When analysing any proposed policy change, it is important to identify what the policy is supposed to achieve, its objectives. Then the analyst should identify precisely how the policy will be implemented and who will benefit and who will lose as a result.

Almost all policy changes create gainers and losers, very few policy changes benefit everyone in practice. It is important to examine whether the losers from a policy change are amongst the poor and food insecure. The time horizon of the poor is very short. Even if they will benefit in the medium term, some immediate intervention may be necessary.

Policy makers on the national and international scene have become increasingly aware of the need to modify and expand the formerly applied "economistic" approaches to adjustment, and to give due attention to the social implications of economic reform programs, including aspects of food security. "The social dimensions of adjustment", "adjustment with a human face", and "making adjustment work for the poor" have become common slogans in designing and implementing policy reform programs. The inter-dependence between food security and overall economic, social and political stability and the relevance of economic and social development policies in the efforts towards achieving universal food security became a major issue of concern at the World Food Summit, held in November 1996 (see Chapter 6, section 5).

Analysing the political economy of a policy change means that the policy analyst concerned with food security is more likely to be able to say in which way certain policies (can be designed to) contribute to improved food security, and, where required, to identify practical and acceptable alternatives to cushion the immediate impact of policy change on the poor and food insecure. These issues form the subject of our further analysis. We will concentrate on the role of government in implementing relevant policies. This does, however, not mean that the highly important role of the private sector and other relevant actors (communities, NGOs) is neglected (see discussion on the relative role of the public and private sector in Chapter 3). Government policy is rather understood as complementary and supportive to efforts of the private sector in all fields which are relevant for food security: production, input supply, marketing, employment and income generation, etc.

In analysing policies to improve food security, a distinction can be made between supply and demand based approaches. Food supply determines availability, food demand is an expression of the ability to gain access to food, and both - availability and access - have to be ensured at the same time to achieve food security. This applies to individual household as well as national and global levels. (see chapters 2 and 4 for details on this subject).

Factors determining food availability are:

• the volume and stability of food production (subsistence and market oriented production),


• available food stocks (farm-level, commercial, government stocks),


• food imports (commercial and concessional imports).

• the purchasing power, or level of real income, for all those who depend, fully or partly, on the market as their source of food supplies. The level of real income depends, again, on a variety of factors such as wage levels, employment, prices, etc. This applies at the household level. On the national level, access to food depends on the availability of foreign exchange to pay for food imports, if - due to an existing production deficit - these are required to complement domestic supplies.


• the productive assets available to those who depend on subsistence production as their source of food supply, and


• non-market transfers (on the national level: food aid).

Whether food security can be enhanced more effectively by supply or by demand based approaches depends also on the predominant types of food deficits in a particular country or area of concern: in countries or areas where temporary or structural production/supply deficits are the predominant problem (e.g. due to insufficient market production and scarcity of foreign exchange to pay for food imports), there is a priority need for supply based approaches (Figure 5.1 a). In cases where, due to wide-spread poverty, demand deficits are the main issue of concern (Figure 5.1 b), policy measures must be primarily geared towards employment and income generation or other measures to promote access to food of the vulnerable groups.

Figure 5.1 Structure of food deficits and priority approaches to food security required

The further analysis draws heavily on the conceptual framework presented in Annex 1. Its prior review will facilitate comprehension of the further analytical steps.

2. Production and Supply Based Approaches

2.1 Increasing food production and supplies

Policies to increase food production and domestic supplies comprise, in principle, the whole set of measures falling under the category of agricultural sector development. They comprise measures in the following fields:

• agricultural research, training and extension,


• agricultural input supply,


• mechanisation,


• irrigation,


• rural infrastructure and institutions,


• land reform,


• agricultural marketing and pricing policies,


• agricultural credits.

The chief strategic concept to induce increased food production is the removal of constraints which prevent a better (increased, more intense, more efficient) use of existing human and natural production potentials. Such factors are listed in Table 5.1, together with policy approaches which can reduce these constraints.

The specific natural, political, social, and economic conditions in a country or region determine which of the approaches are needed and appropriate and how they specifically should be designed.

Some policy measures appear more than once in the table, indicating that the same policy measure may help to alleviate a number of different constraints.

Table 5.1: Food production constraints and policy measures for their alleviation

Various of the policy measures included in Table 5.1 are common elements of structural and sectoral adjustment programmes, such as market reforms, pricing policies and institutional reform measures. These policies contribute to improved food security by stimulating and stabilising food production through better services and improved market performance. (see section 5 in Annex 1) This can either be through the removal of existing state intervention in markets, or through the creation of an institutional framework which encourages competitive private sector market operations.

Other measures can involve state expenditure which might seem to be at odds with an emphasis on reducing the overall level of public expenditure. However, these measures are primarily in areas which may have been neglected in the past, or need to be protected in the future to ensure food security. These may be non-targeted measures, such as research, extension and training programmes. Government expenditure is necessary and justified in these areas, because of the high level of externalities associated with these activities. This makes it difficult for private companies to capture the full benefits of investment in these areas. As a result, often the level of resources allocated to these areas is less than optimal. This does not mean that the state necessarily has to implement proposed programmes, but it may have to be a significant source of finance.

Targeted measures, which promote the food production of specific vulnerable groups (e.g. small-scale and semi-subsistence farmers) can be justified in terms of providing incentives for greater future self-sufficiency and economic viability of particularly marginal groups of the population.

