Chapter 5


'informal monetisation' leads to an artificial increase of supplies on the local food market and
exerts a downward pressure on local food prices. This, again, depresses the real income of the
participants (lower value of the food rations received), on local food production as well as on
the farmers' income in the project area. Figure 5.7 below depicts the lines of impact of
informal monetisation with the dashed line linking non-market transfers (in this case FFW
rations) with the elements, household income and food market.

In order to avoid the possible detrimental effects of informal monetisation, and in cases
where no clear decision for or against one specific form of payment can be made, the optimal
solution may be a combination of both forms of payment: part-payment in cash and part in
kind.

Public works programmes contribute to improved access to food and household food security
indirectly via increasing household incomes, enabling the target group to increase their
effective market demand for food, or directly in the case of FFW by increasing household
food supplies. Depending on the development assets created, there may be also indirect
effects on the volume of food production and supply, e.g. in the case of rural infrastructure,
land and water conservation measures. The lines of impact are illustrated in Figure 5.6 above
and Figure 5.7 below.

Although public works programmes appear as an appropriate approach to mitigate poverty
and improve household food security, they cannot be applied everywhere and in all situations
where vulnerable groups need assistance. Public works can only reach those people who are
able to work, and they require suitable project designs to be developed, complementary
material and technical inputs, and an infrastructure with appropriate management capacity for
their implementation. Where these preconditions are not given, other approaches have to be
applied, in order to reach specific vulnerable target groups. Such alternative approaches to
targeted food assistance are discussed in the following sections.

3.4 Targeted food subsidies

The issue of general food subsidies has already been addressed in section 4.3 of Chapter 4.
Due to the high costs and budgetary burdens involved, and because of the market distorting
effects, such systems are usually discarded or substantially cut down under adjustment, and
replaced by targeted approaches. Targeted subsidies are designed to reach groups selected on
the basis of need. This can yield substantial fiscal savings while maintaining benefits to the
poor and vulnerable.

However, targeting also incurs special costs and has specific infrastructural requirements.
These result from the need for screening beneficiaries, for setting up a special distribution
network, and for the establishment of an effective administration and monitoring system.
Typically, there is always a trade-off between the level of administrative costs of targeting
and the extent to which the subsidy leaks to non-target groups. In analysing the cost-
effectiveness of targeted interventions, the administrative costs of targeting have to be
weighed against the degree of leakage to non-target groups.


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