EDITORIAL: Improve safety net system to shield vulnerable from the rising food prices

Saturday November 30 2019

market

Many households have been forced to do without some essential meals due to the rising costs of food occasioned by severe shortages due to limited local supplies, combined with challenges linked to border restrictions. PHOTO | FILE 

RWANDA TODAY
By RWANDA TODAY
More by this Author

The country is experiencing rising food prices as recorded by e-soko, a government platform transmitting regular market prices information from different locations in the country.

In addition, the increase in prices of the fresh products at 13.8 per cent on annual change had a bearing on the October consumer price index (CPI), the main gauge of inflation released by the national institute of statistics.

Prices of the fresh products had increased by 6.8 per cent on the annual change in September.

Since vulnerable members of our society include both net consumers and net sellers of food commodities, an increase in food prices will inevitably hurt some (poor urban dwellers and landless rural residents) and benefit others (small poor farmers).

Food price increases’ overall impact on poverty depends on: The relative importance of different food commodities in the production set and consumption basket of different households and the difference between the two; The magnitude of the relative price change; The degree to which households are compensated for the price shocks by changes in their income (i.e., by the indirect effect on wages and employment originated by the price change).

Studies suggest that the poor spend between 60 per cent and 80 per cent of their income on food on average. Among the poorest of the poor, many are net consumers of food.

Advertisement

For them, the increase in domestic food price has been significant, and the positive effects on wages lag behind.

Empirical evidence shows that the decline in living standards of net consumers caused by the recent increase in food prices outweighs the benefits accruing to net sellers in the majority of countries that have been analysed so far.

Therefore, the current wave of increasing prices of basic food items around the country means poor net buyers will be adversely affected by higher food prices and net buyers living just above the poverty line are likely to have become poor.

Urgent measures are needed to contain the situation to ensure that those living at the bottom of the pyramid are protected.

Experts propose that given that the shock is a price increase rather than reduced supply, the most adequate safety net is to compensate the affected population for their loss in purchasing power in cash.

Though one key limitation of cash transfer programmes is that they do not have a mechanism to incorporate the “new” poor or increase the size of the benefit in the face of adverse shocks as part of their design.

While cash transfers are not sustainable, in the long term, what is required is for the government to consider increasing access to more land or more productive methods to vulnerable homes to reduce their dependence on purchasing food in the market and begin to address the supply-side constraints on food production.

Policy measures are also needed to improve access to seeds, fertilisers, small animals, land, credit to purchase inputs, and technical assistance.

More needs to be done to ensure that the existing safety net system responds effectively to protect our vulnerable populations from food shocks.

Advertisement