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Russia-Ukraine War and the Global Crisis: Policy Responses to Address Poverty and Food Security Impacts

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Russia-Ukraine War and the Global Crisis: Policy Responses to Address Poverty and Food Security Impacts

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Xinshen Diao and James Thurlow
POLICY SEMINAR
The Ukraine crisis: Unraveling the impacts and policy responses in low- and middle- income countries
AUG 31, 2022 - 9:30 TO 11:00AM EDT

Xinshen Diao and James Thurlow
POLICY SEMINAR
The Ukraine crisis: Unraveling the impacts and policy responses in low- and middle- income countries
AUG 31, 2022 - 9:30 TO 11:00AM EDT

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Russia-Ukraine War and the Global Crisis: Policy Responses to Address Poverty and Food Security Impacts

  1. 1. Results: Aug 22, 2022 Russia-Ukraine War and the Global Crisis Policy Responses to Address Poverty and Food Security Impacts Acknowledgments: This work is funded by the BMGF, FCDO and USAID, and by the donor group that funds the CGIAR’s Foresight and Metrics and National Policies and Strategies research initiatives (see final slide for details and disclaimers). Xinshen Diao, Paul Dorosh, James Thurlow, and others International Food Policy Research Institute, Washington DC IFPRI Policy Seminar | August 31, 2022 Xinshen Diao (x.diao@cgiar.org) | Paul Dorosh (p.dorosh@cgiar.org) | James Thurlow (j.thurlow@cgiar.org) Foresight and Metrics to Accelerate Food, Land and Water Systems Transformation National Policies and Strategies for Food, Land and Water Systems Transformation
  2. 2. Results: Aug 22, 2022 19% -7% 113% 68% 44% 102% 106% 27% 5% 125% 50% Maize Rice Wheat Palm oil Crude oil Natural gas Fertilizers Change in nominal world prices (June 2021 to April/July 2022) Jun 2021 - Jan 2022 Jan 2022 - Apr 2022 Jun 2021 - Apr 2022 Jun 2021 - Jul 2022 Impact Analysis | Modeling World Price Shocks World price shocks Analytical approach Country studies use RIAPA economywide model • Captures entire agri-food system and broader economy • Tracks impacts from products/sectors to households • Peak changes in world prices for food, fuels and fertilizers (i.e., June 2021 to April 2022 | note that food and fertilizer prices fell to pre-war levels by July 2022, but remain higher than in mid-2021) • Effect of higher fertilizer prices on fertilizer use in the current cropping season 19 country studies completed
  3. 3. Results: Aug 22, 2022 3.2% 1.3% 1.2% 1.8% 2.1% 0.3% 2.0% 1.2% 2.5% 2.0% 0.4% 1.9% 1.5% 1.4% 4.4% 0.7% 1.9% 1.1% 0.9% Bangladesh Cambodia DRC Egypt Ethiopia Ghana Kenya Mali Malawi Myanmar Niger Nigeria Nepal Philippines Rwanda Senegal Tanzania Uganda Zambia Food prices Fertilizer prices Fuel prices 3.3% 2.4% 1.3% 1.8% 3.2% 0.6% 2.6% 3.3% 2.4% 7.6% 0.9% 0.9% 4.5% 2.3% 3.8% 2.6% 2.1% 0.9% 0.9% Bangladesh Cambodia DRC Egypt Ethiopia Ghana Kenya Mali Malawi Myanmar Niger Nigeria Nepal Philippines Rwanda Senegal Tanzania Uganda Zambia Food prices Fertilizer prices Fuel prices Increase in poor population (1000s) 1,783 1,272 2,441 485 419 1,241 388 159 209 390 1,118 1,832 4,260 153 1,411 702 442 5,078 4,100 Impact Analysis | Poverty & Food Security Impacts Poverty headcount rate (%-point) Prevalence of undernourishment (%-point) Population with worse diet deprivation (%-point) Increase in undernourished population (1000s) 3,910 420 1,475 555 105 1,137 491 162 97 212 1,082 1,901 2,336 74 1,093 261 462 4,922 1,053 7.5% 3.3% 1.3% 13.0% 1.7% 0.9% 3.0% 0.2% 0.4% 11.8% 0.7% 4.5% 6.1% 0.6% 3.8% 5.5% 1.6% 0.2% 0.3% Bangladesh Cambodia DRC Egypt Ethiopia Ghana Kenya Mali Malawi Myanmar Niger Nigeria Nepal Philippines Rwanda Senegal Tanzania Uganda Zambia Food prices Fertilizer prices Fuel prices Population with deteriorating diets (1000s) 8,350 1,730 589 476 881 912 72 45 178 533 1,159 13,510 1,915 273 1,641 49 72 11,700 6,348
  4. 4. Results: Aug 22, 2022 Impact Analysis | Headline Findings • Agri-food systems are adversely affected, but there is wide variation across countries • Large impacts on household consumption or welfare, especially amongst rural households • Poverty and food insecurity deteriorates, mainly due to rising fertilizer prices (poverty and hunger) and rising food prices (diet quality) Combined impacts across the 19 countries Poor population increases by 27 million people Undernourished population increases by 22 million people Diet quality deteriorates for 50 million lower- and middle-income people 7,358 9,798 10,034 Food prices Fertilizer prices Fuel prices 10,666 7,866 3,218 38,265 9,127 3,042 IFPRI website AgriLinks website Detailed country-level results
