicts that food imports for vulnerable countries could cost four times more this year than they did in 2000.

The commodity boom, which has triggered not only protests and riots in developing countries but serious concern among world leaders, is blamed on growing demand in emerging economies, meager harvests in major food-producing countries and increased use of food crops to make biofuels.

The trend has brought sporadic protests in some Latin American countries, such as Mexico. Haiti's government was toppled during food riots in April.

Record fuel prices have only intensified the surge on commodity markets over the last year. U.S. crude has come down slightly from an all-time high above $135 a barrel, but the high price continues to ripple across the global economy.

The IADB estimates that a sustained increase of 30 percent in six basic food staples could thrust 26 million people into extreme poverty. That would be in addition to the region's 71 million people already living in extreme poverty.

"Now is the time to act," Moreno said during a meeting with government officials from Central America and the Dominican Republic, importers of food and fuel that Moreno said were especially disadvantaged by the price hike.

Moreno urged countries to consider augmenting or setting up cash transfer programs, which can provide stipends, for example, to families whose children stay in school.

Eduardo Ayala, a senior government official from El Salvador, said his government, for example, was subsidizing energy costs for its most poor, in addition to expanding the distribution of free corn, soy and sorghum seeds to farmers.

"Oil affects everything, while feed grains like yellow corn affect the price of chicken, eggs, beef and milk -- they're all connected," Ayala said.

The government is also considering cutting its food import tariffs, a step Mexico took over the weekend. "The most important thing is that we haven't had scarcity," Ayala said.

Central American agriculture officials have met to discuss investments in the region's farm sector, seen as key to turning the situation around in the long run. (Editing by Christian Wiessner)

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