State expenditure may also be necessary in the area of regulation, to provide a suitable framework to encourage individual or collective private sector activity which will promote food security, e.g. in the area of irrigation. In brief, although some of the measures discussed in this section have a primarily humanitarian objective, in others, there is a specific need for government action to develop an enabling environment for private sector activity.

In order to trace the impacts of supply side measures on food security, we can apply the model presented in Annex 1 (see there for further explanations). In general, we can state that any policy measure which leads to a reduction of the production cost induces a downward shift of the production/domestic supply curve, while any measure which leads to an expansion of food production induces a right shift of the production/domestic supply curve.

The effects are illustrated in Figures 5.2 and 5.3. The graphs also demonstrate the changes induced in the volume of aggregate food production/supply and demand, as well as the consequences for the structure and amount of food deficits, hence the impact on aggregate food security.

Figure 5.2: Impacts of policy measures to reduce the costs of food production

Figure 5.3: Impacts of policy measures to alleviate constraints to food production

The effects on the volume of food production, supply, demand and on the overall structure of the food deficits are similar in both cases:

• the volume of food production and domestic food supply will expand (from A to B);


• the volume of aggregate food demand will expand as well (from A to B);


• the market price will fall (from p to p');


• the production, supply and demand deficits will diminish from R-A to R-B.

The above examples show how existing food deficits can be reduced and overall food security be improved through direct interventions in the food sub-sector, aiming at increased food production and domestic supplies. This does, however, not mean that policies to increase production and supplies should be confined to the food-subsector. Food security is not necessarily a matter of self-sufficiency in food production. If a country or region has a comparative advantage in producing other than food crops, the economic benefits may be larger and food security could possibly better enhanced by promoting non-food crops for export. The income earned and the foreign exchange generated through the sale of non-food crops may buy more food than could alternatively be produced locally. In this case, through enhancing non-food production, the food deficits will be reduced and food security improved through increased access to food, rather than by increased food production and domestic supplies.

Whether food or non-food production is more profitable and more effective in achieving food security depends on various factors, such as the existing land use system (including socio-economic differences in production), the world market situation, the rural infrastructure and marketing system for food and export crops. All these factors need to be carefully considered when a strategy to agricultural sector reform and food security is designed. In general it is assumed that the removal of price and market rigidities as result of structural adjustment measures will automatically lead to appropriate price signals for producers to decide on the most efficient allocation of the production resources (see Annex 2A, but also take note of the critics of the free market economy model as raised in section 5 of the same annex).

2.2 Stabilising food supplies

Supply instability is a main cause of temporary food insecurity. This may be a result of acute production shortfalls due to unfavourable weather conditions, or may be characteristic of inter- and intra-seasonal variations in food supply, and they may critically affect the country as a whole, certain areas or specific population groups (e.g. people living in remote or drought prone areas).

Some of the measures mentioned under section 2.1 above will also have positive effects in terms of stabilising food supplies. This is particularly true of measures aimed at improving rural infrastructure, research, storage and food marketing such as:

Food pricing and storage policies play a particularly prominent role in attempts to reduce supply instabilities. This area of policy is politically sensitive as it can be seen to contradict the major objectives of structural adjustment programmes in various respects:

• Price stabilisation can undermine the objective of market price liberalisation,


• Government market interventions related to price stabilisation and stockpiling run counter to the objective of reducing the role of government in the economy,


• Marketing and storage operations for food security purposes incur additional cost which can seldom be recovered, leading to increased budgetary expenditures.

2.2.1 Price stabilisation

Price instability is a major indicator of supply instability, and price stabilisation is a widely applied strategy to stabilise food supplies. Two main approaches to achieving price stability can be distinguished:

i) The direct approach, by setting official market prices, e.g. by a pan-seasonal pricing system or, more commonly, by a system of price guarantees with floor and ceiling prices (see also section 7.2 of Chapter 4);

ii) The indirect approach, by stabilising prices through public sector market interventions.

• the government purchases (usually through a parastatal marketing agency) food on the market and builds up food stocks when market supplies are abundant and the prices tend to fall below a fixed or desired level,


• the government releases food onto the market (from stocks or imports) when supplies are limited and prices tend to rise above a fixed or desired level.

Figure 5.4: Floor and ceiling prices and ideal price movements

In order to be effective in achieving its price stabilisation objectives, a system as described above requires a number of preconditions to be fulfilled:

i) An adequate institutional and physical market infrastructure which allows:
• purchases to be effected, and


• buffer-stocks to be built-up

in periods of abundant supplies, when prices tend to drop below the floor price, and the availability of:
• buffer-stocks to be released, and/or


• food (aid) imports to be channelled into the market,

when the market prices reach the ceiling level.

ii) Another precondition for an effective system of floor and ceiling prices is the setting of a realistic price band, i.e. a price-range which runs in between the upper and lower ends of potentially fluctuating market prices, as demonstrated in Figure 5.5.

If the prices were set outside the bands indicated, the system would imply either ineffective prices, or a severely distorted price structure which is not sustainable in the long-run.
• If the floor price were set too high, stocks would accumulate over the years without being sold (as, for example, in the Mali case recorded in Box 4-6, Chapter 4).
• If the floor price were set too low it would be ineffective, as no purchases could be made and no stocks could be built-up to draw on later when required.
• If the ceiling price were set too high, it would be ineffective, as no sales from the stocks could be made.
• If the ceiling price were set too low, it would be difficult to maintain as the amount of stocks needed to stabilise the price would be rapidly exhausted (if not compensated with cheap food imports).
iii) A third precondition is the availability of funds for the purchasing and stocking operation. Funds are required to cover the additional costs accruing from:
• the necessary stand-by arrangements, in order to be able to intervene when necessary,


• financing of the purchasing/sales operations, when interventions become necessary,


• interest rates for credits /opportunity costs of capital invested in the stocks,


• management and technical storage costs,


• storage losses.

