Price shocks—unexpected changes in the price of agricultural outputs or staple food—affects 42 percent of the rural Malawians, apart from other shocks such as droughts, floods and health, a recent report has said.
The World Development Report (WDR) 2014 by the World Bank titled, ‘Risk and Opportunity, Managing Risk for Development’ released on Monday further shows that 47.2 percent of rural poor experience drought and flood shocks, 3.4 percent experience employment shocks while 18 percent are vulnerable to health shocks.
The WDR adds that over 40 percent of Malawians cope with risks through migration or employment, about 30 percent through consumption reduction while others cope through credit and assistance and sale of assets.
The report, however, indicates that fewer Malawians in urban areas experience shocks with 10.4 percent vulnerable to droughts and floods, 21.1 percent vulnerable to price shocks while 7.7 percent face employment shocks.
The WDR 2014 argues that risk management can be a powerful instrument for development—not only by building people’s resilience and thus reducing the effects of adverse events, but also by allowing them to take advantage of opportunities for improvement.
With over 30 percent of households in Malawi experiencing price shocks and about 40 percent reporting shocks to other disasters, the report has said that government policies can strengthen households’ ability to manage risk by facilitating their access to information, financial tools and labour markets.
It recommends that public policies should also ensure access to education and provide basic protection against health and income risk, especially for the poor.
In May 2012, Malawi devalued the kwacha by 49 percent and subsequently floated it, a policy which prompted a rise in food prices and the cost of living.
The depreciation of the local unit has been attributed to the increase in maize price, a staple food to many Malawians, which rose by over 100 percent in 2013 compared to 2012.
Economists and other experts argued that the policy negatively affected the poor, a situation that compelled government to introduce safety nets for both the rural and urban poor and mitigate effects against the effects of economic reforms.
Government introduced the Public Works Programme (PWP), whose activities entailed the payment of a wage in cash by the State or any other, after working on roads as a social safety net.
In 2012/13 budget, government indicated that it will roll-out the programme in 24 districts with an allocation of K250 million.