The International Monetary Fund says food crisis will be a double edged sword that countries like Botswana might use to their advantage while the prolonged period of higher prices will have a devastating impact on poor people.
Naoyuki Shinohara, IMF Deputy Managing Director, said in a paper this week that spike in food prices will simultaneously impact on economic rebound as public finances could be diverted towards subsidies.
“The food price increases, particularly if sustained, will disproportionately hurt the poor and can have long-lasting effects,” argued Shinohara.
“However, elevated food prices can also offer opportunities for many sub-Saharan African countries to adopt policies to stimulate their agricultural sectors.”
He added that such rapid movements in key prices create big winners and losers in sub-Saharan Africa and complicate macroeconomic management.
Food prices have been rising owing largely to shortages because of floods that devastated the Sub Saharan region and spike in oil prices.
Botswana has a raft of policies, including NAMPAAD and other government subsidised arable schemes, that its people could use to their advantage and become self reliant in agriculture.
In terms of policy response, Shinohara said the first best policy response in these circumstances is to allow the pass through of international prices to domestic prices, and to provide targeted support to the most vulnerable groups.
He added that the support can be in the form of subsidies, income support, or direct provision of food items.
He, however, warned that, of course, in many countries in the region identifying the neediest can be quite challenging, even more so when it has to be done at such short notice.
“Where such identification is not possible, other, still targeted relief should be considered. This could include temporary lowering of import taxes on essential staple foods,” he said.