RESAKSS ASIA PUBLICATIONS

× Policy simulations utilizing an economy-wide model based on PNG national accounts and survey data highlight the importance of linkages between the agricultural and non-agricultural sectors of the PNG economy.
There are potentially major benefits of increased agricultural productivity for national income and urban households. To reduce rural poverty, however, transport and processing costs must be lowered, as well.
Even if only half of the increase in foreign exchange earnings from the 2022 world energy price shock is absorbed into the PNG economy, the real exchange rate appreciates by 13 percent, reducing incomes from export crops. However, increased domestic demand for non-tradable crops contributes to a 10 percent income gain for the rural poor.
Using a portion of increased oil and natural gas revenues to finance new investments in crop agriculture, processing and transport, provides even greater benefits by spurring real GDP growth and raising real household incomes by an additional 2 to 4 percentage points.
A hypothetical carbon credit arrangement in which PNG reduces deforestation in exchange for funds used to finance cash transfers to the poorest 20 percent of both urban and rural households could raise the incomes of these groups by about 13 percent.

× Understanding how the Papua New Guinea (PNG) agricultural economy and associated household consumption is affected by climate, market and other shocks requires attention to linkages and substitution effects across various products and the markets in which they are traded. In this study, we use a multi-market simulation model of the PNG food economy that explicitly includes production, consumption, external trade and prices of key agricultural commodities to quantify the likely impacts of a set of potential shocks on household welfare and food security in PNG.
In this study, we use a multi-market simulation model of the PNG food economy that explicitly includes production, consumption, external trade and prices of key agricultural commodities to quantify the likely impacts of a set of potential shocks on household welfare and food security in PNG. We have built the model to be flexible in order to explore different potential scenarios and then identify where and how households are most affected by an unexpected shock. The model is designed using region and country-level data sources that inform the structure of the PNG food economy, allowing for a data-driven evaluation of potential impacts on agricultural production, food prices, and food consumption. Thus, as PNG confronts different unexpected challenges within its agricultural economy, the model presented in this paper can be adapted to evaluate the potential impact and necessary response by geographic region of an unexpected economic shock on the food economy of the country.
We present ten simulations modeling the effects of various shocks on PNG’s economy. The first group of scenarios consider the effects of shocks to production of specific agricultural commodities including: 1) a decrease on maize and sorghum output due to Fall Armyworm; 2) reduction in pig production due to a potential outbreak of African Swine Fever; 3) decline in sweet potato production similar to the 2015/16 El Niño Southern Oscillation (ENSO) climate shock; and 4) a decline in poultry production due to COVID-19 restrictions on domestic mobility and trade. A synopsis of this report, which focuses on the COVID-19 related shocks on the PNG economy is also available online (Diao et al., 2020).1
The second group of simulations focus on COVID-19-related changes in international prices, increased marketing costs in international and domestic trade, and reductions in urban incomes. We simulate a 1) 30 percent increase in the price of imported rice, 2) a 30 percent decrease in world prices for major PNG agricultural exports, 3) higher trade transaction costs due to restrictions on the movement of people (traders) and goods given social distancing measures of COVID-19, and 4) potential economic recession causing urban household income to fall by 10 percent. Finally, the last simulation considers the combined effect of all COVID-19 related shocks combining the above scenarios into a single simulation.
A key result of the analysis is that urban households, especially the urban poor, are particularly vulnerable to shocks related to the Covid-19 pandemic. Lower economic activity in urban areas (assumed to reduce urban non-agricultural incomes by 10 percent), increases in marketing costs due to domestic trade disruptions, and 30 percent higher imported rice prices combine to lower urban incomes by almost 15 percent for both poor and non-poor urban households. Urban poor households, however, suffer the largest drop in calorie consumption - 19.8 percent, compared to a 15.8 percent decline for urban non-poor households. Rural households are much less affected by the Covid-19 related shocks modeled in these simulations. Rural household incomes, affected mainly by reduced urban demand and market disruptions, fall by only about four percent. Nonetheless, calorie consumption for the rural poor and non-poor falls by 5.5 and 4.2 percent, respectively.