Although, in principle, the marketing margin should cover storage costs, experience shows that this is difficult to achieve, particularly in the case of buffer-stocks and food reserves established for market regulatory and food security purposes (see also Box 5.1).

In order to be effective, price stabilisation policies need to comply with all the conditions set out above. If this is not guaranteed, the outcome of government interventions on price stability and food security could be worse than without intervention, as producers and consumers would end up bearing additional marketing and price risks.

In an open economy and in the presence of marked fluctuations of food prices on the world market, the use of variable levies on imports could serve as an instrument to achieve partial price stability on the internal food market.

Since biblical times in ancient Egypt, public holding of food stocks has been considered an essential element of the food security strategy of a country. Different types of public food stocks can be distinguished, according to the main purposes and features of stockpiling:

Table 5.2: Types and purpose of public food stocks

The preceding discussion has already revealed the close linkages which exist between price stabilisation and stocking policies: building-up of food stocks means increased market demand and has the effect of stabilising prices from falling below desired levels in times of abundant supplies, while a release of food stocks means increased market supplies and prevents prices from rising exorbitantly when market supplies are scarce. There are two exceptions to this general rule:

i) if stocks are built-up with food imports, there is no additional market demand and no price effect on the domestic market when stocks are built-up, and

ii) if stocks are released via free food distribution to the poor, the volume of market supplies and the market prices will not be affected to the full extent of the stock release.

In establishing targets for the size of public food stocks, a compromise has to be found between the objective of maximising supply stability and food security, and minimising costs and budgetary burdens. The costs of public stockholdings are quite substantial and are seldom covered by the marketing margins, as indicated above.

In defining optimal stocking levels for public food reserves, a number of different factors have to be taken into consideration, such as:

• Production and supply risks, depending, for example, on the drought proneness of a country, the prevailing production systems (e.g. rain-fed versus irrigated agriculture), civil disorder, etc.


• External supply routes for food imports: countries with easy access to external markets will have lower storage requirements than, for example, land-locked countries, countries with insufficient port facilities, or areas which are cut off from external markets for geographical, political or economic reasons.


• The quality of the internal transport infrastructure determines the effectiveness and efficiency of internal transfers between (potential) surplus and deficit regions.


• Private stocks held, for example, by farmers, traders or households, and the interrelationship between private and public stockpiling practices. Private stocks will reduce the need for public security reserves. The interaction between private and public stocking practices depends largely on:


• The established marketing system: the role of public sector and private agencies in food marketing, pricing and marketing policies pursued by the government, and the efficiency of the marketing system. (The case of pan-seasonal pricing policies discouraging private stockholding has already been addressed in section 7.2 of Chapter 4.)


• Vulnerable groups, their characteristics, size, and location, their food needs and the emergency-relief requirements complementary to other sources of food supply,


• The effectiveness of early warning systems: if effective, early provisions can be made for internal transfers and food imports which will reduce overall stocking requirements.

In determining optimum stocking levels, the costs and efficacy of public stockholdings in achieving stability and food security objectives have to be compared with alternative approaches, e.g. commercial and/or food aid imports. A combined strategy with minimum stocking targets, sufficient to cover the period until imports arrive, may often be the most appropriate approach. Box 5.2 illustrates how to calculate the size of a food security reserve, using the case of Ethiopia.

2.3 Food imports

Food imports help to bridge structural production deficits or to mitigate supply deficits resulting from acute production shortfalls. See Annex 1, section 2 for definition of food deficits, and section 3 for the impact of food imports on the food situation. In our graphic model, (additional) food imports induce a right-downward shift of the supply curve. The broad effects, compared to a situation without food imports, are, in summary:

• The volume of food supplies increases and an existing supply deficit is reduced accordingly;


• The food prices go down, with further implications in regard of:


• A positive real income effect, inducing an increase in the volume of food demand and a corresponding reduction of an existing demand deficit, and


• A likely disincentive effect on local production, inducing decreased production and a widening of an existing production deficit.

i) The price elasticities of supply and demand (see Annex 1, section 3 and 4): the lower the elasticities (expressed in a steeper slope of the supply and demand curve), the smaller is the quantity effect and the larger is the price effect. This can be easily demonstrated in a graph using differently shaped production and/or demand curves.

ii) The level of world market prices (border or import parity prices, for definition see Annex 2B) in relation to domestic market prices without imports. In Figure A-6 of Annex 1, the price p stands for the internal price without food imports while p' represents the border or import parity price. The larger the difference (the lower the import prices), the greater are the effects as described above. If world market prices were above the domestic market price, no commercial food imports would take place under free market conditions.

