This document discusses the impact of the Global Financial Crisis on poverty and hunger. It identifies key channels through which the crisis impacted poverty, such as trade, terms of trade, remittances, aid, and foreign direct investment. It also examines countries at high risk of increased poverty and hunger due to the crisis based on their Global Hunger Index scores and aid dependence. The role of social protection programs in mitigating the crisis's impacts on the poor is discussed, using Mexico and Indonesia as examples. The document concludes that policy responses must account for differences between countries and that social protection should not be ad hoc but aim to both ease current impacts and support long-term recovery.

1. The Global Financial Crisis
and the Poor
John Hoddinott
IFPRI

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. IMF Estimates of countries at risk
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE

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. 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. 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
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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. 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