GLOBAL: An Ethiopian solution to costly food aid

As food prices hit record highs, analysts warn that a re-think of food aid strategies is needed - and Ethiopia, a traditionally food insecure country, could offer some answers.

Globally, the World Food Programme's (WFP) operational budget for 2008 has now risen to $3.4 billion - "an increase of $500 million to account for the increased price of food and transport alone," said WFP spokesman Robin Lodge. "This budget is just to cover our current assessed needs, and leaves nothing for unforeseen emergencies or the huge number of people who are now falling into the hunger trap as a result of the rising prices."

Food prices are expected to continue to rise for the forseeable future as a result of surging global demand and reduced cereal stocks, partly on account of biofuel. Edward Clay, senior research associate at the Overseas Development Institute, a UK-based think-tank, noted that the situation called for a major re-think of food aid.

"Globalisation now means that the poor everywhere are affected. There is a need to ask how to anticipate a potentially much more volatile world food economy and this may require different institutional arrangements," he suggested. "How do we ensure that poor people and indeed poorer countries are not crowded out of world food markets?"

Food aid agencies have limited options, but the answer lies perhaps in Ethiopia, said Marc Cohen, research fellow at the US-based International food Policy Research Institute (IFPRI), and Shukri Ahmed, Senior Economist at the Food and Agriculture Organisation (FAO). "Ethiopia, which now has several million people in need of food assistance, has taken steps to emerge from aid dependency," Ahmed commented.

Among these was attempting to differentiate between people facing chronic food insecurity - currently estimated at more than eight million - and people facing either transitory or acute food insecurity - estimated between one to two million. Such a classification lent itself to providing a better response to food insecurity and targeting increasingly scarce food aid resources more effectively.

As part of a federal Food Security Programme (FSP), Ethiopia's Productive Safety Net Programme (PSNP) provides a combination of cash, farming inputs and food to the vulnerable and chronically food insecure, while the Emergency Food Security Reserve (EFSR) holds more than 400,000 metric tonnes of food available for aid agencies to borrow from in case of emergencies.

Ethiopia's past response

Five major droughts in two decades have left most Ethiopian households reeling, and hundreds of thousands of people still live on the brink of survival. Ethiopia's PSNP arose partly out of concern by the government and the donor community that emergency appeals were regularly falling short of their targets, or providing late and erratic support, according to the Human Development Report 2007/2008 by the UN Development Programme.

"For poor households, delayed support during a prolonged drought can have devastating consequences in both the short and longer term. In 1983-1984 it led to the death of thousands of vulnerable people [in Ethiopia]," the report pointed out.

The PSNP is a multiyear arrangement that started by assisting five million people in 2005 and intends covering eight million by 2009. It has widely been punted by the relief community as a model for building resilience to face climatic shocks.

The EFSR, set up in 1982 "to ensure people did not have to wait for food aid to arrive," said Ahmed, is managed by the government and aid agencies in a transparent manner: aid agencies can borrow from the reserve on condition that they replenish it within a certain timeframe.

"Until the late 1980s the grain reserves in several countries of sub-Saharan Africa were strictly regulated by government, with a strong bias towards the politically more active urban population," Ahmed remarked.

"Low consumer prices were maintained by a combination of low producer prices and heavy subsidies ... Parastatal companies or marketing boards with monopoly rights for the marketing of designated cereals - and, in some instances, the provision of inputs - were established to administer the system."

However, governments could not always provide the parastatals with adequate funds to finance their operations, which often led to reserve stocks being used for normal market operations. "Financial pressures on both governments and the parastatals resulted in insufficient resources being made available to replenish the reserve stocks at the start of the following marketing year," Ahmed said.

"At the same time, the donor community, which was facing increasing demands for food aid, was becoming steadily more disenchanted with the way that reserves stocks were being used, and was increasingly unwilling to provide the resources necessary for rebuilding stocks," he added.

"Progressively, the quantities held in reserves dwindled, eventually ceasing to exist in most countries. Thus, for many countries the strategic grain reserve, while continuing to form an integral part of the government's food security programme, tended to exist in theory rather than in practice."

IFPRI's Cohen said resource pooling - regionally or nationally - was the future of food aid. "Countries have to strengthen their disaster preparedness and become more self-reliant, as Ethiopia has developed its Disaster Preparedness and Prevention Agency and so has Bangladesh. The UN and other aid agencies can continue to provide them with support in developing capacity."

Shahidur Rashid, an IFPRI research fellow based in the Ethiopian capital, Addis Ababa, was more cautious: "I think [food aid dependent countries] taking control [of their response to food aid needs] is a rather strong statement.

"A high incidence of poverty, weak infrastructure and institutions, and limited ability to invest indicate that Ethiopia (and many other developing countries) will need aid to support anti-poverty programmes. The challenges are using the aid effectively and, along with economic growth, reducing aid dependency in the future."

Ethiopia is among the poorest countries in the world. Its agricultural sector accounts for about 40 percent of national gross domestic product (GDP), 90 percent of exports, 85 percent of employment, and 90 percent of the poor, according a recent paper by the World Bank's Derek Byerlee and Madhur Gautam, IFPRI's David Spielman, and Dawit Alemu of the Ethiopian Institute of Agricultural Research.

"Rural poverty is further compounded by extreme land shortages in the highlands - per capita land area has fallen from 0.5ha in the 1960s to only 0.2ha by 2005," the authors pointed out.

Response to price rise

The Ethiopian government has announced a temporary freeze on WFP's local purchases of food for emergency interventions, among other measures to counter high and still rising domestic food prices. The government also banned exports of the main cereals and grain stockpiling, and a temporary 10 percent surtax on luxury imports has also been imposed to help fund wheat subsidies for the poor.

WFP began buying food in Ethiopia in the mid-1990s on the invitation of the government, to help firm up prices, "which tended to fall drastically at harvest time, resulting in farmers often receiving prices which were incredibly low, as farmers were under pressure to dispose of their commodities to meet urgent cash requirements," said Simon Denhere, WFP Ethiopia Procurement Officer.

He brushed aside any assumption that WFP had been prevented from buying locally because its purchases had affected food prices. "WFP's procurement policy is that local purchase will only be implemented where there are marketable surpluses, to the extent that WFP purchases should not have a negative impact on the market, WFP should be a 'residual buyer', so to speak," he explained.

Role of aid agencies in the future

As countries develop, "food aid agencies should gradually go out of business," commented Rashid. He cited India, where the scale of food aid has declined significantly as the country developed its own ability to invest and implement anti-poverty and social safety net programmes. But Ethiopia's PSNP still depends on several aid agencies, "and I don't see Ethiopia, and many other developing countries, break free from such supports in the near future."

WFP's Denhere suggested that the Ethiopian government needed to invest in the supply side of agriculture. "Recent policies have been targeted at the demand side and price controls, often curtailing the activities of traders and buyers and market improvements.

"If WFP were to leave Ethiopia, beneficiaries who have no capacity to enter the market will be worst affected, as they will have no fallback position ... owing to the levels of poverty in the country, many families could face probable starvation."