There are further factors and conditions governing the level of domestic prices, import prices and the volume of food imports, and determining the extent to which the effects described above take place. This refers, for example, to the following issues:

i) The exchange rate (see section 3.3 of Chapter 4 and Annex 2B);
ii) Government market and price interventions (see section 7 of Chapter 4);
iii) Concessional (food aid) imports, implying lower import prices compared to commercial imports (this issue will be discussed in detail in Chapter 6), and:
iv) The uses of food aid. Food aid supplies can be used, for example:

• to build up food stocks/security reserves (see section 2.2.2 above);


• to increase general market supplies, by feeding the food aid deliveries into normal market channels to sell them at normal market prices. (Typical approach to programme food aid, see Chapter 6. The effects are as described above);


• for specific food and nutrition interventions, aimed at improving the consumption of those who, due to poverty or other reasons, have insufficient access to the food they need. This refers for example to targeted food subsidies, emergency relief, feeding programmes for vulnerable groups, food for work schemes, etc. Such approaches are discussed in the following section.

3.1 Access to food on national and household levels

Often the crucial food problem does not consist of a general shortage in the volume of food production and supplies but in insufficient access to the food which is available on the market or which would be produced and made available if absorbed by effective demand (see the important link between food demand and food markets in Figure 4-2, Chapter 4). A precondition for food security is, therefore, not only the availability of adequate and reliable food supplies but also sufficient access to food supplies for the household to meet their requirements. The importance of access to food as the other essential precondition of food security was emphasized at the World Food Summit and is reflected in the Commitment number two "We will implement policies aimed at eradicating poverty and inequality and improving physical and economic access by all, at all times, to sufficient, nutritionally adequate and safe food and its effective utilisation" (see Chapter 6, section 5). Access to adequate food as a prerequisite for food security applies to the national as well as the individual household level.

On the national level:

If a country has a production deficit (for definition see section 2 of Annex 1) and depends on food imports to complement supplies from domestic production, then access to sufficient food for the country as a whole is determined by the availability of foreign exchange to pay for the necessary food imports. The factors which have contributed to the macro-economic imbalances, the chronic balance of payments deficits and the increased indebtedness and debt service burdens of many developing countries (see sections 1 and 2 of Chapter 4) have inhibited the import capacities of the countries concerned and the achievement of food security on the national level.

All policies aiming at re-establishing macro-economic balance and economic growth will therefore, if successful, increase the import capacity of the countries and implicitly serve the purpose of improving access to food at the national level. This applies, in principle, to structural adjustment programs but also depends, as outlined in section 9 of Chapter 4, on a number of other factors which are beyond the reach of individual countries' policies, e.g. the international trade and financial environment. Increasing access to food on the aggregate national level requires , therefore, a two-sided approach:

i) Economic reform programs by and within the countries themselves along the line of macro-economic, structural and sectoral adjustment policies discussed in Chapter 4,

ii) International co-operation and appropriate policies at global level, e. g. in the field of international financial and trade relations. The latter issues will be addressed in Chapter 6.

At the household level:

At the household level, access to food depends on the means available to the households to obtain the food and other essential items required for a decent living. Food insecurity occurs if the means are insufficient and is, therefore, closely related to wide-spread poverty. The households may lack the means (e.g. land, manpower, access to water, knowledge, technology) to produce enough food on their own, and/or the purchasing power to buy the food they need on the market. In tracing the effects of macro-economic policies down to the factors determining household food entitlement, we have seen that certain vulnerable groups are prone to suffer a further aggravation of their food security situation under adjustment. The capacity to attain access to the food required may be further eroded by a nominal and/or real income decline, resulting from general food price increases, a removal of general food subsidies, or a decrease in employment and cash-income.

Under such conditions, targeted approaches are required to support those groups of the population who, due to poverty and insufficient access to food, are exposed to food insecurity. Targeted assistance may consist of measures to enhance the capacity of the people to gain access to the food they need on their own, or of direct food transfers to vulnerable groups. Table 5.3 presents an overview of the main types of targeted interventions for enhancing food security at household level, the relevant target groups, and the expected outcome on the factors determining household food entitlement.

Table 5.3: Targeted policy interventions to improve access to food - an overview

Figure 5.6 traces the impact of targeted interventions on the major elements of the food chain and on the factors determining access to food and household food security.

Figure 5.6: The impact path of targeted interventions on factors determining access to food

Adapted from: P. Webb, J.von Braun, Yisehac Yohannes, Famine in Ethiopia: Policy Implications of Coping Failure at National and Household Levels, IFPRI, Washington 1992.

The targeting approach is particularly appropriate where it is anticipated that macro-policy changes will threaten the livelihoods and food security of specific population groups in the short-run. Food transfers in particular will help protect vulnerable groups until they are in a position to benefit from the improved economic opportunities that macro-economic reform could present. Where the impact of policy reform is expected to be negative in the long run, asset distribution and production support may be a more appropriate form of intervention, in as much as it has a longer term impact.

The specifics of various approaches are discussed in detail in the subsequent sections.

3.2 Targeted asset distribution and production support

Targeted asset distribution and production support measures can include all measures which are mentioned in Table 5.1 above, with two conditions:

i) the measures address the specific constraints which agricultural producers belonging to vulnerable and food-insecure groups face;
ii) the measures are effective in reaching the target group(s).

i) identification of the target groups;
ii) identification of the constraints to increased production which the target group faces;
iii) design of appropriate measures to overcome the constraints;
iv) implementation of the programme;
v) monitoring of the programme performance (are target groups reached and do they benefit effectively?).

The relevant target groups for production support programmes in agriculture are primarily poor and small-scale farmers involved in livestock, food crop or export crop production. Target groups may be tenants or subsistence farmers, and could also include urban and suburban dwellers who derive part of their subsistence from small-scale farming and home gardening activities.

