The Global Financial Crisis and the Poor

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John Hoddinott (IFPRI)
30th April 2009, International Food Policy Research Institute (IFPRI)

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The Global Financial Crisis and the Poor

  1. 1. The Global Financial Crisis and the Poor John Hoddinott IFPRI
  2. 2. Channels of Impact on Poverty and Hunger Primary Secondary • Trade Volume • Linkages and multiplier • Manufactures effects • Services • Primary commodities • Changes in terms of trade • Source of government revenue • Remittances • Aid • Composition of government expenditure • Foreign Direct Investment INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
  3. 3. IMF Estimates of countries at risk INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
  4. 4. Countries at Risk by Global Hunger Index Risk Mean Country GHI Aid Country GHI Aid Level GHI Dep Dep Afghanistan 30* † Liberia 32 High 24 CAR 28 Malawi 22 † Medium M di 17 Congo DR 43 Mauritania 18 Low 15 Cote d'Ivoire 15 Philippines 14 Ethiopia 31 † Sudan 21 † El Salvador 6 Tajikistan 26 Guinea 21 Zambia 29 Haiti 24 † INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
  5. 5. Priority Countries and the Role of Social Protection • Three sets of countries: • High GHI, High at risk, Highly Aid Dependent • High GHI, High at risk, Commodity Dependent • High GHI, Medium/Low Risk but where there are strong g , g secondary channels of transmission • Within th Withi these countries, the role of Social Protection is t ti th l f S i l P t ti i to • Protect living standards of poor • Prevent more households from falling into poverty traps • Contribute to recovery and longer term growth INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
  6. 6. A Tale of Two Countries • Mexico’s Financial Crisis (1995) • Revamp existing social protection programs • Introduce PROGRESA • Eliminate/scale back poorly performing subsidies • Indonesia, East Asian Financial Crisis (1998) • Rice subsidy y • “Crash program” of public works that were not well coordinated INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
  7. 7. Rural Poverty Rates Mexico Indonesia 60 30 25 50 20 40 15 30 10 P0 P0 20 5 10 0 0 INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
  8. 8. Messages • Policy response, including a social protection response, must recognize heterogeneity of effects across and within t i h t it f ff t d ithi countries • Social protection component should not be designed to both mitigate current shock while laying the foundation for sustainable recovery. It should not be ad hoc. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE

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