I had a long chat with Pascal Fletcher at Reuters on Friday while he was writing this article on the effect of price rises for food and fuel in west Africa, where he’s based. He clearly knows the region back to front, and as his piece makes clear, the outlook isn’t good:
Africa’s cocoa makes the world’s chocolate, its fish, fruit and vegetables reach tables around the globe and its oil powers vehicles and factories from China to the United States. Yet far from benefiting from soaring commodity prices, African states are being squeezed as hard as any by the costs of fuel and food imports. Their desperate moves to cushion the impact for potentially restive populations threaten to wreck already stretched budgets, slashing receipts and swelling state spending.
As far as I can tell from the rough tally I’ve been keeping over the last few months, west Africa’s been one of the regions hardest hit by civil unrest related to food and fuel inflation, and Pascal’s article seems to confirm this. As a result, many governments have been under pressure to subsidise prices for both. Problem is, that doesn’t do their exchequers any good at all – quite apart from the inflationary impact of such measures.
The unplanned contingency measures, on top of global food and oil prices far above what most imagined a year ago, are wreaking havoc with governments’ finances. “This trend is throwing the budget out of gear,” Ghana’s President John Kufuor lamented last month when he unveiled a package of actions to mitigate the price rises …
As I argue in Pascal’s piece, the expense of subsiding goods across the whole economy, coupled with the inflationary impact, are two of the reasons for the current enthusiasm for social protection systems – be they food aid, vouchers or straightforward cash transfers – that are targeted at the poorest people. Expect to hear a lot about such ‘social protection systems’ at this week’s UN food summit.
But there’s a catch, too: in many places, the infrastructure for administering these systems just isn’t in place. Helping countries to get it set up has to be a top priority for donors – starting right now.