…Recommends Targeted Support To Vulnerable Families
The International Monetary Fund (IMF) on Thursday advised governments globally to avoid relying on food subsidies during periods of rising prices, noting that such measures could drain public resources while offering greater benefits to wealthier households.
Rather, the Bretton Woods development finance institution advised policymakers in the various countries to identify the specific causes of food price increases and adopt targeted assistance programmes to protect vulnerable families.
In a blog published on Thursday with the title “What Governments Should Do When Food Prices Surge” authored by David Amaglobeli, Rodrigo Cerda, Tewodaj Mogues and Patrizia Tumbarello, the IMF maintained that the choice between food subsidies, vouchers and direct food distribution remained critical, as selecting the wrong intervention could waste scarce resources without adequately protecting those most affected by rising food costs.
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While noting that food affordability is a major socioeconomic concern, particularly in low-income countries where food purchases could account for more than half of household expenditures, the Fund expressed renewed concerns about a stronger El Niño weather pattern and possible disruptions to fertiliser and energy supplies arising from the Middle East conflict could increase pressure on food production and prices.
It clarified: “When food prices rise, governments face immediate pressure to act, because food affordability is primarily a socio-economic issue with significant impact on income inequality and public health.”
The IMF charged policymakers toask four questions before deciding how to respond to a food crisis, namely Is food available? Is affordability the problem? Are markets functioning properly? And can beneficiaries be targeted?
It stated that answering these questions would help governments determine whether to provide financial support, food vouchers or direct food assistance.
The Fund noted that governments often turned to price subsidies during crises because they can be introduced quickly and require limited administrative capacity, warning, however, that subsidies are costly and could disproportionately benefit wealthier households, which generally consume more food and are less sensitive to price changes.
On the solution to the food insecurity problem, it recommended that price subsidies should ideally be avoided by the governments and, where necessary, be exceptional, temporary, transparent and strictly limited just as it advised governments to allow domestic food prices to reflect international costs while protecting vulnerable households and viable small businesses through temporary and targeted fiscal measures.
The IMF stated on food vouchers, the governments could provide more focused assistance if they had reliable systems for identifying beneficiaries, noting that social registries and digital payment infrastructure could help direct support to households most in need.
Even then, the Washington D.C-based development finance institution maintained that subsidies and vouchers would not solve food shortages when there was insufficient food available for purchase while conflicts, natural disasters and disruptions to supply chains could interrupt food production and distribution, making direct food transfers necessary.
It canvassed: “When food is physically unavailable, direct in-kind food transfers are essential and can save lives.”
The Fund further cautioned that prolonged food distribution programmes could reduce demand for locally produced food, weaken prices and discourage domestic farmers and food producers from expanding production, and also raised concerns about the financial burden of poorly designed food assistance programmes, particularly in low-income countries.
The IMF stated that excessive spending on general food subsidies could limit governments’ ability to invest in agricultural research, infrastructure, healthcare and education and, therefore, called for clear exit strategies, warning that emergency support programmes could become permanent once beneficiaries began to regard them as entitlements.
The Fund advised national governments to plan a gradual shift towards more targeted and efficient assistance as crises ease, citing the 2015–2016 El Niño weather event, which affected food security for about 60 million people worldwide, to justify its position
While also noting that the food price increases triggered by Russia’s war in Ukraine pushed about 71 million people into poverty globally within three months, the IMF stated that the recent global food crises had exposed weaknesses in the food assistance systems of several countries, with some governments relying on expensive measures that failed to reach the needy in their countries.
Stressing that there is no universal solution to food crises, as countries differed in their food supply, market conditions and administrative capacity, the development finance institution urged governments to assess their food support systems before crises occur and develop time-bound intervention plans.
The IMF advised: “By first properly diagnosing the problem they are trying to solve, governments can choose the best policies to more efficiently protect their most vulnerable citizens, at the lowest cost.”