If the programmes are effective, access to food will be improved either from the supply side, via increased subsistence production, or via increased household food demand, resulting from higher cash income brought about by increased production and sales revenues. The impact path of such interventions is illustrated in Figures 5.6 above and 5.7 below.

Targeted production support and income generating schemes may also be initiated in favour of vulnerable population groups involved in non-farming sector activities, e.g. by promoting urban or rural small-scale industries and other informal sector activities.

3.3 Public works programmes and Food-for-Work schemes

The main type of targeted interventions that governments apply to augment the incomes of poor un- and under-employed people in urban and rural areas are public works programmes. People involved in such programmes may be paid in cash or in kind (e.g. food).

Four categories of public work projects can be distinguished (Webb et al., 1992, op.cit.):

• emergency relief projects, providing temporary (food) wage employment to supplement or replace a crisis-induced loss of income;


• seasonal projects, aimed at supplementing the income of poor households during slack agricultural seasons;


• regular (infrastructural) projects, designed to create or enhance productive assets by tapping available labour while providing employment opportunities for poor households;


• long-term employment-generation projects, designed to tackle chronic un- and under-employment by offering continuous job opportunities, particularly to the urban poor and the landless.

Targeting is, however, only effective if the wages for the people employed in the programme are below market wages. Otherwise, public work schemes may attract people other than the poor and unemployed, displacing private employment.

For an evaluation of public works programmes, the dual objectives of providing targeted support to vulnerable groups and of generating investments and development assets need to be taken into account. Therefore, in assessing the cost-effectiveness of such programmes, two factors have to be considered (see also Box 5.3):

i) The net income (in cash or kind) conveyed to the target group. This is the difference between wages paid and the additional costs accruing to the participants (e.g. costs for travelling to the work site, for staying away from home, opportunity cost in terms of income forgone from other activities such as reduced food production at home, etc.).
ii) The value of the works performed or assets created compared to the costs of the scheme (e.g. wages, materials, etc.).

Only projects which can absorb a large amount of unskilled labour are suitable for implementation under public works arrangements. Typical examples are projects in the fields of infrastructure and natural resource conservation, e.g. rural roads and feeder roads construction, dam construction, afforestation and erosion control. Even if cost-effective, such projects usually demand large fiscal expenditures, and the assets created are, in most cases, public goods which do not generate revenue for the government. To reduce government expense, the costs may be fully or partly borne by foreign assistance, either in form of budgetary support or, for example, in kind, as food aid deliveries.

Food-for-Work (FFW)

FFW projects are a special type of public work scheme where the people employed are paid in kind of food. The rationale of FFW projects is a combination of employment creation, food security and development objectives. However, the main impetus to launch FFW projects often comes from the resources available to fund such schemes, namely food aid provided by external donors (see Chapter 6 on issues of external assistance).

There has been an extensive debate about the appropriate form of payment: cash or kind. Even in cases where public work programmes are funded by food aid deliveries from abroad, there exists, in principle, the possibility of cash payments via monetisation of the food aid deliveries. Monetisation means that the food aid commodities are sold on the market, and the counterpart funds generated through the sales are used for specific purposes, for example to finance public works programmes. Whether wages in kind or in cash are the preferable form of payment depends on various factors, as shown in the table 5.4.

Table 5.4: Determinants of preferable type of payment in public works programmes

Experiences show that participants in FFW schemes usually sell part of the food received, in order to generate some cash income needed for other purposes (clothing, other food items, school fees, repayment of debts, etc.). In areas with large FFW programmes, massive 'informal monetisation' leads to an artificial increase of supplies on the local food market and exerts a downward pressure on local food prices. This, again, depresses the real income of the participants (lower value of the food rations received), on local food production as well as on the farmers' income in the project area. Figure 5.7 below depicts the lines of impact of informal monetisation with the dashed line linking non-market transfers (in this case FFW rations) with the elements, household income and food market.

In order to avoid the possible detrimental effects of informal monetisation, and in cases where no clear decision for or against one specific form of payment can be made, the optimal solution may be a combination of both forms of payment: part-payment in cash and part in kind.

Public works programmes contribute to improved access to food and household food security indirectly via increasing household incomes, enabling the target group to increase their effective market demand for food, or directly in the case of FFW by increasing household food supplies. Depending on the development assets created, there may be also indirect effects on the volume of food production and supply, e.g. in the case of rural infrastructure, land and water conservation measures. The lines of impact are illustrated in Figure 5.6 above and Figure 5.7 below.

Although public works programmes appear as an appropriate approach to mitigate poverty and improve household food security, they cannot be applied everywhere and in all situations where vulnerable groups need assistance. Public works can only reach those people who are able to work, and they require suitable project designs to be developed, complementary material and technical inputs, and an infrastructure with appropriate management capacity for their implementation. Where these preconditions are not given, other approaches have to be applied, in order to reach specific vulnerable target groups. Such alternative approaches to targeted food assistance are discussed in the following sections.

3.4 Targeted food subsidies

The issue of general food subsidies has already been addressed in section 4.3 of Chapter 4. Due to the high costs and budgetary burdens involved, and because of the market distorting effects, such systems are usually discarded or substantially cut down under adjustment, and replaced by targeted approaches. Targeted subsidies are designed to reach groups selected on the basis of need. This can yield substantial fiscal savings while maintaining benefits to the poor and vulnerable.

