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Restrictions on developing countries that provide support to smallholder producers and subsidized food to food-insecure consumers became the centre of a WTO dispute at the Bali Ministerial in 2013. India, which had just passed a National Food Security Act entitling two-thirds of its population to 5 kilograms of subsidized grains per capita per month through its food distribution programme, demanded relaxation of restrictions on such domestic price support programmes. The Bali agreement exempted existing programmes for stockholdings of traditional staple crops until a permanent solution to the dispute could be found. However, introduction of new food distribution programmes, expansion of existing programmes, and inclusion of nutritious non-staple foods in food distribution programmes continue to be subject to the Aggregate Measure of Support restrictions.
Figure 3.3 Proportion of children of primary and secondary school going age provided meals at school, by country, 2012 (percent)
It is important that the global trade agreements are revised to remove disparities in permissible agricultural support levels between developed and developing countries, modify archaic clauses in the rules that govern global trade, and provide exemptions from restrictions on procurement programmes meant for domestic food security and support to poor producers. These rules have severely limited the potential of national governments to run food distribution programmes for the purpose of domestic food security.
Cash transfer programmes Following the decline in food provisioning programmes over the last few decades and the recent promotion of cash transfer programmes, the latter have become the most widely used instrument for social protection in developing countries. Many countries, particularly in Latin America and the Caribbean, have established large-scale cash transfer programmes. Some of these have had remarkable outcomes in reducing the prevalence of poverty and food insecurity, though not necessarily malnutrition. Cash transfer programmes can be either conditional, when they require beneficiaries to satisfy certain conditions like sending children to school, or unconditional, where a basic transfer is ensured for all.
Cash transfer programmes in Latin America and the Caribbean Large-scale use of conditional cash transfer (CCT) programmes started in Latin America in the late 1990s (Cecchini and Madariaga, 2011). By the end of the first decade of the twenty-first century, CCTs were used in almost all countries of Latin America and the Caribbean, covering about 19 percent of the region’s population (Table 3.3). Spending on CCTs was about 0.4 percent of total GDP of all countries in the region. The most well-known and biggest CCT programme, Bolsa Familia in Brazil, started with a coverage of about
3.6 million families in 2003, when various social protection programmes in the country were merged to form the programme. By 2013, Bolsa Familia covered 13.9 million families. Mexico ended decades-old corntortilla subsidies and shifted to the Progresa-Oportunidades conditional cash transfer programme in the late 1990s. Starting with about 1.6 million families, the coverage of Progresa-Oportunidades expanded to about 5.8 million families by 2012.² In terms of coverage of national populations, ² In addition, about 700,000 households in Mexico were covered by the Programa de Apoyo Alimentario (PAL) in 2012. The PAL covers marginalized communities which cannot fulfil conditionalities of Oportunidades because of non-availability of schools and health facilities. Households covered by PAL can either opt to get a fixed food basket from the Distribuidora Compañía Nacional de Subsistencias Populares (DICONSA) store, or an equivalent amount of money.
52 Ending Malnutrition Table 3.3 Latin America and the Caribbean: Coverage of and public expenditure on conditional cash transfer programmes, by country, 2009–10 (percent)
Ecuador’s Bono de Desarollo Humano programme has the highest coverage, of 44 percent.
Cash transfer programmes in Africa While Latin American countries have been able to implement large-scale cash transfer programmes primarily with domestic resources, growth has been sporadic and slow in Africa. Social protection in Africa has been heavily dependent on aid and used primarily to deal with emergencies akin to ‘social safety net’ programmes. The decline in the availability of food aid has weakened social protection systems in Africa and encouraged countries to shift to donor-funded cash transfer programmes. Although a few middle-income countries have been able to sustain cash transfer programmes albeit with heavy donor support, in most African countries, cash transfer programmes have been implemented as pilot projects or as small, short-term projects to deal with emergencies. Kakwani, Soares, and Social Protection 53 Son (2005) argue that owing to budgetary constraints, most cash transfer schemes in Africa set benefits at such low levels that they have very little impact on poverty.
Food stamps/coupons Food stamps/coupons are essentially cash transfers only meant for food purchase. In a typical food coupon programme, beneficiaries are entitled to food coupons worth a specified amount of money every month, which they can use to buy food from approved retailers. Food retailers can then exchange these food coupons for money.
The longest running food stamps programme is the Food Stamps Programme in the United States, started by the Food Stamps Act of 1977 and renamed as the Supplementary Nutritional Assistance Programme in 2008, which covers, according to statistics for 2014–15, over 46 million Americans.
By contrast, food coupons have not been very popular among developing countries (Josling, 2011). Most countries that have introduced food coupons have done so mainly to reduce the fiscal burden of food subsidies through narrow targeting. Several countries in Latin America and the Caribbean experimented with food coupons in the late 1970s and early 1980s, before abandoning them in favour of CCT programmes.
Since no producer subsidies are involved, food coupon programmes are not considered trade-distorting under the WTO’s Uruguay Round Agreement on Agriculture.
Nutritional impact and limitations of cash transfer programmes In countries that have implemented large cash transfer programmes – providing substantial transfers and covering most of their vulnerable population – these programmes have increased expenditure on food as well as other essentials. Manley, Gitter, and Slavchevska (2013) provide a detailed review of a large number of evaluations of various cash transfer programmes. The general finding of most studies is that programmes that involve substantial transfers result in higher food consumption and improved dietary quality.
