The chapter on the Middle East and North Africa recently published in IFPRI’s Global Food Policy Report asserts that stability is crucial for policy reforms of MENA countries transitioning from extended social, political, and economic turmoil. Key policy developments in the areas of fuel subsidies, agriculture, and food trade are reported.
Importantly, the authors make a case for substantiating actual reforms on the basis of their efficiency – do reforms foment more social unrest and violence? The recommended aim for policy-makers is to tailor reforms to each countries’ existing governance characteristics.
Stability is a key determinant of growth. For example, in Egypt, a strongly improved perception of stability has re-attracted domestic and foreign investment. The most recent GDP data confirm that investment in 2014 is about 20 percent higher than the previous year, and economic recovery is accelerating. These positive developments are consistent with the favorable popular perceptions in Egypt about the economy and food security (Table 1). Amid relative stability in 2013 and 2014 and the largely peaceful elections in October 2014, Tunisians also became more optimistic about the economy and employment (Table 1).
Table 1: Changes in political, economic, and social conditions, 2012 – most recent 
Source: Authors’ representation based on data from GALLUP Analytics (accessed October 10, 2014). Note: * = survey was conducted before the recent conflicts. The reported indicator changes measure the percentage point changes in the response rates to the perception-based questions on (1) ‘feeling safe walking alone’, (2) ‘economic conditions in the country’, and (3) ‘not enough money for food’ as well as in (4) GALLUP’s (un)employment index. One triangle indicates a change of (rounded) 1–5 percentage points; two triangles indicate a change of (rounded) 6–10 percentage points; and three triangles indicate a change of (rounded) 11 percentage points or more. A square indicates a change of (rounded) 0 percentage points. Light colors indicate an insignificant change of (rounded) 1–3 percentage points, given survey standard errors (Gallup 2014).
In 2014, several countries implemented significant policy reforms in the areas of fuel subsidies, agriculture, and food trade. On July 4, 2014 the government of Egypt drastically increased prices for different types of fuel between 40 to 78 percent, saving an estimated 44 billion Egyptian pounds ($US 6.14 billion). In September 2013, Morocco partially indexed its energy prices to the international market price. In January 2014, it then removed all the subsidies on both petrol and fuel oil and also significantly cut diesel subsidies. In late 2013, Sudan introduced fuel subsidy cuts, and the prices of fuel and its derivatives increased between 68 to 75 percent. In July 2014, Yemen increased the price of gasoline and diesel by 60 and 95 percent, respectively, in an attempt to reduce its unsustainable fiscal burden. Public outcry resulting from these reforms varied from nonexistent or minimal in some countries, such as Morocco and Egypt, to violent riots in others, including Sudan. At the extreme is Yemen, where these reforms likely exacerbated the on-going civil conflict.
In the face of continuously rising food imports, governments continue to emphasize the importance of agriculture and food trade for building resilience to food price shocks. In 2014 Egypt prepared several laws related to the support of farmer associations, contract farming, crop insurance schemes, and health insurance for farmers. The government is also supporting the cultivation of new land, with the aim of producing more food and creating jobs. To encourage new production efforts, both Egypt and Jordan introduced higher government procurement prices for wheat during 2014. The Jordanian government also increased its strategic wheat reserves more than three-fold to a 10 month reserve. To protect the price of local wheat, Morocco continues to control the customs duties of wheat and subsidizes local wheat importers. Following the 40 percent reduction in global wheat prices in 2013, the government raised wheat tariffs from 17 to 45 percent in 2014. By 2015 Saudi Arabia plans to increase its strategic grain reserve capacity by close to 75 percent in order to cover a larger share of its growing annual consumption of wheat. While those policies and public investments are likely to help build resilience, the fiscal sustainability and efficiency of these measures remain uncertain.
According to the authors, many of the policy actions that need to be urgently tackled in 2015 remain the same as before the Arab awakening, such as fostering economic transformation and growth that creates jobs, shifting from subsidies to targeted income transfers, developing innovative solutions for agriculture and water constraints, improving trade and market integration, and leveraging health, nutrition, and education for food security.
A key take-away point is that more emphasis needs to be put on tailoring policy reforms to countries’ existing governance characteristics. For example, where public trust in government is problematic, mechanisms to facilitate consensus and spur buy-in from all major political fractions may be necessary. Where state capacity is low, less technical options that involve very gradual changes, such as small-scale pilot reforms, may be the only feasible pathway.
Photo Credit: IFPRI
