Nearly two decades ago, in 2002, several newspapers reported that the IMF had recommended the sale of Malawi’s strategic grain reserve just before the country suffered a catastrophic crop failure during which people died from starvationAccording to The Guardian the IMF representative in Malawi, Girma Begashaw, insisted that no such recommendation had been given. He even went so far as to say that the IMF had ‘no expertise in food security policy.’ However, Malawi’s then-agriculture minister, Aleke Banda, insisted that he’d been pressed by the IMF to sell off the reserve in order to settle various commercial debts. He also claimed that a food consultant hired for an EU-funded project in the country had made the same recommendation, even though the EU subsequently funded a project to replenish the depleted reserve, a classic case of shutting the stable door after the horse had bolted.
It is very hard to disentangle what actually happened from all the claims and counter-claims made by the various organisations involved. But what clearly emerges is that there is at best, limited support from bodies like the EU and the IMF for buffer stocks. They will supply free seed and agricultural goods for farmers, in the hope that this will boost supplies. However, they don’t like the idea of building up reserves. One gets the feeling that this is seen as an indulgence, like hoarding your gold and jewellery when the family’s going short of bread.
The tragedy in Malawi suggests that problems were caused through having the wrong strategy rather than through lack of generosity. Good and bad harvests are inevitable, but the volatility in food supply which they cause needs action to stabilise prices. Food reserves are a stabilisation mechanism which once established can be self-sustaining, replenishing the reserves when prices are low and releasing food onto the market when they are high. This is the strategy that needs to be implemented.
Has any of this percolated through to the IMF? It would seem not. Last year the organisation published a special series of notes by ‘IMF experts’ to help members to deal with the economic effects of COVID-19. A report published on June 29th, 2020 concerning ‘food markets during COVID-19’ declared that ‘food buffer stocks to stabilize prices should not be aggressively accumulated as they carry a large fiscal cost and do not efficiently improve food security’. This is simply not true. These stocks can be maintained by a ‘buy cheap and sell dear’ process that reduces costs considerably and may even make them self-sustaining.
In the next blog we will consider the IMF report in more detail in order to examine why it remains unwilling to support a measure that can stabilise prices and maintain itself at low cost through time. In the meantime, we may note that one thing does not seem to have changed over the last two decades. The IMF, as its representative in Malawi admitted in 2002, ‘has no expertise in food security policy’.