Rising inflation triggers food insecurity: FAO



A sharp spike in cereal products prices and weak foreign currency reserves at the Reserve Bank of Zimbabwe will worsen the country’s food security as drought ravages the country, a new report has shown.

Zimbabwe, a primary producer, has been battling a trade imbalance for years. The situation worsened in 2013, a few years after the country ditched its own currency for a basket of multicurrencies mainly dominated by the dollar, when the economy imploded in the aftermath of a general election.

Since August 2018, the country’s annualised inflation has been on an upward trend reaching 56,9 percent as of January 2019.

According to the latest Food and Agriculture Organisation (FAO) Special Alert on Zimbabwe, the country country’s food security situation is in a dire situation. FAO said Zimbabwe, which requires 1,5 metric tonnes of maize for its annual consumption, will require more foreign currency to import the staple from the region.

On Monday, central bank chief John Mangudya said the country had US$500 million in reserves, a figure reflecting sagging exports.

“Food insecurity conditions have deteriorated sharply in recent months on account of steep spikes of staple foods since October 2018. The sharp increases were triggered by severe fiscal challenges, primarily foreign currency deficits and a significant loss in the value of the Zimbabwean bond note on the parallel market that caused a considerable increase in import costs,” the report reads.

“The higher prices were further underpinned by the introduction of a two percent tax on electronic payments which constitute the bulk of transactions across the country. The price increases, notably for cereal products which represent the largest share of calorie supplies have curtailed households’ access to food.”

In an effort to alleviate price pressure and improve supplies, the government lifted an import ban on basic commodities in late 2018, which had been in place since 2016.

Experts say the harvest of the 2019 cereal crop is expected to start not earlier than April, slightly later than normal reflecting a delayed onset on seasonal rains.

FAO also attributed the price hikes of cereal products to fuel price increases which raised op erational and distribution costs for millers and retailers. The price of petrol and diesel more than doubled in January after government increased tax on the commodity.

“The projected tightening of domestic supplies in 2019/20 infers an expected increase in import requirements and a drawdown in stocks to cover the supply shortfall, reducing the country’s capacity to cushion supply shocks in future,” the report reads.

“Although this is not an unusual situation for the country, which imports on average about 500 000 tonnes of maize per year (2013-2017) to satisfy approximately 1,6 million tonnes of consumption needs, the recent fiscal challenges have further impacted the country’s import capacity, amid diminishing foreign currency reserves.

“Given indications of growing shortages of foreign currency reserves, the domestic import is expected to weaken, portending difficulties in accessing external supplies. Moreover, a poor outlook for the 2019 cereal production, as well as increasing prices, in South Africa and Zambia, two main exporters in the region, points to a higher likelihood of reduced availabilities in the regional market, further signifying constrained access for Zimbabwe.”

Last week, the United Nations and government jointly launched an urgent appeal for US$234 million to feed millions facing starvation.

According to the UN, a staggering 5,3 million Zimbabweans will need food assistance until June this year following poor harvests last season.