20220707-IMF-Staple_Food_Prices_in_Sub-Saharan_Africa_An_Empirical_Assessment_44页_1mb

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Staple Food Prices in Sub-Saharan Africa: An Empirical Assessment

Introduction

• High food prices significantly impact inflation, food insecurity, and income distribution in Sub-Saharan Africa (SSA). Staple foods constitute a large part of consumption for poorer households and are vulnerable to global price fluctuations.
• This paper uses empirical evidence based on market prices of the five main staples across 15 SSA countries to understand domestic and external drivers of price inflation.

Key Findings: Drivers of Food Price Inflation and Vulnerability

1. External Drivers: Global food price shocks have a near-direct pass-through effect, especially for heavily imported staples. Even in countries less dependent on imports, global prices significantly influence local food prices.
2. Domestic Drivers:
   • Consumption Share: The proportion of total caloric intake from a particular staple acts as a primary determinant of its price.
   • Supply Side: High net import dependence raises prices. Poor domestic storage capacity, low agricultural productivity, fertilizer and fuel price increases, and droughts contribute to supply-side volatility.
3. Vulnerability Composition: External factors strongly drive inflation, but domestic factors like consumption shares and local production mitigate some price vulnerabilities. Countries with higher local production and consumption, along with better-managed monetary frameworks, generally exhibit lower food price inflation.
4. Food Insecurity Aggravating Factors:
   • Natural Disasters: Cause sharp, although temporary, price spikes (averaging 1.8%).
   • Wars: Lead to significantly higher and more persistent price increases (averaging 4%).
   • COVID-19: Amplified the price effects of other drivers, particularly for imported staples.

Disparities and Specific Effects:

• Urban vs. Rural Prices: Staple food prices are typically lower in large cities, reflecting better infrastructure and logistics, despite potential better-off urban purchasing power.
• Geographic Challenges: Higher terrain ruggedness increases food prices within countries, likely due to higher transport costs.
• Currency and Global Prices: Depreciation of the real effective exchange rate increases domestic currency prices of imported staples. Stronger cross-border demand for inputs like fertilizers raises prices.

Policy Implications

• Mitigating Inflation: Strengthening monetary policy credibility decreases food price sensitivity to global pressures. Countries with weaker fiscal management or higher public debt tend to have higher food prices.
• Engel’s Law: Income growth reduces the share of food spending, lowering overall food price inflation sensitivity as incomes rise.
• Infrastructure and Logistics: Investing in transport, storage, and basic inputs (fertilizers, fuel) reduces logistics costs, lowers market prices, enhances food availability and access, and promotes exports.
• Integrating Local and International Production: Strengthening domestic staples production reduces reliance on spatial arbitrage and lowers prices for high-import staples. The Africa Continental Free Trade Agreement (AfCFTA) presents opportunities.