Report warns against overburdening grain reserves

NATION REPORTER

A NEW report jointly produced by the World Bank, World Food Programme (WFP), and Food and Agriculture Organisation (FAO) has cautioned that assigning too many objectives to strategic grain reserves, such as the Food Reserve Agency (FRA), risks creating financial strain, diverting resources from other priorities, and threatening fiscal sustainability.

The report, titled “Strengthening Strategic Grain Reserves to Enhance Food Security,” draws lessons from various countries including Bangladesh, India, the Philippines, Uzbekistan, Ghana, Ethiopia, Zambia, Egypt, Tunisia, Honduras, and the Dominican Republic.

It highlighted that public grain stocks often pursue multiple, overlapping goals — from stabilising prices to meeting emergency food needs — which complicated management and led to inefficient use of public funds.

The report noted that price stability efforts for urban consumers were frequently mixed with emergency food security aims.

Additionally, there was often confusion between achieving food self-sufficiency and ensuring food security, which focused on consistent access to safe, sufficient, and nutritious food for all.

A common practice, described as “buying high and selling low,” involves purchasing grain at higher prices to support farmers and later selling at lower prices to protect consumers.

The report warned that this strategy resulted in high fiscal costs, created subsidy dependency, discourages private sector participation, and caused market distortions that ultimately undermined food security.

“The more objectives a grain reserve has, the more financially demanding it becomes, diverting funds from other priorities and potentially endangering fiscal sustainability,” the report stated.

It also highlighted the high costs of pursuing multiple objectives.

“In Zambia, for example, the FRA is tasked with responding to food emergencies, stabilising market prices, and supporting both farmers and consumers. In 2021, the agency consumed 17 percent of the Ministry of Agriculture’s budget,” according to the report.

The report further recommended addressing the high costs of financing grain reserves, stating that: “In Zambia’s case, financing costs alone made up 11 percent of total expenditure, with some countries reporting even higher figures.”