Though still inadequate, as a safeguard measure, the government has earmarked Rs 8.6 billion for agriculture sector in the budget of FY 2009/10. Additionally, some of the incentives that can be expected to greatly assist farmers to capitalize their investments are Rs 1.5 billion subsidies for chemical fertilizer, 50 percent capital grants to import machinery for organic fertilizer industry, concessionary tax policy and continuation of interest subsidy to small farmers.
The global financial crisis has offered an opportunity to focus worldwide attention to mobilize government and civil society to generate resources and experience on tackling hunger.
On the downside, global recession has led to high cost of imported inputs. Since Nepali currency devalued against the US dollar (from Rs. 68.50 in August 2008 to Rs. 75.60 during July 2009), the cash flows for majority of the farmers was significantly negative because of the higher price of import of the inputs such as fertilizers, fuel, chemicals and machineries. The cost of local inputs like energy and labor also went up.
The world is now showing some signs of gradual economic recovery. If such recovery sustains, falls in agricultural prices and in the production and consumption of farm goods are likely to be moderate. As downturn lowers food prices, pressure is eased on recession-hit consumers who have less money to spend says the OECD-FAO Agricultural Outlook 2009-2018.
It is surprising to note, on the average food prices have come down compared to the highs of early 2008 but remained still high in the poor countries. The projections show, average crop prices will be 10-20 percent higher in real terms (adjusted for inflation) for the next 10 years (compared with the average for the period 1997-2006). Prices for vegetable oils are estimated to remain at more than 30 percent. Failure of winter crop in 2007/08 (winter drought worst in 40 years) and less than 60 percent rainfall than the preceding years’ average during 2009 monsoon has made Nepal’s food security situation worse over the past three years. As a result of sharp and sustained decline in food production, the United Nations World Food Program reveals 3.4 million Nepalis have become severely food insecure and about 48 percent (with an average rate of 60 percent in mountains) children under five is estimated to suffer from chronic malnutrition.
For decades, macroeconomic policies did not support agricultural productivity growth. Investment in agriculture could not be increased. Agricultural research in developing world fell sharply by failing to increase yield growth rates. As a result, there were inadequate technical advances that increase sustainable yields. This situation contributed to the decline in global stocks of cereals and escalating cereal prices in 2008. The recent decision of G8 leaders to allocate US$20 billion three-year investment in developing countries is actually in response to 2008 price spikes.
Study shows poverty, hunger, environmental degradation and low educational attainment and agricultural productivity are self-reinforcing processes. Food being the single-biggest expenditure, the state of agriculture measures the state of livelihood of the poor. The World Bank research shows economic growth from agriculture generates three times more poverty reduction than growth in any other sector.
The time has come to assess the link between global financial crisis versus population growth, rising energy prices, subsidized bio-fuel production, underinvestment in rural infrastructure, limited access to inputs and weather disruptions. The diversion of capital into sub-prime mortgage lending and poorest regulatory instruments have further escalated food crisis. Some view that although the fundamental reason for financial and food crisis are different, they are becoming intertwined through their implications for financial and economic stability, food security and political security. Such relationships can be further elaborated by the fact that food crisis has pumped up general inflation and macroeconomic imbalances to which the state’s role should be the immediate adjustments in financial and monetary policies. If this is not done, the world would soon experience food price bubble since the world price of wheat and maize were three times higher than at the beginning of 2003, whereas the price of rice was five times higher says International Food Policy Research Institute’s Director General Joachim von Braun.
The advocacy of optimizing the use of natural resources by ensuring the availability, accessibility and affordability of food has never been a successful agenda. At present, the financial crunch has unfortunately diverted attention away from food crisis. Food and Agricultural Organization states that the cereal stocks-to-use ratio in 2008/09 is at its second-lowest level in three decades. About 40 percent increase in production is required to return to their pre-crisis levels to feed an estimated 960 million hungry people in 2009. Therefore, the president of International Fund for Agriculture recommends that governments must put agriculture first to ward off the impact of the global financial crisis on poor rural communities.
The world still produces adequate food to feed the world’s hungry population. As there have been gross inequities in distribution, at least 1 in 8 people have experienced extreme food insecurity. The damage caused by anti-agricultural macroeconomic policies can be corrected as soon as diversified small-scale production based on local needs is promoted where the community and regions take control of agriculture and food production.
It is true, hunger and malnutrition exacerbated by global financial crisis has further added millions of world’s population into the basket of chronically-food insecure. This has, however, offered an opportunity to focus worldwide attention to mobilize government and civil society to generate resources and experience on tackling hunger. Alternatively, such initiative can be expected to increase the ability of the farmers to grow more and emerge from poverty. It is therefore the right moment to discuss the challenges in financing and governing food & environmental security at a bilateral, regional and global level.
bishwambher@yahoo.com
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