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Food and financial crises CSD, 9 February 2009 Henk-Jan Brinkman, Senior Adviser for Economic Policy - PowerPoint PPT Presentation


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Food and financial crises CSD, 9 February 2009 Henk-Jan Brinkman, Senior Adviser for Economic Policy. Food prices have increased. Rapid deterioration of nutritional status. Prices  nutritional status. Food prices remain high. Thank you.

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Food and financial crises CSD, 9 February 2009 Henk-Jan Brinkman, Senior Adviser for Economic Policy

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Food and financial crisesCSD, 9 February 2009Henk-Jan Brinkman,Senior Adviser for Economic Policy


Food prices have increased


Rapid deterioration of nutritional status


Prices  nutritional status


Food prices remain high


Thank you


Climate change: increasing frequency and intensity of weather disasters


Food prices have increased


Demand > Supply: Agreement on list, but not on relative weight

  • Demand

    • Emerging markets, changing demand patterns

    • Biofuels

    • Institutional investors

    • Depreciating dollar

  • Supply

    • Low stocks

    • Weather-related shocks

    • Low productivity growth

    • Export restrictions

    • Oil price

      • Inputs: Fertilizer and transport costs

      • Outputs: Link between food and energy prices


Oil prices fell from a cliff


Some forecasts for 2009

  • Global GDP growth: 1% (-0.5%?)

    • Developed GDP growth: -0.5%

    • Developing GDP growth: 4.5%

  • Trade volume: -2.1 %

    • -20% to -30% for some countries?

  • FDI: -20% in 2008, -30% in 2009

  • Net private debt + equity: -49% from ‘07

    • $1.03 trillion in 2007; $530 billion in 2009

  • Remittances: -1% (-5.7%?)

    • Indonesia: -50% compared to 2007

  • ODA: -$20b compared to 2007?

    • another -$9b in 2010?


Strong trade but weak financial links with US+ EU; dependent on ODA

SS Africa

Central America

West Asia

Caribbean

some Latin American countries

Strong trade and financial links with US + EU

E + S Asia

C + E Europe

some Latin American countries

Two stylistic groups


Group 1

Lower commodity export volumes and prices

Lower tourism revenues

Lower remittances

Less ODA

Group 2

Lower volumes of manufactured exports

Financial distress in developed countries spilled over

Channels of effects


ODA down, WFP $ halved?


WFP’s Strategic Plan 2008-11

  • From food aid to food assistance

  • Broader, flexible and nuanced toolkit

  • Tools not new, but expanded scale:

    • Cash and vouchers

    • Purchase for Progress

    • Policy dialogue and advocacy

    • No one-size fits all school feeding

    • New nutrition and food products


Historical context


Transmission from int’l to domestic prices is larger if:

  • Food imports as % of domestic supplies are larger

  • Transportation costs are lower

  • Trade barriers are lower

  • Exchange rate is depreciating

  • Food taxes & subsidies are reduced

  • Markets are more competitive


Decline int’l prices ≠ national prices

  • Delayed transmission because of transportation time

  • Sticky prices and the ratchet effect (more easily adjust upwards than downwards)

  • Effects of reductions of fuel subsidies on food prices

  • Second-round price effects (P  W  P)


Intervention

1.Reducing low-birth weight

1a Treatment for asymptomatic infections

1b Treatment for presumptive STD

1c Drugs for women with poor obstetric history

2. Improving child nutrition

2a Breastfeeding promotion

2b Integrated child care programmes

2c Pre-school programmes (focus on nutrition)

3. Reducing micronutrient deficiencies

3a Iodine (women child-bearing age)

3b Vitamin A (children under 6)

3c Iron (per capita)

3d Iron (pregnant women)

Source: Jere Behrman, Harold Alderman and John Hoddinott, “Malnutrition and Hunger”, in: Bjørn Lomborg (ed.), Global Crises, Global Solutions, Cambridge, 2004.

Benefit/cost

0.6-4.9

1.3-10.7

4.1-35.2

5.6-67.1

9.4-16.2

1.4-2.9

15-520

4-43

176-200

6-14

Benefit-cost ratios


Risk analysis

Global, at HQ

Ex ante

Secondary data

Isolate price effect

No coping

Impact assessment

In country

Ex post

Primary data (surveys)

All factors

Incorporate coping

Monitor!

A1: Assess and analyze


Risk = hazard x vulnerability

  • Hazard = Price increase

  • Vulnerability:

    • Imports as % of consumption

    • Government response capacity

    • Foreign exchange reserves

    • Existing socio-economic conditions


Assessments at country level

Vulnerability at household level:

  • High % of income spend on food

  • Buy more food than sell (net-buyer)

  • Few coping mechanisms


People most at risk

  • Rural landless

  • Pastoralists, agro-pastoralists

  • Small-scale farmers

  • Urban poor

  • Children under 2 and under 5

  • Pregnant and lactating mothers

  • Sickly


A2: Advocate for action and resources

  • Large impact

  • Need for urgent action

  • Resources required to cover additional costs of:

    • Existing programmes: $755m (March 08)

    • Add programmes to address impact: ??

    • Budget 2008: $5.7b, 90m people

    • Shortfall 2008: $1.7b


A3: Advise

  • Price policy

  • Trade policy

  • Social protection


Policies: A snapshot

  • Food price policies

    • Reduce taxes

    • General subsidies: high inclusion errors + cost

  • Targeted subsidized food sales

  • Food reserves

    • Reduce intra-annual price changes and shortfalls

    • Not for long-term high prices

  • Import policy

    • Cut tariffs, quotas and other trade barriers

    • Facilitate imports (speedy clearances, licences)

  • Export policies

    • Export bans and taxes might do more harm than good

    • Need for humanitarian access


A4: Assist

  • Assessments and analysis (joint)

  • Logistics, imports

  • Scaling up existing safety nets

  • Design upscaling social protection systems


A5: Adjust programmes

  • Adjust targeting

  • Increase caseloads

    • Food for work

    • School feeding

  • Adjust food baskets

    • Cheaper food

    • More nutritious food

  • Adjust programmes

    • Cash/vouchers


A6: Add programmes/activities

  • Monitoring and surveillance

    • Food frequency and diversity

    • Prices

  • Urban areas

  • Nutrition programmes

  • Contingency plans


Roll out


a coherent global response

Balance of payments/financial support

agricultural inputs

(seeds, fertilizer)

policy

reform

emergency

food

& safety nets

(child nutrition,

school feeding)

cash & vouchers

increased

agriculture

production

community works

programmes

urgent agriculture inputs

12 months +

(Long term)

6 – 12 months

(Medium term)

0 – 6 months

(Immediate)


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