× The onset of the COVID-19 pandemic has presented a unique challenge to governments across the globe, reinforcing the need to improve understanding of domestic and international trade trends to provide more informed options for policy response. During the last several months, IFPRI has been analyzing a variety of Papua New Guinea (PNG) national and global datasets with the goal of expanding analytical tools to evaluate potential production shortfalls and food price shocks, and their associated impacts on household food security and livelihoods. This research note focuses on agri-food import and export trends during the last two decades to better evaluate potential changes in related import demand and export potential in PNG. In doing so, this research note informs an upcoming economy-wide multi market model analysis that will model a variety of potential shocks to household welfare to identify policies to manage potential ensuing food security threats.
PNG’s growth in international agri-food trade (both export and import) will continue to be important to overall food security outcomes among rural and urban households. Rural households that produce key export cash-crops (e.g., coffee, cocoa, palm oil) depend on the cash economy to supplement overall food consumption, while urban households depend on rice and other agri-food imports (as well as domestic goods) for consumption. Agri-food imports are also contributing to important increases in the availability of protein-dense foods, with the value of poultry imports growing, on average, 30 percent per capita per year from 2001 – 2016. Although PNG’s agri-food import data suggest a greater demand for higher value food items such as animal-sourced foods, the total import value of ultra-processed foods, such as sugary drinks, are also increasing rapidly within PNG.
The profitability and growth of agricultural exports and imports are driven by several factors, including levels of public investment in infrastructure, weather and climate shocks, security and political stability, and conditions in the world market. Government economic policies, including exchange rate, trade and price policies, also heavily influence agricultural trade. Policy to promote and facilitate domestic movement of goods, as well as macro-economic policies that influence the relative price of tradable to non-tradable goods (the real exchange rate) should be managed appropriately to support and incentivize greater agri-food production and trade. These policies could also be paired with an expanded set of education programs that integrate nutrition-sensitive information to address current increases in demand and consumption of high-saturated and sugary processed goods, of which total import values are rapidly increasing in PNG. Finally, a greater portfolio of organized databases, analytical tools and policy resources are warranted to facilitate real-time policy analysis that can inform key development investments and initiatives.

× Public food transfer program provide a lifeline for the poor in both high- and low-income countries, and many countries stepped these up in response to COVID-19. But little is known about how effective these programs have been in reaching the poor during the crisis. This brief reviews the findings of an evaluation of Bangladesh’s Food Friendly Program, pointing to the difficulties encountered during the pandemic and lessons to help these program perform better in future crises.

× Provision of food safety requires not only regulation but also a demand pull where value chain participants demand food safety or are able to play their role in providing safe food. In both cases, producer, and consumer awareness about requirements for food safety is a precondition for delivery of food safety. In this paper, focusing on dairy in Sri Lanka, we assess the awareness and choice of practices by producers and consumers towards food safety. Sri Lanka has unique features in the dairy sector, with very high import penetration and form of consumption, i.e., powdered milk, that actuates formalization.
Looking at different segments of the population, including rural, urban and estate, and different management systems, the evidence suggests only a moderate level of food safety awareness in dairy in middle-income consumers in Sri Lanka. Considering the differences across systems, the degree of adoption of food safety is lowest among farmers in the extensive system, while it is highest among farmers in the intensive system. However, in terms of choice between powdered and fresh milk, food safety consciousness is one of the most significant determinants where fresh milk is considered comparatively unsafe.
Even when food safety issues arose in powdered milk, only small adjustments occurred in consumption, both because the health effects were limited, and the choice sets were circumscribed by the number of brands across which some consumers switched following the food safety scare. In the push toward promotion of fresh milk consumption, ensuring food safety and convincing consumers about merits of fresh milk would be required in Sri Lanka beyond the preference change from well-established powdered milk consumption.

