Global Food Security: Macroeconomic and Financial Crisis Impacts <br />Shenggen FanDirector General<br />International Foo...
Key messages<br /><ul><li>Global food security is under stress
Food security is affected by macroeconomic policies and financial turmoil
Uninsured shocks are costly for poor people
New agenda for enhancing global food security is needed</li></li></ul><li>The number of hungry needs to fall by 73 mil. pe...
29 countries have “alarming“/“extremely alarming” levels of hunger (2009 GHI)<br />GHI components:<br /><ul><li>Proportion...
Prevalence of underweight in children
Under-five mortality rate</li></ul>Source: von Grebmer et al. 2009.<br />
Domestic prices remain high in some countries <br />Rice prices, $US/ton<br />Source: FAO 2010.<br />
Emerging stress factors<br />Population growth and demographic changes<br />Land and water constraints<br />Climate change...
Macro policies Foodsecurity<br />Fiscal policy<br />Monetary policy (Inflation) <br />Exchange rate policy<br />Energy pol...
Inflation and exchange rate effects<br />High inflation erodes poor consumers’ purchasing power<br />Volatile prices disto...
Fiscal responses to the food crisis <br />Source: Headey, Malaiyandi, and Fan 2009.<br />Note: Agricultural spending is re...
Oil and food prices are tightly interlinked<br />Source: Data from FAO 2009 and IMF 2010.<br />
Financial crisis: Potential impacts<br />Reduced financial revenue may lead to decline in government spending in agricultu...
FAO and WB estimates of impacts<br />Source: Headey, Malaiyandi, and Fan 2009.<br />Note: CR = Chen and Ravallion 2009.<br />
The cost of uninsured shocks<br />Uninsured shocks lead to income and asset loss and reductions in consumption <br />Even ...
Shocks can severely impact food security<br />Transitory shock with severe<br />and permanent consequences<br />Cascading ...
Tools to manage shocks<br />Source: Vargas Hill 2010.<br />
New agenda for food security needed<br />Invest in agriculture and improve smallholder productivity<br />Keep trade open<b...
1. Invest in agriculture and improve smallholder productivityAgriculturalspending as % of ag GDP<br />Source: Fan 2009.<br />
4.0<br />Actual ag spending in 2004, billion USD <br />3.5<br />Annual agspending required, billion USD (2008-15) <br />3....
Ag + non-ag growth = highest poverty reduction<br />Poverty simulations, Rwanda<br />Source: Diao et al. 2008.<br />
2. Keep trade open<br />Eliminate harmful trade restrictions and refrain from imposing new ones<br />to increase efficienc...
3. Promote productive social protection<br />Scale up safety nets to: <br />Secure and smooth food consumption<br />Enable...
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Global Food Security: Macroeconomic and Financial Crisis Impacts

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DG for Economic and Financial Affairs, Brussels, May 4, 2010

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  • As quoted by the WTO staff, examples of border measures are: Argentina has recently imposed non-automatic licensing requirements on products as auto parts, textiles, TVs, toys, shoes, and leather goods.India reportedly raised tariffs on some steel products in November 2008. On November 17, 2008, Mercosur members decided to raise their common external tariff, by five percentage points, on numerous items, like wine, peaches, dairy products, textiles, leather goods and wood furniture. - But it seems that this has not been really implementedOn November 26, 2008, Ecuador raised, between 5 and 20 percentage points, its tariffs on 940 products, including butter, turkey, crackers, caramels, blenders, cell phones, eyeglasses, sailboats, building materials, and transport equipment. Russia (a non WTO-Member) has announced its plans to raise import tariffs on cars and harvesters and continued to impose SPS measures. Ukraine‘s Parliament has been considering raising applied tariffs.In December 2008, Indonesia’s government implemented a regulation which states that imports on 500 individual tariff lines, including textiles, toys, and electronics will require special licenses granted conditionally upon the approval of domestic producers.In December 2008, the Republic of Korea announced that its tariffs on imports of crude oil will rise from 1 percent to 3 percent from March 2009.The European Union announced that it would re-introduce export subsidies for some dairy products from late-January 2009.Some measures emphasized by the WTO have been discussed at the domestic level in the beginning of 2008 -&gt; Before the Crisis
  • Global Food Security: Macroeconomic and Financial Crisis Impacts

