News Brief No. 02/123

News Brief: IMF and World Bank Issue a Statement on the Food Situation in Southern and Eastern Africa

December 13, 2002

The International Monetary Fund's African Department Director, Abdoulaye Bio-Tchané and the World Bank Group's Vice-President Calisto Madavo issued the following joint statement to the Boards of Executive Directors of both institutions, on the food situation in Southern and Eastern Africa:

"The food security situation in southern and eastern Africa has continued to deteriorate since the summer. Donors' response to date has met only half of the midyear appeal for aid by UN agencies. Since then, the needs have doubled, and we urge donors to increase the assistance provided to deal with this enormous humanitarian crisis.

"In southern Africa, food stocks built up by the population at risk in the six most affected countries (Lesotho, Malawi, Mozambique, Swaziland, Zambia, and Zimbabwe) during the April-June harvest period are now largely depleted. The World Food Program (WFP) is currently projecting that up to 14.4 million people are likely to be affected early in 2003, compared with its previous projection of 13 million. In addition, a major food crisis is unfolding in the Horn of Africa, where it is expected that over 15 million people in Ethiopia and Eritrea will be at risk next year.

"There has been a heartening response by the international community to the southern Africa food crisis since the appeal launched by the UN agencies, in support of which Mr. Köhler and Mr. Wolfensohn wrote to Executive Directors on July 30, 2002. The UN appeal has so far received pledges toward food aid of US$286 million. However, this falls short of the initial target of US$507 million in food aid plus US$104 million in nonfood assistance. In addition, a further US$600 million is now expected to be needed in 2003 to cover the costs of aid to Ethiopia and Eritrea.

"It has become increasingly clear that the food crisis and the HIV/AIDS pandemic are closely intertwined. HIV/AIDS has reduced agricultural productivity and increased the demands on a declining working population for food provision; at the same time, it has raised the vulnerability of a large proportion of the population to a decline in the level of nutrition. The combination of high HIV/AIDS prevalence and food deficiency is causing an unprecedented dependency on international financial assistance.

"As Executive Directors know, the Fund and the Bank have been assisting the authorities of the affected countries in a variety of ways. Discussions with Fund staff in the context of ongoing PRGF arrangements have included consideration of the budgetary implications of the food crisis and the HIV/AIDS pandemic, and fiscal deficit targets were raised to accommodate the related government expenditures. While emphasizing that the primary source of supplementary external financing should be grants or highly concessionary loans, the staff has indicated the Fund's willingness to consider covering a portion of the financing needs. For Malawi, an emergency credit of SDR 17.35 million (25 percent of quota) was disbursed on August 29, 2002 to help finance a large additional quantity of food imports. Use of such emergency assistance, or the Fund's Compensatory Finance Facility (CFF), is also available in principle to other countries in the region. A possible augmentation of access for Lesotho under the PRGF arrangement will be discussed during the current staff mission. The last mission to Zambia discussed possible augmentation under the PRGF, but this was considered not necessary at the time.

"The World Bank has approved assistance packages for both Malawi and Zambia to help alleviate the impact of the food shortage and other domestic needs. The assistance packages, each totaling US$50 million, are partly composed of IDA credits and partly of IDA grants, and will support import finance, as well as such items as social safety nets, targeted packages for smallholder planting, public works programs, and government early warning and disaster management systems.

"The extent and means of addressing the food situation vary considerably from country to country. Nearly half of the population is at serious risk in Zimbabwe, compared with roughly one-fourth in Lesotho, Malawi, Zambia, and Swaziland. Zimbabwe is facing a continuing disaster. For the other countries in southern Africa, the crisis will worsen materially over the coming months, although there is a prospect of some relief by next April as the first crops of 2003 are harvested. In the Horn of Africa, where nearly half the Eritrean population and one in five Ethiopians are affected by the drought, food security is expected to deteriorate rapidly into the beginning of 2003. Widespread mortality of cattle is also expected.