However, targeting also incurs special costs and has specific infrastructural requirements. These result from the need for screening beneficiaries, for setting up a special distribution network, and for the establishment of an effective administration and monitoring system. Typically, there is always a trade-off between the level of administrative costs of targeting and the extent to which the subsidy leaks to non-target groups. In analysing the cost-effectiveness of targeted interventions, the administrative costs of targeting have to be weighed against the degree of leakage to non-target groups.

A replacement of general food subsidies by targeted approaches may also cause social friction and political problems, as targeting always means that certain population groups are excluded from the subsidies. A switch from general to targeted subsidies will be particularly difficult, if politically influential sections of the population are excluded.

Targeted food subsidies mean a food-mediated income transfer to the target group (if effectively reached). The effects of food subsidies on household food security result from a real income and a substitution effect (see Annex 1, section 4 with Box A-2 for definition). Both effects imply increased household food demand of the beneficiaries, hence increased household food entitlement and improved household food security.

Food subsidies may be targeted in various ways:

i) geographically,
ii) by commodity,
iii) through a special distribution network (fair price shops/ration shops),
iv) food stamps,

i) Geographical targeting

Geographical targeting means that the subsidies are exclusively directed to areas where vulnerable groups are concentrated. These could be the urban/suburban housing and squatter areas of poor families, or rural areas with acute, seasonal or chronic food shortages. Simple geographical targeting involves low administrative costs but will also benefit those households in the area who are less poor and not affected by food shortages. To avoid this, geographical targeting may be combined with some kind of additional targeting method, e.g. ration cards issued to households according to specific criteria such as income below a certain level, families with children, female headed households, etc. This, however, will increase the administrative costs, as mentioned above.

ii) Targeting by commodity

Targeting by commodity can be applied in areas and countries where there are differentiated consumption patterns of low and high income groups, for example coarse grains, roots and tubers constituting typical staples of low income groups while high income households prefer other food commodities such as fine grains like wheat or rice (see section 3.3.5 of Chapter 4 and the discussion of demand elasticities in section 4 of Annex 1).

Subsidies on "inferior" commodities are a relatively cost-effective method of targeting with few administrative requirements, as they are largely self-targeting. However, safeguards may become necessary against misuse (e.g. quantity restrictions, food stamps), in order to prevent the subsidised low-cost food commodities being (mis) used for other than the programme purposes (e.g. as animal feed or for beer brewing). Such practices would substantially reduce programme performance.

In general, the opportunities for commodity targeting are very country specific, depending on existing food consumption patterns and on other factors. It also depends on the objectives of the food intervention programmes. If the objective is a food-mediated income transfer to poor households and/or an increase in their calorie intake, commodity subsidies may be an appropriate method. If the objective is to mitigate certain nutritional deficiencies of specific vulnerable groups (e.g. protein deficiencies of children and mothers of poor families) with suitable food commodities (e.g. milk, dairy products), or where there are no typical staples of the poor, mere commodity subsidies are not effective. In such cases, they must either be combined with other forms of targeting (e.g. geographical targeting, ration cards or ration shops, see Box 5.5 and 5.6), or approaches to direct food transfers must be applied (see section 3.5 below).

iii) Fair price/ration shops

Fair price/ration shops are special outlets for the sale of subsidised commodities to the target population. As such shops are usually placed in areas where low income groups are concentrated, they represent a form of geographical targeting. In order to achieve more precise targeting, restrictions concerning the population groups eligible to purchase in such stores and/or regulations concerning types and quantities of commodities which can be obtained there may be applied.

Compared to other approaches to targeted subsidies, additional costs accrue from the need to set up and to manage a particular distribution system. Such costs are largely avoided in the case of a food stamp programme, as discussed in the following section.

iv) Food stamps

Food stamps are a method of targeting subsidies through a coupon system. The coupons are distributed to eligible groups and can be cashed as part or whole payment for purchases of a predetermined set of commodities in specific retail outlets. The participating retail outlets can be ordinary private shops which are refunded by government on presentation of the coupons. Government is not directly involved in supply and retailing operations. Its involvement is confined to administrative tasks such as the issue and distribution of the food stamps and refunding the participating retailers. The beneficiaries have a choice among the range of scheduled commodities. This gives the food stamps a "near-money" property. Food stamp programmes are considered as consistent with the operation of markets, a cost-effective way of food-mediated income transfer to low income households, and as an attractive alternative to general food subsidies, largely in line with the objectives of budgetary savings and market liberalisation under adjustment.

There are, however, a number of crucial difficulties and problems involved in establishing a functioning food stamp system:

a) It is important that the intended beneficiaries are effectively targeted. This requires a system to identify and register the beneficiaries, and to provide regular entitlements on the basis of continuously updated records. Apart from the administrative capacities required, this is an almost insurmountable task in countries without an established social welfare system and with large informal sectors which makes it difficult to validate eligibility.

b) The near-money property of the coupons makes them highly vulnerable to financial abuse and leakage. This refers to all stages of the network: issue of the coupons, distribution, use by the recipients, acceptance by the retailers up to refunding. To minimise abuse requires a well administered system of control.

c) As food stamps are usually denominated in monetary terms, their value rapidly erodes in countries with high inflation rates, implying a substantial reduction in the real transfers to the poor (see, for example, the Sri Lanka case recorded in Box 4-2, Chapter 4). Even if revalued, in practice value adjustment often lags behind in time and value.

For the reasons mentioned above, food stamp programmes are only feasible and effective in countries with strong public administration. In countries with weak public administrations, (and this may apply to most of the countries concerned), less sophisticated targeting procedures, specifically self-targeting approaches, appear to be the more appropriate solutions.

