The coronavirus pandemic has been a crushing one-two punch to the global economy, delivering a dual shock to supply and demand in quick succession. It’s a serious threat to food security because even though there is enough food for everyone in the world, it’s not a given that people have access to it.
The first jab was the disruption to the global food supply chain. Food has to move from where it is produced to where it is needed. Thanks to farmers and workers across the food supply chain, food has been moving, if with delays. And logistical bottlenecks that cause the delays are being resolved. The second blow is a global recession. Surging job losses means that people are losing income to buy food. It could trigger a food crisis induced by lack of income rather than high food price.
In April, the International Monetary Fund projected that the global economy would shrink by 3% in 2020. To put this into perspective, the world economy didn’t contract at all during the 2007-2008 financial crisis. In May, the IMF said the growth forecast would be slashed further. As we enter June, it seems likely that global growth would drop at least 5%, if not more.
Even before the pandemic, hunger was on the rise with 821 million people not having enough food. If the world economy contracts by 5 – 10%, between 38.2 million and 80.3 million people in countries that rely on food imports could be added to the count. The ranks of the hungry will expand in the poorest and most unequal regions. It will exacerbate economic inequality, which in turn will worsen hunger.
Many food insecure people live in poorer countries that have been hardest hit. The oil price crash dried up sources of revenue for exporters in Africa and Latin America. Tourism shut down, which is especially damaging for Small Island Developing States like Fiji, Maldives and Mauritius. Remittances are falling because the senders in rich countries have lost their jobs in the informal economy. The World Bank expects remittances to fall by 20%, the sharpest decline in recent memory.
The pandemic could decimate 35% of employment in the food systems. That’s 451 million jobs and more than a billion livelihoods — and that’s not counting losses of informal jobs.
Africa ticks all the boxes. Pre-pandemic forecasts indicated that the desert locust outbreak would force 25 million people in East Africa, including Ethiopia, Kenya, Somalia, Uganda and Sudan, to face acute food insecurity in the second half of the year. A single swarm, containing some 150 million insects per square kilometer, can devour in a single day the amount of food that could feed 35,000 people. Tumbling oil prices has led to decrease in revenue in countries like Nigeria, Chad, Libya and Algeria; it has also weakened local currencies against the dollar, making debt repayments to other countries all but impossible. The sub-Saharan region, which has the world’s highest prevalence of undernourishment, faces the first recession in 25 years. The continent’s poor, for whom social distancing is not an option, are debating whether to fall to the virus or hunger.
Governments must focus all their efforts on helping people ride out a deep recession. The effort starts with what I call the coronavirus resilience trifecta: health, food and the economy.
First, make sure the poorest and most vulnerable people have access to nutritious food, as food is essential in safeguarding health. Cash transfers that help people buy food in the market is ideal and should require them to purchase only healthy foods. Countries can subsidize producers, so that they can deliver unsold products to food banks, instead of throwing them away. The U.S. Department of Agriculture is helping farmers deliver pre-approved boxes of fresh produce, dairy products and meat to food banks and community organizations.
These social protection measures should be accompanied with efforts to increase production and employment. Infrastructure projects throughout the agri-food system can help. It is vital that rural populations benefit from this combination, as it will help prevent the further spread of poverty and hunger, and contain inequality. Vulnerable countries that are already in food crisis need funding to put this policy combo into action.
Second, keep the supply chains operating to ensure continued flow of food. This means protecting the health of all supply chain workers. If they fall ill, countries will be forced to resort to second rounds of lockdowns. Anyone who believes that the choice is between health and the economy is fooling themselves. Without health, there is no getting the economy back on track. This is already happening in the meat processing plants in the U.S. and the markets of Peru and Brazil.
Third, provide temporary support to smallholder farmers and micro, small and medium enterprises (MSME) to help them survive a drawn-out period along the bottom in a U-shaped recovery. They are facing severe liquidity constraints. Governments have to support them to protect their food production, reduce pre-harvest and post-harvest crop losses, and secure access to markets. These enterprises in agricultural value chains must stay liquid to ensure food supply. If not, the problem of food access and food availability could converge, creating a severe crisis.
Central Banks (when countries have the resources) or International Financial Institutions can provide warranties so banks can give loans at affordable interest rates to MSMEs. Such support — highly concessional emergency loans, business continuity grants, moratorium of loans payments, among others — should be adopted only if they are temporary and have a well-defined exit strategy. Businesses should qualify for this support only if they continue to produce food and deliver them to local markets and food banks. This line of access to credit or soft loans assures that small businesses stay open to serve local markets even when most other demand drops.
Fourth, create new market opportunities. Accelerating intra-regional trade can create new demand for food. This requires significant political commitment and investment to ramp up access to infrastructure and improve food safety. Improving food safety across the value chain can reduce non-tariff trade barriers — so that governments don’t restrict imports more than is necessary. This is central to promoting trade within a region. Africa could hugely benefit from removal of non-tariff barriers because the region can make up for the slumping export demand from Europe. The African Continental Free Trade Agreement is key to this.
The onus is on rich countries, too. Injecting cash into the economy is a challenge for poorer countries and they need help. In April, G20 nations agreed to put a moratorium on bilateral government debt repayments for some 70 low-income countries. It was a right move but is far from enough. Poorer economies require long-term support, including debt cancellation — in a deeply interwoven world, this is to every country’s benefit.
COVID-19 is an extraordinary crisis because of the twin shocks to supply and demand. So it requires an extraordinary response. Countries have a rare opportunity to deploy the full power of fiscal and monetary policies to avert a food crisis and address inequality. They shouldn’t hold back from implementing the four recommendations above. These are not foolproof but sure can prevent millions of people from slipping into the hunger trap, making it that much easier to bounce back from the recession.
Countries must move fast. Time is in short supply, and every day more people succumb to the virus or hunger.
(Photo Credit: NeONBRAND on Unsplash)