Reluctance by governments to allow imports of genetically modified (GM) grain has been widespread in the region, and particularly strong in Zambia, even when suppliers have offered to mill the grain to flour before delivery. Adequate alternative sources to GM grain have not yet been fully identified.

"The situation of individual countries is as follows:

"Eritrea is facing a critical food situation that is expected to worsen appreciably in 2003. Agricultural production could fall by as much as 70 percent from 2001. The cereal deficit in 2003 is estimated at 400,000 tons. Of this food deficit, WFP is appealing for funding for 140,400 tons. While Eritrea would be eligible for emergency assistance or resources from the Compensatory Financing Facility, use of these resources would be too costly for the country, and, therefore, additional aid in the form of grants is urgently needed.

"Ethiopia has met its food aid need for 2002, but it will need 1.44 million metric tons in 2003 as a result of sparse and delayed rains in 2002. Projections for 2003 point to 14.3 million drought-affected people, with HIV/AIDS and a lack of infrastructure aggravating the crisis. The Ethiopia Disaster Prevention and Preparedness Commission launched a joint government-UN food appeal for 2003 at the time of the Consultative Group meeting in Addis Ababa on December 7, 2002. The Bank is preparing an emergency operation, similar to those for Malawi and Zambia. An augmentation of access under the PRGF arrangement may be appropriate if alternative sources of financing are not available.

"Lesotho is seeking 36,000 tons of emergency cereal food assistance from the international community to provide support for at least 30 percent of its population. The situation is made more critical by an estimated HIV/AIDS prevalence rate among the working-age population of 31 percent. In addition, higher grain prices and an increase in the volume of commercial imports are straining the fiscal and external balances. The overall fiscal deficit has been raised to accommodate the government's expenditure on food relief. An augmentation of access under the PRGF arrangement may be appropriate, but no request has been made to date. The current mission for the fourth review under the PRGF arrangement will discuss this issue with the authorities.

"Malawi now anticipates humanitarian aid requirements of 240,000 tons of cereals, with a peak number of people at risk of 3.3 million (30 percent of the population). Donor pledges already cover most of Malawi's needs, and good progress has been made in importing cereals. Rail and road links and equipment have been improved with donor support; financing has been received from the Fund and the World Bank (as noted above). As in other countries affected by the food shortage, the high incidence of HIV/AIDS has intensified food security issues.

"In Mozambique, the problems are localized, with only 3 percent of the population affected. While up to 48,000 tons of emergency food assistance are required for the most affected regions, surpluses have been harvested in other parts of the country. The authorities are confident that donor resources so far committed and contingency reserves in the budget will be adequate to meet emergency food needs.

"Swaziland, a lower-middle-income country with a 33 percent HIV/AIDS infection rate among the working-age population, requires emergency cereal aid of about 20,000 tons to address the pressing food needs of about one-fourth of its population. During the recent Article IV consultation discussions, the authorities expressed only limited interest in the Fund's emergency assistance facility because of its lack of concessionality.

"In Zambia, about 150,000 tons of cereals was originally sought from international aid agencies to help support nearly 3 million people (one-fourth of the population). However, the refusal by the government to allow food relief agencies to import genetically modified maize-even if milled before entry-has complicated aid delivery. Additional commercial imports may fill the gap, leading to considerable fiscal expense and use of the international reserves in 2002 and 2003. As noted above, US$50 million in support from the World Bank was agreed at the end of October.

"Zimbabwe's situation is becoming increasingly difficult. Nearly 600,000 tons of emergency cereal food assistance will be required by March 2003. Half the population (6.7 million) is at risk. Food production has dropped to about one-third of previous years' levels, and the high prevalence of HIV/AIDS (34 percent), foreign exchange shortage, growing unemployment, and reported diversion of food aid for political purposes have exacerbated the situation. Prospects for 2003 are very poor.

"Further updates of the situation will be provided as it develops."