High food prices, depreciation, to hit the poor most, cautions UN

The United Nations Economic Conference for Trade and Development (Unctad) says the rising global food prices and currency depreciation will create food security challenges for import dependent developing countries like Malawi.

In a report titled A Double Burden; The effects of Food Price Increases and Currency Depreciations on Food Import Bills, Unctad said this is more so because of a stronger US dollar.

Reads the report in part: “Food prices have hit record levels in 2022, creating challenges for food security worldwide, especially for people in the developing countries that import most of their food.

“Although the world has suffered food crises in the past, the current one, triggered by the Covid-19 pandemic and the war in Ukraine, is different because of a stronger US dollar.”

An index published by the UN Food and Agriculture Organisation tracking the prices of the most traded food commodities remained at historically high levels in November (135.7 points) after reaching an all-time high in March (159.3 points).

During past crises, the value of the US dollar fell as food prices climbed.

Since the dollar is the main currency for international trade, its devaluation lowered the final price in local currency that people paid for imported food. This provided some relief.

But the US dollar has gotten stronger this time, climbing 24 percent between May 2021 and October 2022 as the Federal Reserve increased interest rates to try to curb inflation in the United States.

Unctad said the combination of high food prices and a strong dollar is a “double burden” that many people in developing countries cannot bear, leaving them to face even harder choices to make ends meet, such as skipping meals or taking a child out of school.

Malawi Agriculture Policy and Advancement Agenda (Mwapata) data shows that the country’s value of food imports doubled between 1998 and 2018, signifying the country’s huge overdependence and reliance on foreign-made food products during the two decades under review.

According to the study, between 2015 and 2016, for instance, there was an upsurge in food imports of about 64 percent while food exports grew by only two percent in the same period, the study shows.

Classifying imported commodities by end-use broad economic categorisation shows that importation of food and beverage both primary and processed constituted about 80 percent of food imports between 2010 and 2018.

Malawi’s dependence on food imports not only renders the country vulnerable to volatile prices and increased national debt, but also contributes to food insecurity in the case of an abrupt increase in world food prices.

In addition, the country has also been losing a lot of foreign exchange as a result of food imports, which consequently piles more pressure on the kwacha as demand for foreign currency outstrips available supply.

Meanwhile, the country is yet to start reaping benefits from the Buy Malawi Strategy, launched to enhance competitiveness of local firms, stimulate local production, promote industrialisation and enhance import substitution, six years after its launch.

In an interview, Chamber for Small and Medium Businesses Association executive secretary James Chiutsi said: “Little effort has been invested to improve the business environment, competitiveness and capacity of small and medium enterprises, thereby limiting the benefits”. n