Food subsidies in developing countries

Governments of most countries attempt to influence the price consumers pay for food. In low-income countries the aim is frequently one of reducing consumer food prices below a free-market level. The results are what in this book is called consumer-oriented food subsidies. The goals of subsidy programs and policies vary among countries and over time and may include desires to improve the real purchasing power of all or certain groups of consumers, to reduce or eliminate calorie and nutrient deficiencies in low-income population groups, to maintain low urban wages, to assure social and political stability, and a number of other goals. The design of subsidy policies and their implementation procedures vary widely among countries and include explicit price subsidies or food stamps targeted to selected population groups or food commodities, as well as explicit or implicit general price subsidies and food-related transfers with little or no targeting. In some countries, consumer-oriented food subsidies place a heavy financial burden on either the government or food producers, while in others, subsidy costs are of little consequence to the government or farmers. Similarly, the benefits from food subsidies and their distribution as well as their cost effectiveness vary greatly among countries. Some subsidy programs greatly enhance poor people's purchasing power and nutritional status while others primarily benefit middle- and upper-income population groups. In some countries, consumer-oriented food subsidies are of such magnitudes that they exercise considerable influence in foreign trade, inflation, and the performance of the agricultural and other sectors, as well as on economic growth and equity in general. The processes determining the effects of consumer-oriented food subsidies are complex, and reliable information on the effects of existing policies and programs and changes in these are often available only from relatively complicated analyses. Policy design and modifications based on simplistic reasoning may lead to disappointing results.In spite of the widespread occurrence of consumer-oriented food subsidies in developing countries and their large magnitude in some of these countries, in-depth research aimed at assisting policymakers in estimating the effects of existing subsidies and predicting the effects of policy changes has been very limited. It was against this background that IFPRI initiated a set of studies of food subsidies in collaboration with national institutions and individuals in several developing countries. These studies have now been completed. This book is based on the research, policy experience, and performance of subsidy policies and programs in more than a dozen countries in Africa, Asia, and Latin America. Most of the research was undertaken under the auspices of IFPRI during the period 1978-86. National researchers, government advisors, and policymakers from many countries, including those where studies were carried out, played a key role. Throughout the research, emphasis was placed on assuring a high degree of policy relevance and utility of research results for those responsible for making recommendations and decisions about subsidy-related policies and programs. For this purpose, interaction among analysts and policy advisors and decisionmakers was pursued through frequent personal exchange of research findings and policy experience and expertise as well as through workshops and conferences. Such interaction also permitted the sharing of policy experiences across countries