× The Ukraine War has had major implications for food security and food systems across the world given the important role both Russia and Ukraine play in global food, fertilizer, and energy markets. Russia and Ukraine together supply about 12% of global agricultural exports on a caloric basis and over 30% of global wheat exports.1 Fertilizer and energy markets experienced rising prices and supply disruptions as well. The Russia-Ukraine conflict heavily impacted food security in Sri Lanka which is dependent on imports from the Caspian region. The impact of this shock has been compounded for Sri Lanka which has been suffering from a severe economic crisis due to a lack of foreign reserves, a debt default, high inflation, import restrictions, and shortages of critical goods and services. These compound crises have halted Sri Lanka’s progress on economic development and its achievement of the SDGs. Progress had been significant with the share of undernourished population declining from 16.7% in 2001 to 3.4% in 2020.2 During the same period the prevalence of stunting declined from 20.6% to 16%.3 The prevalence of wasting among children under age five declined from 15.9% in 2000 to 15.1% in 2016. Sri Lanka was ranked 65th out of 116 countries on the Global Hunger Index and 77th out of 113 countries on the Global Food Security Index in 2022 suggesting the need for some improvements in the food system. The latest food security assessment by the World Food Program (WFP) notes that about 30% of the population of 22 million (6.26 Mn people) are food insecure.4 Further, most households are regularly employing food-based coping strategies such as eating less preferred and less nutritious food and reducing the amount of food they eat. Further, an estimated 200,000 households are using emergency livelihood coping strategies that are likely to severely impact their income-generating activities and it is anticipated that more people are turning to these coping strategies as the crisis deepens. Against this backdrop, this policy brief explores the impacts of the evolving crisis in Ukraine on the nexus of poverty, agriculture, and food security in Sri Lanka and the possible avenues for mitigating the negative implica-tions of export restrictions, rising import costs, and inflation.

× Maximizing efficiency throughout the entire agri-food value chain is critical to fostering greater economic growth and poverty reduction in Papua New Guinea (PNG). Investments in midstream value chain infrastructure (e.g., improved storage facilities, rural feeder roads, electricity, and cold storage transport) are crucial to strengthen linkages between producers and consumers. These investments should also promote inclusive development that benefits both men and women value chain actors. In this study, we analyzed three key value chains in Papua New Guinea—poultry, sweet potato, and fresh vegetables—aiming to guide policymakers and stakeholders toward ways to improve productivity, increase revenue, and bolster competitiveness and inclusiveness within the agriculture and livestock sectors.

× While a lot of development planning and policy attention has been dedicated to achieving dietary energy (i.e., calorie) adequacy to ensure food security and support greater household wellbeing, nutrition adequacy is also necessary to achieve improved human development indicators (e.g., improved educational attainment, decreased disease prevalence, and decreased child stunting prevalence). This study (explained in detail in the comprehensive working paper) calculates two poverty lines based on the costs that an individual faces in PNG to secure a diet consisting of foods typically consumed by poor households adjusted to align with a calorie threshold and healthy diet thresholds, respectively, together with modest non-food expenditures. Results suggest that over half of the sample households are unable to meet the necessary costs of ensuring an calorie equate modest food basket along with some basic non-food needs (Schmidt et al., 2022). Comparing the healthy diet poverty line to average household income suggests that attaining a nutritious, balanced diet while meeting other basic needs remains out of reach for nearly 4/5 of the rural sample households. Based on the study results, we identify 3 key interventions to improve food and nutrition security in vulnerable areas. First, PNG will continue to face disruptive climate events that quickly increase agricultural vulnerability and food insecurity in remote areas with limited market access and underdeveloped support services. The government of PNG in collaboration with development partners should pilot a series of social safety net programs that can assist vulnerable populations. These programs can be designed to build resiliency during non-shock seasons or years, such as improving livestock holdings, diversifying crop mix, investing in sustainable land management, and building agricultural production and other rural infrastructure for improved marketing and access to agricultural inputs. Second, a concerted effort is needed to promote the importance of nutrition at all levels of society. At the household level, training should aim to instill (for both men and women) the value of a costlier, but more nutritious diet. District and regional government officials, healthcare workers and other key stakeholders should be trained on methodologies to integrate nutrition programming into other development activities. High-level government dialogue and learning should aim to encourage greater coordination between local and federal government officials and across government departments to ensure improved nutrition outcomes for greater agricultural productivity and economic growth. Finally, PNG (both government and development partners) must invest in more timely data collection of key welfare indicators to inform nutrition targets and assistance programming.

