Chapter 4


As an immediate measure, the provision of public services is likely to be cut and/or their
prices increased substantially.

Such measures affect producers and consumers, depending on the types of services that are
affected. Furthermore, long-term effects have to be distinguished from short-term effects.

Price increases and/or cuts in public services are felt immediately, while the expected
positive effects in terms of an increased efficacy and efficiency in the provision of the
services may take some time to materialise. On the other side, a cut of extension services
will have little immediate effect but may severely hamper medium- to long-term growth of
production and incomes.

Food production and overall food supplies are negatively affected, if agricultural services
(extension, input supply, marketing, veterinary services) are reduced or charged for. Table
4.10 showed that economic services suffered the largest reductions of government
expenditures under adjustment.

As far as household welfare is concerned, the impact of public service cuts and charges
depends on the extent to which the poor had access to the services and benefited effectively.
The impact will, in general, be limited as most users of such services usually do not fall into
the category of poor and vulnerable. Nevertheless, there are also poor households among the
users of these services who may be critically affected by an increase in public service
charges. This refers for example to the group of 'new poor' who, in the wake of public sector
retrenchment and investment decline, have lost their jobs and fallen under the poverty line.
As poor households typically spend a higher proportion of their income on such services
than richer household, they suffer a substantial real income decline which may result in
lower food purchases and lower consumption.

There are further possible indirect effects on household welfare: If for example, the public
health services are cut or if poor households respond to price increases by diminishing the
use of the health service, this may result in increased morbidity and a worsening of the
nutritional status. This effect has to be weighed against the fact that the quality of public
services had often already deteriorated considerably before adjustment programmes were
launched, due for example to a lack of necessary imported equipment and spare parts or to
low efficiency in an extremely underpaid public service personnel.


4.7 Summary of the effects on the food economy and food security

We have seen that fiscal policies of public expenditure reduction affect almost all economic
spheres. The possible impacts on the food economy and food security feed through the whole
system of macro-meso-micro economy linkages as presented in figure 4.6.


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