IFRC adjusts cash assistance program to fight food inflation

Half of the 2.3 billion people experiencing food insecurity globally in 2021 were in Asia, according to the latest United Nations report on The State of Food Security and Nutrition in the World. The situation is worsening, driven by a mix of conflict, political instability, and extreme weather events in the region, Michael Belaro, cash assistance coordinator for the International Federation of Red Cross and Red Crescent Societies in Asia-Pacific, told Devex. In addition, many countries are still recovering from the economic impacts of the COVID-19 pandemic, he said. In Afghanistan, the percentage of the population covered by humanitarian food assistance has already been predicted to fall from 38% to 8% from June to November 2022 due to lack of funding. In Sri Lanka, food inflation reached a record high of 90% last month, making staple food items such as rice unaffordable for many families, according to the World Food Programme. “We needed to design our cash programming [to] become an inflation-proof cash assistance and voucher assistance program.” --— Michael Belaro, cash assistance coordinator for IFRC Asia-Pacific In Pakistan, the recent widespread flooding has led over 735,000 livestock to perish, and affected 2 million acres (about 809,000 hectares) of crops, which experts fear could lead to food insecurity. Devex spoke to Belaro about what the food crisis means for their cash assistance program in the region, as part of a Devex Pro series on how organizations are responding to the global challenge. This conversation has been edited for length and clarity. How is the food crisis affecting your work? It is particularly challenging because … we usually provide cash assistance based on what we call “minimum expenditure basket,” … [meaning] cash assistance based on the minimum survival thresholds that people need in one month. The food crisis is [making] it more complex from our end because of the instability of the food prices … and disruption to the supply chain. It is very difficult to … monitor how much of our cash assistance can actually help the people. For example, Sri Lanka. Right now, due to the economic collapse and the disruption to the supply chain in the country, primarily because of the economic crisis, the food inflation has gone up to 90% in August, [according to a] report from WFP. So that means that the purchasing power of the people to access food is becoming [less]. So if [we're] providing cash assistance … we need to put extra effort to at least monitor the markets. We're seeing more and more of these cases not just in Sri Lanka, but also in highly volatile contexts such as Afghanistan and Pakistan, and also Myanmar, but also in Southeast Asia, surprisingly. How are you dealing with high inflation, such as in Sri Lanka? For Sri Lanka, which is a very specific case, we needed to design our cash programming [to] become an inflation-proof cash assistance and voucher assistance program. Although that is part of our risk mitigation mechanisms, it is always challenging to 100% say that the cash assistance we are providing is 100% inflation-proof, primarily because of the instability of the food prices. So what we are doing is … we adopt a mechanism wherein our cash assistance will follow an inflation index base mechanism, meaning the exchange rate of whatever currency that we are providing — in our case, it’s Swiss francs — will need to follow whatever the current exchange rate by the time that we are providing the distribution … so that the value of the assistance that we're giving will still be able to allow the households to follow and catch up with the very volatile food inflation. But it's always not very easy at some point, because it's always very difficult to justify that today, we are providing 100 [Swiss francs] from our end, but in the local currency it could be 20,000 [Sri Lankan] rupees and then the following day it would be 25,000 rupees because of the devaluation of the local currency. But to communicate this at the community level, it's not easy. Why are we giving 20,000 rupees this week and then the following week we are providing 25,000 rupees? There will always be challenges in terms of community engagement and beneficiary communication as to why we're doing this because there will always be comparison. In some cases, we will have to adopt a longer-term assistance. For example in Afghanistan … to mitigate the risk of the devaluation of the currency, and then the food [price] inflation, we opted to design a program that [allows] the beneficiaries … to receive the cash assistance [covering two months] in one time. And then we'll have a time to monitor how the two months' worth of assistance has really made an impact with the households, and then review our programming later on, whether to adjust or further top up the cash assistance. But it is very challenging. We have to do this type of programming internally and then communicate at the community level to the beneficiary level but also manage relations and how we communicate changes in our programming to our donors. What are the biggest impacts you're seeing? There are many, but the ultimate impact and the longer-term impact of this food crisis is how the people are coping with it. For example in Sri Lanka, people are already adopting negative coping strategies — selling their assets and then liquidating it so that they will have extra income. And then some in Sri Lanka, but also in Afghanistan … adults are prioritizing the food needs of their children and then limiting their [own] food to lesser quantity and quality. What do you think needs to happen in the long term to prevent something like this from happening again? There needs to [be] an institutional commitment now within governments and [the] private sectors — for governments to scale up the social protection mechanisms, policies, and programs within the country to really target the most vulnerable households, and then for private sectors to support governments in helping provide those essential social services in the country. [As humanitarians] we need to devise assistance programs that will build greater resilience to vulnerable households and communities.