Chapter 4


 Figure 4.7:
Main lines of impact of monetary policy on the food economy and food security


Under adjustment, many producers find themselves squeezed between rising costs of
production on the one side (due to increased prices for imported production inputs, increased
interest rates) and reduced demand, sales and profit prospects on the other side (due to public
expenditure reduction, general income decline and increased consumer prices). This will not
only affect their actual level of production, as described above, but also their investments.

In fact, a severe investment decline is a common phenomenon under adjustment, particularly
during the early stages when stability and growth effects have not yet materialised. This
affects almost all markets of goods and services, except the export and, perhaps, the import
substitution industries. An investment decline has negative repercussions on the levels of
employment and income which, again, will reduce food demand, household food
entitlement, and expose certain population groups, specifically the unemployed and
underemployed, to a greater risk of food insecurity.

If the investment decline affects the food chain at one or more of its stages production,
processing, transport, marketing and storage it will also have negative implications for the
volume and stability of future food supplies. This applies specifically to those investments


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