Beneficiary households consume more fruit, vegetables, and animal-source foods than households with similar economic status who are not covered by cash transfer programmes. Expenditure on food accounts for the bulk of the money provided by cash transfer programmes in developing countries. Cash transfer programmes that provide substantial transfers and are accompanied by other interventions providing access to nutritionally rich food items are associated with improved nutritional outcomes. Food coupons, when substantial in their real value, have been found to significantly contribute to improving dietary diversity (Hidrobo et al., 2014). On the other hand, 54 Ending Malnutrition when the real value of transfers is very small, benefits in terms of increased consumption and improved nutritional outcomes are not significant.
In comparison with programmes that entitle beneficiaries to a certain amount of food, an important limitation of cash transfer programmes is that the entitlements for beneficiaries are not protected against inflation. Very few cash transfers have entitlements indexed to inflation. There are many examples in low-income countries where cash transfer and food stamps programmes became insignificant because of depreciation of the real value of transfers, and the unwillingness of governments and donors to index entitlements against inflation.
Rapid devaluation in the value of food stamps because of food price inflation is the most serious problem that food stamp programmes in developing countries have faced (Swaminathan, 2004). Sri Lanka, where the food stamps programme started in 1978, is one of the few developing countries that continues to have a food stamps programme. However, as shown by Edirisinghe (1987), the real value of food stamps in Sri Lanka fell to about half their original value within three years of introduction. A careful assessment of the shift from a universal food subsidy scheme to food stamps in Sri Lanka by Anand and Kanbur (1991) found that “the burden of real cuts in the food subsidy budget is likely to have fallen disproportionately on the poor”. With the low value of transfers involved, food stamps in Sri Lanka have not had any significant impact on nutritional outcomes. In Jamaica, another country where a food stamps programme has been implemented for a long time, devaluation of the real value of food stamps has marginalized the significance of the programme.
Sabates-Wheeler and Devereux (2010) reviewed the impact of food price crisis on the real value of cash entitlements under the Productive Safety Net Programme (PSNP) in Ethiopia. Under different conditions, participating households under the PSNP are provided food or cash, employment in public works, as well as other specified goods and services. They show that the real value of cash transfers in terms of staple cereals varied considerably across districts and seasons because of variations in prices; the real value of cash transfers in terms of staple cereals had eroded to less than half within just four years since the inception of the PSNP.
Sabates-Wheeler and Devereux (2010) highlight that not only has the real value of cash transfers diminished because of food price inflation, in places where food supply is constrained and entirely dependent on unregulated private traders, cash transfer itself can exacerbate inflation. This in turn further diminishes purchasing power and particularly adversely affects vulnerable households that are excluded from the cash transfer programmes. Cunha, De Giorgi, and Jayachandran (2011) studied the inflationary impact of cash and food provisioning using data from beneficiaries of the Mexican Programa de Apoyo Alimentario (PAL), which allows beneficiaries to choose between cash and in-kind transfers. In half of the Social Protection 55 villages studied, poor households were directly provided food through the PAL; in 25 percent of the villages, beneficiary households were provided equivalent amounts in cash; while in the remaining control villages, no transfers were provided. The study found that food provisioning contributed to bringing down inflation by increasing supply along with increasing demand for food, while cash transfer programmes exacerbated inflation.
This difference alone accounted for an 11 percent additional benefit from food provisioning against cash transfers.
Since beneficiaries of cash transfers/food coupons purchase food from the market, governments are not required to procure, stock, and distribute food. Cash transfers/food coupons can be used when infrastructure for public procurement, supply-chain management, and distribution does not exist for running food distribution programmes. In countries where food distribution programmes only provide staple grain, cash transfers (in particular, food coupons) can be used as a complement to improve access to perishable commodities like fruit, vegetables, and milk.
However, the flip side of this aspect of cash transfers/food coupon programmes is that governments do not intervene on the supply-side to ensure that adequate food is available to meet the demands of the programmes.
Without such an intervention, the impact of a food coupon/cash transfer programme on production is mediated by the market, and may not be optimal for long-term food security, nutritional outcomes or sustainability.
Besides, as discussed already, imperfections in the functioning of markets and supply-side bottlenecks can create serious inflationary imbalances.
It is widely recognized that the use of conditionalities requires considerable supply side investments to ensure availability of services upon which provision of cash is made conditional (Fernald, 2013; Ghosh, 2011). Some conditional cash transfers have been criticized for large-scale exclusion of particularly vulnerable sections of the population because of their inability to meet conditions (Garcia and Moore, 2012). Also, the cost of imposing and monitoring conditionalities can be high, and may outweigh the benefits of imposing them. In Sub-Saharan Africa, most cash transfer programmes are either unconditional or have soft conditionalities not requiring mandatory compliance as supply constraints and the inability of many beneficiaries to comply with the conditionalities could result in large-scale exclusion of many of the poorest and most vulnerable (Garcia and Moore, 2012). In Mexico, the Programa de Apoyo Alimentario (PAL) was started in 2003 to provide support to communities whose households are unable to participate in Oportunidades because of absence of a school or health clinic nearby.
Conditionalities under the PAL are softer than in Oportunidades, and are not strictly enforced.
There can also be considerable leakage and fraud in cash transfer programmes; preventing them usually entails considerable monitoring costs.
Where penetration of formal financial systems is low, regulatory systems are 56 Ending Malnutrition weak, and corruption in the public services is serious, cash distribution can create significant opportunities for fraud at different stages of programme implementation. Ellis, Devereux, and White (2009) have documented various kinds of problems in targeting social protection programmes in Africa. For example, in Lesotho’s Old Age Pension programme, ‘ghost beneficiaries’ were created to secure benefits. In various programmes in many countries, headmen, officials, and other powerful people have cornered substantial benefits. The experience with cash transfers in India’s Integrated Rural Development Programme (IRDP) in the 1980s was similar.