The Design and Implementation of Effective Safety Nets December 2 - - PowerPoint PPT Presentation

The Design and Implementation of Effective Safety Nets December 2 - 13, 2002 Washington, DC The World Bank

Public Intervention in Responses to the Shock of the 1998 Flood in Bangladesh Carlo del Ninno Protecting the Vulnerable: The Design and I mplementation of Ef f ective Saf ety Nets December 2 - December 13, 2002 - Washingt on, D.C.

Bangladesh in Summer of 1998

The 1998 Floods in Bangladesh • From early July to the end of September, 1998, floods covered much of Bangladesh • At their peak on 7 September, 1998, 51 percent of the country was under water • The floods caused 2.04 million MTs losses, equal to 17.9 percent of target national rice production for the first half of 1998/99 • Yet, no reported deaths from starvation occurred after the flood, and food market prices were stable

Outline of the Presentation • Availability of Food – Volume of public food grain distribution following the flood – Market availability and private sector imports • Impact on household and coping strategies • Government transfers – Effectiveness of targeting – Determinants of program participation • Policy impacts on calorie consumption – Econometric estimates of calorie consumption – The contribution of rice prices and government transfers to post-flood calorie consumption • Conclusions

Food Aid for Flood Relief and Rehabilitation • After a GOB appeal for international help on 26 August, donors committed 1.081 million MTs for flood relief to Bangladesh. • By 30 June 1999, total food aid received was 1.22 million MTs, about 620 thousand MTs for flood relief. • The remainder of the flood relief food aid later was deferred to fiscal year 1999-2000.

Public Food Grain Distribution • Initial efforts to increase public food grain distribution were constrained by a shortage of rice and wheat stocks. • Actual distribution from July through December 1998 was only 26 thousand MTs (4.3 percent) greater than originally planned for these months. • The arrival of government commercial imports and food aid later permitted a 415 thousand MT expansion in public distribution.

Foodgrain Distribution by Channels, Budget and Actual 1998/99 Budget 1998/99 Actual 1998/99 VGF Rice 8% EP/OP Rice OMS Rice 6% TR/VGD TR/VGD OMS Rice 12% Wheat** Wheat** 0% 13% FFE Rice EP/OP Rice 11% 3% 8% FFE Wheat FFW/VGD VGF Rice FFE Wheat 12% Rice* 11% 1% 7% VGF Wheat FFE Rice EP/OP Wheat 1% 9% 5% VGF Wheat 14% FFW Wheat 22% FFW/VGD FFW Wheat Rice* EP/OP Wheat 33% 18% 6% Rice = 529 Th MTs Rice = 813 Th MTs Wheat = 160 Th MTs Wheat = 905 Th MTs Total Foodgrain = 2.32 Ml MTs Total Foodgrain = 1.78 Ml MTs

Trade Liberalization and Private Food Grain Imports • In the early 1990s, Bangladesh liberalized food grain trade, allowing private sector imports of wheat in 1992/93 and rice in early 1994. • In October 1994, India also liberalized its private rice trade, permitting private sector exports of non-basmati rice, (though an export quota remained).

Rice Price Stabilization • At the same time, as part of its price stabilization strategy, the government encouraged private sector imports through the elimination of a 2.5 percent import tax on rice and other measures. • In response to market incentives, hundreds of private sector traders imported an estimated 2.42 million tons of rice from July 1998 to April 1999 (according to official data).

Rice Price Stabilization • Private sector rice imports thus set a ceiling on domestic rice prices, equal to the import parity price of rice, ( equal to the cost of rice in Indian markets plus trade and transport margins), preventing a major price increase. • Adequate levels of government stocks may have also helped stabilize markets through influencing private traders’ expectations of the ability of the government to intervene in local rice markets

Rice Prices and Quantity of Private Rice Imports in Bangladesh, 1993-2000 18.00 400 16.00 350 14.00 300 12.00 250 Imports ('000 MT) Price (Taka/kg) 10.00 200 8.00 150 6.00 100 4.00 50 2.00 0.00 0 Jul-93 Jan-94 Jul-94 Jan-95 Jul-95 Jan-96 Jul-96 Jan-97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Private Sector Imports Import Parity(ex: Bongaon) Dhaka Wholesale Price Import Parity(ex: Delhi) Note : Price data for April 2000 is up to the fourth week only; private sector imports are as of 26th April, 2000. From November 1998, the carrying cost has increased by 1.1 Tk/kg to 4.1 Tk/kg. From January 2000, 5% tax imposed on rice import. Source : Dorosh (1999), calculated using data from FPMU and MIS, DG Food, CMIE (1999, 1998, 2000) and Baulch, Das et. al, (1998).

