Chapter 4


Table 4.12 presents a summary of the likely short- to medium-term impact of the various
approaches to public expenditure reduction on the poverty status and food security situation
of those groups who have been identified as vulnerable to food insecurity (see Module 1).
Obviously, the impact is throughout either negative or undetermined while, in the case of a
currency devaluation (see table 4.11 above), at least some groups gained. In comparing the
effects of both policy measures we find that the most severely affected people are the same
in both cases: the urban vulnerable and female-headed households.


Table 4.12: Summary effects of public expenditure cuts on poverty and food security


 Approaches to public expenditure reduction
 Vulnerable group Public sector Public Consumer Charges / cuts in
 employment and investments subsidies public services
 wages
 Rural vulnerable groups
 Unskilled landless -?/
 Deficit subsistence farmers ? ?/- ?
 Small-scale food-crop farmers ?/- -
 Small-scale cash-crop farmers ? ?/-
 Pastoralists ? ? ?
 Remote area dwellers ? ?/-- ?
 Urban vulnerable groups
 Informal sector/self employed -
 Unemployed
 General
 female-headed households ? -

 Explanations:
 + likely positive impact, + + strong positive impact
 likely negative impact, - strong negative impact
 ? little impact or undetermined
 / different impact on subgroups, depending on conditions


 5. Monetary Policies

 5.1 Main features of monetary policies under adjustment

 Monetary policies constitute the third major element of macro-economic adjustment. These
 are policy measures which determine the volume and the costs (interest rate) of money
 supply and credit in an economy.

 There exist close linkages between monetary and fiscal policy. Budget deficits are financed
 by credits, either by credits from abroad or from internal sources, comprising individuals,
 companies, commercial banks, or the central bank. The latter source of financing budget
 deficits has been widely applied by many governments. In this case, the money spent by the


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