× Russia’s war on Ukraine shows no signs of subsidence. Its economic and societal adversities have already been felt worldwide but keep evolving, with food and energy being the most affected. Low-income, food-deficit nations importing from these two countries – many of which are in Northern Africa and Western and Central Asia – face critical challenges. The South Asian region, which has grappled with surging commodity prices and supply constraints even before the war, is likely to witness further inflation with rising food and oil prices. India is home to around 18% of the world’s population and accounts for 74% of the South Asian population. It is predicted to be the fastest-growing big economy this year. The country’s central bank (RBI) predicts that GDP will grow by 7.5% in FY 2022-23 (RBI, 2022), while many international organizations forecast growth between 6.4% and 8.2% (ADB, 2022; IMF, 2022; United Nations, 2022; World Bank, 2022). Still, in the wake of the ill effects of COVID-19, the country’s dependence on imports such as oil, fertilizers, and edible oils, and given surging domestic food and nonfood inflation in recent months, raises concerns about economic stability and possible interventions that might curtail fragility. The country consumes around 5 million barrels of crude oil daily but imports over 89% of its requirement from overseas. Crude oil prices have increased by 27% in just four months since the start of the war (February- June 2022). Edible oils have similarly increased, with palm and soybean oil prices rising by around 14% and 18%, respectively. The price of sunflower seed oil has increased by 42%, of which 86% originates from Ukraine and Russia. Fertilizer import dependency from the conflict regions is also sizeable. Russia was the 5th largest supplier of fertilizers to India in 2021-22, and Ukraine and Belarus were the 9th and 10th largest suppliers. The rise in prices of both finished fertilizers and fertilizer inputs has prompted the Government to double the fertilizer subsidy budgeted earlier this year. This policy brief investigates India's susceptibility to the war's disruptions and higher prices for commodities where import dependence is high. It then discusses potential income, food, and nutritional impacts on farmers, the poor, and the vulnerable. It also evaluates the Government’s policy measures such as subsidization, social safety nets, and trade diversification to reduce the impact of the war. Finally, it explores the market opportunities the conflict has created and the required structural reforms that would equip the country to handle such shocks in the future

× Policy simulations utilizing an economy-wide model based on PNG national accounts and survey data highlight the importance of linkages between the agricultural and non-agricultural sectors of the PNG economy.
There are potentially major benefits of increased agricultural productivity for national income and urban households. To reduce rural poverty, however, transport and processing costs must be lowered, as well.
Even if only half of the increase in foreign exchange earnings from the 2022 world energy price shock is absorbed into the PNG economy, the real exchange rate appreciates by 13 percent, reducing incomes from export crops. However, increased domestic demand for non-tradable crops contributes to a 10 percent income gain for the rural poor.
Using a portion of increased oil and natural gas revenues to finance new investments in crop agriculture, processing and transport, provides even greater benefits by spurring real GDP growth and raising real household incomes by an additional 2 to 4 percentage points.
A hypothetical carbon credit arrangement in which PNG reduces deforestation in exchange for funds used to finance cash transfers to the poorest 20 percent of both urban and rural households could raise the incomes of these groups by about 13 percent.