1998 Market Prices in the Absence of Imports From India • In the absence of trade with India, the next lowest cost source of imports would likely have been Thailand. • From December 1997 to November 1999 import parity prices from Thailand averaged 16.1 Tk/kg, 21 percent higher than the Dhaka price. • If private trade with India had not been feasible, (and assuming no change in GOB interventions), rice consumption would have fallen by an estimated 4.2 to 6.3 percent and rice imports (from Thailand) would have been 0.7 - 1.0 million tons less

Increasing Access to Food by Flood Exposed Households • Even though the contribution of public food grain distribution was small in terms of increasing availability of food grain, it nonetheless played an important role in increasing access to food for poor, flood-exposed households.

Impact on Households and Coping Strategies • Employment and Income – Agricultural production – Wealth (asset losses) • Health and Nutritional – environment and illness – status of children and women • Food consumption – Caloric consumption • Household coping mechanisms • Government transfers • Effect of rice price increase

FMRSP-IFPRI Household Survey • FMRSP-IFPRI conducted a survey of 757 rural households in seven flood affected thanas at three points in time: Nov 98, Apr 99 & Nov 99 • 71.1 percent of households surveyed were exposed to the flood, 57.6 percent were severely exposed to the flood (defined in terms of depth of water in the house, depth of water in the homestead, and number of days away from home due to the flood).

Food consumption • The price of rice, vegetables and many other foods that were in short supply increased, and as a consequence caloric consumption of flood-exposed households was 272 cal/person/ day less than non flood exposed households • After the flood, the mean level of total household expenditure decreased from Taka 4,001 in the first round to Taka 3,663 in the second round and remained relatively stable at Taka 3,508 in the third round

Food consumption • The decrease of total expenditure was due to the decrease of non-food expenditure from Taka 1,293 in the first round to Taka 842 in the second round and Taka 855 in the third round. • As a consequence of the change in the expenditure pattern, the resulting consumption of calories per capita per day increased across the three rounds from 2,249 to 2,518 and 2,526 respectively

Per capita daily calorie consumption Per Capita Daily Calories 4,000 3,000 2,000 1,000 0 Nov-98 May-99 Nov-99 Poor Middle Non-Poor

Government Transfer Programs • 47.2 percent of all households received government transfers. • 24.4 percent of households received Gratuitous Relief (GR); 21.8 percent of households received Vulnerable Group Feeding (VGF). • For the August through November period, government transfers were generally equal to only a small share of expenditures.

Value of Transfer Received and Share of Total Household Expenditures (5.3) 100 (2.6) Average Value of Transfers (Taka/Month/Household) 90 (1.0) (2.9) (1.8) 80 70 60 50 40 30 20 10 0 Quintile 1 Quintile 2 Quintile 3 Quintile 4 Quintile 5 Household Expenditure Quintile Gratuitous Relief (GR) Vulnerable Group Feeding (VGF) Other Government Transfers NGO Transfers *The Numbers In Perentheses Denote The Percentage Share of All Transfers On Total Household Expenditutres

Targeting the Poor • 67.1 percent of households in the lowest per capita expenditure quintile received government transfers. • 38.8 percent of households in the lowest per capita expenditure quintile received VGF transfers; 17.2 percent and 11.2 percent of households in the top two expenditure quintiles, also received VGF. • GR transfers were less well targeted to the poor.

Households Receiving Transfer By Expenditure Quintile (Percent) 40 35 Percentage of Households 30 25 20 15 10 5 0 Quintile 1 Quintile 2 Quintile 3 Quintile 4 Quintile 5 Household Expenditure Quintile Gratuitous Relief (GR) Vulnerable Group Feeding (VGF) Other Government Transfers NGO Transfers

Targeting by Flood Exposure • GR was better targeted towards flood-exposed households. Only 11.4 percent of GR households (as compared to 24.7 percent of VGF households) were not directly exposed to the flood. • 36.7 percent of very severely flood-exposed households received GR transfers, while only 24.5 of this category of households received VGF transfers. • Coverage was small in both programs. 69.3 percent of flood-exposed households did not receive GR; 76.6 percent did not receive VGF.