  5. 5. Results: Aug 22, 2022 Policy Analysis | Modeled Interventions Food tax relief • Reduce import tariffs and other taxes on wheat, wheat flour, oilseeds, and edible oils. Subsidize consumption of some of the affected food products. Fertilizer subsidies • Reduce tariffs on imported fertilizers and increase subsidies to offset rising fertilizer costs and limit any decline in fertilizer use and crop productivity. Fertilizer use efficiency (e.g., via farmer advisory services) • Reduce fertilizer wastage so that farmers can minimize any decline in production caused by rising fertilizer costs and lower fertilizer use. Fertilizer supply chains (e.g., via loans & credit provision) • Support to producers to increase production & to midstream traders to lower transaction costs, thereby increasing supply and lowering prices. Cash transfers • Provide direct cash transfers to poor rural and urban households. Five broad interventions Scenario design Modeling approach • Interventions are overlaid on top of the world price shocks for each country Focus on cost-effectiveness of interventions • Allocate 1% of government revenues to each of the five interventions • Measure the reduction in poverty, hunger and diet quality impacts Sequencing and implementation • Impact analysis focused on near-term outcomes (i.e., 2022) • Policy analysis considers a slightly longer timeframe (e.g., 2022-2024)
  6. 6. Results: Aug 22, 2022 Policy Analysis | Avoided Poverty & Food Security Impacts Share of total impact avoided by allocating 1% of revenues to each intervention Poverty Cash transfers are most cost-effective (by design, they target the poor) Hunger Fertilizer options are often most effective (offset declining food availability) Diet deprivation Food & fertilizer options are most effective (increase overall food supply, and reduce prices for the most-affected products)
  7. 7. Results: Aug 22, 2022 Impact Analysis | Headline Findings & Caveats • All policy options are effective (to some degree) in offsetting poverty and food security impacts • But no policy is the most cost-effective in addressing all outcomes • Even for specific outcomes, the most effective policy varies by country • Cash transfers, fertilizer use efficiency, and fertilizer supply chains are usually more effective than food or fertilizer subsidies • Cash transfers, like subsidies, generate large but temporary benefits • Efforts to improve fertilizer efficiency take longer to implement, but may have more lasting benefits • Having a balanced portfolio of policy responses is critical • i.e., combination of immediate and lasting investments designed to address countries’ unique poverty and food security impacts Caveats & Areas for Improvement Country-specific interventions • We considered broad interventions, but are now engaging national governments and partners to tailor policy options Costing interventions • Governments in the model finance the interventions, but we do not yet account for administrative/overhead costs • Investments in fertilizer use efficiency and supply chains are not fully costed (assumed to be mainly donor-financed) Falling prices since June 2022 • Recent declines in some world prices are not modeled • Food prices have returned to pre-crisis levels, and so we may overstate the benefits of food tax relief Compounding crises • We do not (yet) model concurrent macroeconomic and climate shocks facing many countries
  8. 8. Results: Aug 22, 2022 Acknowledgements Funding: This research and seminar were made possible through support provided by the Office of Policy, Analysis and Engagement, Bureau for Resilience and Food Security, U.S. Agency for International Development (USAID), under the terms of the Strengthen Evidence-based Policy Making in Africa, Asia, Latin America and the Caribbean (IFPRI/ReSAKSS) Award # AID-BFS- I0-17-00001 and the Policy, Evidence, Analytics, Research and Learning (PEARL) Award# 720RFS22IO00003. Joint funding was also received from the Bill and Melinda Gates Foundation (BMGF), the United Kingdom’s Foreign, Commonwealth and Development Office (FCDO), and the donor group funding the CGIAR’s Foresight and Metrics, and National Policies and Strategies initiatives. The opinions expressed in this seminar are those of the author(s) and do not necessarily reflect the views of BMGF, CGIAR, FCDO or USAID. Country researchers: • Kibrom Abay (Egypt) • Fadi Abdelradi (Egypt) • Kwaw Andam (Nigeria) • Seth Asante (Ghana) • Gilberthe Benimana (Rwanda) • Clemens Breisinger (Egypt, Kenya) • Antony Chapoto (Zambia) • Jan Duchoslav (Malawi) • Mia Ellis (Cambodia, Nepal, Tanzania, Uganda, Zambia) • Mekamu Kedir Jemal (Ethiopia) • Kristi Mahrt (Myanmar) • Juneweenex Mbuthia (Kenya) • Bart Minten (Myanmar) • Serge Mugabo (Rwanda) • Edwin Ombui Oseko (Kenya) • Lensa Omune (Kenya) • Karl Pauw (Cambodia, D.R. Congo, Egypt, Ghana, Malawi, Myanmar, Philippines, Tanzania, Uganda, Zambia) • Josee Randriamamonjy (D.R. Congo, Egypt, Mali, Myanmar, Niger, Senegal) • Pranav Patil (Ghana) • Angga Pradesha (Kenya, Nigeria, Philippines) • Mariam Raouf (Egypt) • Gracie Rosenbach (Rwanda) • Jenny Smart (Nepal, Senegal) • David Spielman (Rwanda) • Mitelo Subakanya (Zambia) • Hiroyuki Takeshima (Nepal) • John Ulimwengu (D.R. Congo)

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