There are further aspects which limit the applicability of targeted food subsidy programmes in general:

• Food subsidies can only benefit those population groups who have, although minimal, cash income. All population groups without any cash income (e.g. subsistence farmers, jobless, old and sick persons, children, refugees, etc.) cannot be reached by food subsidies. These may be the most vulnerable to food insecurity.


• Food subsidies are relatively ineffective in alleviating food deficiencies resulting from unequal intra-household distribution, e.g. distribution patterns favouring the adult male household members at the expense of the children, female members, etc.


• Food subsidies are relatively ineffective in alleviating specific nutritional deficiencies with certain types of food commodities which represent either high value products or food items which are unfamiliar to the target groups (e.g. high protein food to mitigate protein deficiencies in young children, pregnant and lactating mothers).

In all the latter cases, direct food transfers appear as the only feasible alternative of targeted food interventions.

Direct food transfers mean a free distribution of food rations to the beneficiaries through a particular distribution network. Various types of direct food transfers can be applied, depending on the food deficiency problem to be addressed, the target group to be reached, and the available infrastructure:

i) Free distribution of relief rations,
ii) Special feeding programmes.

i) Free distribution of relief rations

In all cases where whole groups of people have lost their basis of subsistence, for example in the wake of natural or man-made disasters, free distribution of food rations may be required to bridge the period of destitution and maintain a minimal level of subsistence. Depending on the situation, the infrastructure and the means available, rations to cover all or part of the household food requirements may be distributed on a daily, weekly or monthly basis.

Targeting is usually best achieved if daily rations are distributed. This, however, involves high administrative costs and requires the beneficiaries to come to the distribution centre every day. If at all feasible, this can only be done in cases where the target group lives close to distribution centres, e.g. in refugee camps or urban areas.

Experiences show that relief food is most effectively distributed where it is channelled through established community structures, and least effective, where it is provided in the framework of massive institutionalised relief operations (GTZ 1993, op. cit.). Therefore efforts should be made to keep the people in their community environment by providing assistance there. This has the additional advantage that the beneficiaries can still apply their various coping strategies of which reliance on relief food distribution is only one. If people migrate to camps or distribution centres they lose alternative means of subsistence and become completely dependent on relief assistance. This involves a high risk of food insecurity, due to delays and irregular supplies.

The sale of relief aid by the beneficiaries is a common phenomenon, particularly if weekly or monthly wholesale rations are distributed. There are various reasons why beneficiaries often sell part of their relief rations: to satisfy urgent cash needs, to buy other necessary commodities needed (e.g. salt, sugar, soap, clothing, etc.), to exchange the commodities received for preferred local or cheaper types of food, to avoid bulky transport if people live far away from the distribution centres, etc. For such reasons, the sale of part of relief rations is not necessarily an indication of excessive relief supplies. Relief food assistance can also be considered as a type of real income transfer, comparable to food subsidies or FFW wages.

In any case, massive food relief distribution schemes require close monitoring, in order to ensure proper targeting and to prevent major market distorting effects resulting from large scale informal monetisation. Such effects were, for example, reported in the Ogaden region of Ethiopia in 1992/93 where, due to massive and excessive free relief food supplies, the price of grain dropped to 20 ETB per quintal (Ethiopian Birr per 100 kg of grain), compared to 100 ETB per quintal in surplus producing areas of the country and transport costs into the Ogaden region of 160 ETB per quintal (GTZ 1993, op.cit.).

In general, emergency food assistance has the advantage of assuring direct access to food. The effectiveness of disaster relief operations depends primarily on whether assistance is provided in time and volume according to need which, again, requires an institutional mechanism to identify the needy persons and to distribute the relief commodities directly to them. Also here, the administrative overhead costs to ensure precise targeting have to be weighed against the implicit costs of leakage.

ii) Special/supplementary feeding programmes

Special feeding programmes have been implemented in many developing countries. They are most effective when targeted to high risk individuals, such as children, pregnant and nursing mothers, old and sick people.

In general, special feeding programmes are administratively intensive in terms of screening and reaching the eligible people, and they require a certain level of infrastructure and logistical support for their successful implementation. Often existing institutions such as health centres or schools are used as a distribution network. Sometimes special food distribution or feeding centres need to be established. The food may be distributed as take-home rations or provided as wet-feeding on site. In the latter case, the administrative costs are relatively high but targeting is most effectively achieved, as leakages caused by intra-family sharing and selling of food is reduced. An evaluation of supplementary feeding programmes in five countries found that in on-site feeding, mothers reported 79-86 percent of the children ate the ration compared to only 50 percent under the take-home programme. One project showed that the increase in the weight-for-age of pre-schoolers who participated in on-site feeding was significantly greater than that of children who were enrolled in a take-home programme (FAO 1988, op.cit.).

If the whole family is, however, poor and exposed to food insecurity, certain leakage to other family members may be acceptable and considered as effective, as the feeding programme will have nutritional benefits for the other household members, too, and increase overall household income. There are further potential benefits of feeding programmes. School feeding programmes can provide an effective channel for distributing food to children of low-income families and an incentive for such families to send their children to school. This cab contribute to increase school enrolment and attendance among school-age children. Such programmes will, of course, be less effective or ineffective if the majority of the school children come from relatively better-off families, if the poorest families do not send their children to school, or if the crucial nutritional deficiencies are in under school-age children. In the latter case, health care or special mother and child care centres may be an appropriate channel to reach the target group.

