Africa Food Prices Are Soaring Amid High Import Reliance

IMF Blog, September 27, 2022

Source details

Staple food prices in sub-Saharan Africa surged by an average 23.9 percent in 2020-22—the most since the 2008 global financial crisis.
The surge is commensurate to an 8.5 percent rise in the cost of a typical food consumption basket (beyond generalized price increases).
Price spikes occurred for both imported staples (wheat, palm oil, rice) and locally sourced staples (cassava, maize) in some countries.
- In Nigeria, prices of both cassava and maize more than doubled.
- In Ghana, prices for cassava escalated by 78 percent in 2020-21.
Using price data from 15 countries on five staples (cassava, maize, palm oil, rice, and wheat), the study finds that, in addition to global food prices, the following drive changes in local staple food prices:
- net import dependence,
- the share of staples in food consumption,
- real effective exchange rates.

Consumption share effect:
- A 1 percent increase in the consumption share of a staple food raises the local price by an average 0.7 percent.
- If the staple is mostly imported, the effect is about 1.2 percent.
Net import dependence:
- When a country’s net import dependence increases by 1 percent, the local real cost of a highly imported staple is expected to increase by an additional 0.2 percent.
Exchange rate pass-through:
- A 1 percent depreciation in real effective exchange rates increases the price of highly imported staples by an average 0.3 percent.
Event-driven effects:
- Staple food prices rise by an average 4 percent in the wake of wars.
- Staple food prices rise by an average 1.8 percent after natural disasters (depending on magnitude, frequency, duration, and location of events).
Global-to-local pass-through:
- For many countries in the region, pass-through from global to local food prices is significant, nearly one-to-one in some countries.

Monetary policy:
- Countries with stronger monetary policy frameworks are better at curbing direct and second-round food price inflationary pressures and at controlling overall inflation.
Fiscal policy:
- Food prices tend to be higher in countries with weaker fiscal management and elevated public debt.
Suggested policy mix:
- A mix of fiscal, monetary, and structural reforms could help lower food inflation.
- Improving public financial management could free up resources for investment in well-targeted social assistance programs or in climate-resilient infrastructure to help stabilize prices.
- Structural and regulatory reforms to promote fair competition could help make agricultural inputs (seeds, fertilizers) cheaper.
- Streamlining trade procedures and better leveraging research and development could boost agricultural innovation and reduce costs.

Analysis uses price data from 15 countries on five most consumed staple foods in the region: cassava, maize, palm oil, rice, and wheat.
The research draws from work on low-income countries supported by the United Kingdom’s Foreign, Commonwealth and Development Office (FCDO) and partners in the IMF’s COVID-19 Crisis Capacity Development Initiative (CCCDI)—Belgium, Canada, China, Germany, Japan, Korea, Singapore, Spain and Switzerland.

Source: IMF blog post "Africa Food Prices Are Soaring Amid High Import Reliance" (September 27, 2022).