    1. 1. Global Food Security: Macroeconomic and Financial Crisis Impacts <br />Shenggen FanDirector General<br />International Food Policy Research Institute<br />DG for Economic and Financial Affairs, Brussels, May 4, 2010<br />
    2. 2. Key messages<br /><ul><li>Global food security is under stress
    3. 3. Food security is affected by macroeconomic policies and financial turmoil
    4. 4. Uninsured shocks are costly for poor people
    5. 5. New agenda for enhancing global food security is needed</li></li></ul><li>The number of hungry needs to fall by 73 mil. per year to meet MDG1<br />
    6. 6. 29 countries have “alarming“/“extremely alarming” levels of hunger (2009 GHI)<br />GHI components:<br /><ul><li>Proportion of undernourished
    7. 7. Prevalence of underweight in children
    8. 8. Under-five mortality rate</li></ul>Source: von Grebmer et al. 2009.<br />
    9. 9. Domestic prices remain high in some countries <br />Rice prices, $US/ton<br />Source: FAO 2010.<br />
    10. 10. Emerging stress factors<br />Population growth and demographic changes<br />Land and water constraints<br />Climate change<br />Projected water scarcity in 2025<br />Source: IWMI 2000.<br />
    11. 11. Macro policies Foodsecurity<br />Fiscal policy<br />Monetary policy (Inflation) <br />Exchange rate policy<br />Energy policy<br />
    12. 12. Inflation and exchange rate effects<br />High inflation erodes poor consumers’ purchasing power<br />Volatile prices distort long-term planning for agriculture<br />Overvalued exchange rate discourages production of export crops <br />Overvalued exchange rate discourages consumption of local foods<br />
    13. 13. Fiscal responses to the food crisis <br />Source: Headey, Malaiyandi, and Fan 2009.<br />Note: Agricultural spending is reported in US$, and for countries with *, the total fiscal stimulus response to the financial crisis is reported.<br />
    14. 14. Oil and food prices are tightly interlinked<br />Source: Data from FAO 2009 and IMF 2010.<br />
    15. 15. Financial crisis: Potential impacts<br />Reduced financial revenue may lead to decline in government spending in agriculture<br />Private investment in agriculture and credit for agriculture may drop sharply<br />Rural migrants may return to agriculture and rural towns<br />Remittances may decline sharply<br />Both domestic and international demand for high value commodities may be affected severely<br />Donor investment in agriculture and rural development becomes uncertain<br />
    16. 16. FAO and WB estimates of impacts<br />Source: Headey, Malaiyandi, and Fan 2009.<br />Note: CR = Chen and Ravallion 2009.<br />
    17. 17. The cost of uninsured shocks<br />Uninsured shocks lead to income and asset loss and reductions in consumption <br />Even the potential of an uninsured shock has welfare costs<br />productivity and income are reduced as households take action to limit risk exposure <br />substantial costs are incurred by poor households to manage risks<br />Source: Vargas Hill 2010.<br />
    18. 18. Shocks can severely impact food security<br />Transitory shock with severe<br />and permanent consequences<br />Cascading series of shocks<br />Source: Hoddinott 2009.<br />
    19. 19. Tools to manage shocks<br />Source: Vargas Hill 2010.<br />
    20. 20. New agenda for food security needed<br />Invest in agriculture and improve smallholder productivity<br />Keep trade open<br />Promote productive social protection<br />Invest in climate change adaptation and mitigation<br />Improve institutions and capacities<br />
    21. 21. 1. Invest in agriculture and improve smallholder productivityAgriculturalspending as % of ag GDP<br />Source: Fan 2009.<br />
    22. 22. 4.0<br />Actual ag spending in 2004, billion USD <br />3.5<br />Annual agspending required, billion USD (2008-15) <br />3.0<br />2.5<br />2.0<br />1.5<br />1.0<br />0.5<br />There is a large gap between required and current spending<br />Source: Fan and Johnson (2009).<br />Increase agric. spending, improve access to inputs and services, secure land rights, invest in rural infrastructure <br />
    23. 23. Ag + non-ag growth = highest poverty reduction<br />Poverty simulations, Rwanda<br />Source: Diao et al. 2008.<br />
    24. 24. 2. Keep trade open<br />Eliminate harmful trade restrictions and refrain from imposing new ones<br />to increase efficiency<br />to stabilize prices<br />Complete the Doha Round <br />if tariffs increase to their current WTO limits (bound level): <br />11.5% loss of developing country exports <br />US$353 billion loss in world welfare<br />Potential costs of failed Doha Round could be high<br />Source: Bouet and Laborde 2009.<br />
    25. 25. 3. Promote productive social protection<br />Scale up safety nets to: <br />Secure and smooth food consumption<br />Enable saving and investment <br />Build and diversify assets<br />Types of interventions e.g.:<br />Conditional cash/food transfers<br />Maternal and child health/nutrition programs<br />Public works<br />Insurance for the poor<br />Programs depend on needs, capacities, and resources<br />Source: Adato and Hoddinott 2008.<br />
    26. 26. Innovative insurance for poor farmers and consumers<br />Agriculture: index-based weather insurance for crops and livestock <br />Health: community-based health insurance<br />Effective delivery channels<br />Agricultural cooperatives to deliver weather insurance products<br />Microfinance institutions to provide microinsurance<br />Source: Vargas Hill and Torero 2009.<br />
    27. 27. 4. Invest in climate change adaptation and mitigation<br />Annual expenditure to counteract climate change effects on child nutrition by 2050 (million 2000 US$)<br />Source: Nelson et al. (IFPRI) 2009.<br />
    28. 28. 5. Improve institutions and capacities<br />Build up existing institutions and improve evidence-based policy making<br />Increase gradual implementation after careful experimentation as in Asian reform process (esp. China) <br />Increase investment in information gathering, monitoring, and evaluation <br />Strengthen human and administrative capacities through increased investment in education and training<br />
    29. 29. Rapid hunger reduction is achievable with effective country-led and country-owned actions<br />

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