Figure 5.7 presents a concise view of the impacts of the food policy interventions discussed in the previous sections. The Figure is based on the framework of macro-meso-micro linkages presented in section 2 of Chapter 4 (Figure 4.1). However, in contrast to that model, the meso-economic elements here (markets of food, production inputs, credit, labour, and the economic and social infrastructure) do not refer to the aggregate markets and the overall infrastructural setting, but to the segregated elements (special markets, institutions and services) serving particularly the target groups of the policy interventions. The aggregate food market is introduced as an additional element into picture (oval box), of which the segregated food markets (e.g. local or restricted food markets such as fair price shops or market outlets for ration card holders) constitute one component.

Figure 5.7: Framework of meso-micro economic linkages of food policy interventions*)

*) The numbers in the oval-shaped boxes refer to the category of targeted policy interventions (upper boxes). Numbers in parenthesis indicate an indirect or less significant link to the respective policy.

The picture depicts the main linkages of the food system with the main lines of impact of food policies on the supply and demand factors determining household food entitlement of poor and vulnerable groups. The effects and the major lines of impact are summarised in the subsequent paragraphs. For details refer to the analysis in the preceding sections.

i) The supply side measures discussed in section 2 (agricultural/food production, pricing, stocking and import policies) influence aggregate food supplies, i.e. the volume of domestic food production, food stocks and food imports. Aggregate food supplies determine food availability at the food market (market supplies) as well as the food available for transfers (FFW and direct transfers) to target groups. The food for transfers may be procured through local purchases by governmental or non-governmental institutions, or may stem from food aid deliveries. Food aid deliveries from abroad (concessional food imports) are included in aggregate food supplies.

ii) Effective household food demand and institutional demand are linked as demand factors with aggregate food supplies. This points to the importance of effective market demand (household and institutional demand) as a prerequisite for maintaining a certain level of domestic market production.

iii) Targeted production support measures (1) link through the segregated food, input and/or credit markets with the elements household income, aggregate food supplies (marketed food production by smallholder target groups) and subsistence production. Increased household income (resulting from increased sales revenues of marketed smallholder production) results in increased household food demand, hence increased market access to food, while increased subsistence production of the target group directly augments household food supplies.

iv) Public works programmes (2) directly influence the labour market. They contribute to increase household cash incomes or, in the case of FFW, household food supplies. By improving the production basis, the assets created through public works programmes may also contribute to increased domestic food production and aggregate food supplies (indirect effects on aggregate food supplies).

v) Targeted food subsidies (3) directly influence the (prices on the) segregated food market. Lower food prices will increase the real household income of the target group, and, in turn, increase effective household food demand of the target groups.

vi) All types of targeted interventions (1,2,3,4) require special infrastructural provisions, in order to establish and to administer the segregated markets, and to ensure that the intended target groups are effectively reached.

vii) In the case of direct food transfers (4) these are, for example, institutions which undertake local purchases or receive external food aid supplies (indicated as institutional demand arrow), and which distribute food rations (institutional supplies) to the beneficiaries. The direct food transfers directly increase household food supplies of the target groups.

viii) The dashed lines linking non-market transfers with the food market element depict the effects of informal monetisation on the food market (supply factor) and on real household income. There are also indirect effects of non-market supplies on household food demand if, as a result of the food rations received or due to increased subsistence production, the households reduce their effective market demand for food (demand factor).

Introduction

1. The activities proposed below should refer to a specific country case. Depending on available data, this could be the country where the course is held or the country of origin of participants.

2. Activities 2 and 3 may be considered as a specific important elements of an overall food security strategy which are elaborated in greater detail.

Activity 1: Outline of a food security strategy of a country, taking into account the implications of adjustment policies for overall national and household food security

This activity closely links with activity 2 of Chapter 4 where the impact of adjustment policies on food security have been analysed. In elaborating the outline of a food security strategy of a country, the following elements, addressed in Chapter 5, need to be considered:

• Assessment of the typical overall structure of food deficits in the country concerned (refers to Annex 1, section 1 and Chapter 5, section1);
• Supply side measures (Chapter 5, section 2);
• Measures to improve access to food, depending on the situation of most vulnerable groups which have been identified in the country (Chapter 5, section 3).

1. As a first step, template A5 overleaf listing the determining factors for the requirements of a food buffer stock/food security reserve should be completed, using the following scores to indicate the degree of vulnerability to food insecurity and the implications for food stock requirements:

+++ very strong, ++ strong , + fair positive implications for food security, argument against the need for a food security/buffer stock;

- - - very strong, - - strong , - fair vulnerability to food insecurity, argument in favour of food security/buffer stocks;

o not applicable or undetermined.

• Main purpose (market intervention, emergency food reserve)


• Number of people to be covered


• Time to be covered (depending, e.g. on food import lag)


• Risk of total stock depletion


• Storage costs (investment and operation costs)


• Financial resources.

Template 5A: Determining factors of the requirements of a food buffer stock and/or a food security reserve

Activity 3: Design of policy measures aimed at improving household food security of selected vulnerable groups

Select one or more of the vulnerable groups in the country concerned (for example, as identified in activity 1 in module 1) and elaborate a detailed proposal of policy measures specifically designed to improve the food security situation of the groups concerned.

On the basis of Figure 5.7, Chapter 5, trace the line of impact of the proposed policy measures down to the factors determining the household food entitlements of the target groups, and explain the nature and dimension of their effects on the various elements.