Chapter 6


Figure 6.1 depicts the situation of an overall aggregate food deficit in a country, composed of
a market supply/import deficit (C-B) and an aggregate demand deficit (D-C). It applies to an
open economy, with p indicating the level of world market prices (border price expressed in
local currency units, see Annex 2B for explanation).

Figure 6.1: Food deficits and the scope of food aid interventions

 requirements


 production
 demand /domestic supply








 p -- -- -- - ----- ---
 A ,-mpotdefcit "dekt R a volume
 4.toal (structual) food defidtct >

Explanations to Figure 6.1:

B-A: Market supply/import deficit: Need for commercial imports or, alternatively (if a
 country lacks foreign exchange), need/scope for programme food aid to be monetised,
 to cover the gap between domestic supplies and effective demand.

R-B: Demand deficit: Need/scope for project and/or relief food aid for targeted distribution
 of food to those people who lack the purchasing power to express their food needs as
 effective demand.

R-A: Total aggregate (structural) food deficit: Needs to be covered by imports
 (commercial imports, programme food to be monetised, and project/relief food aid
 according to the proportion of the sub-deficits) in order to meet total requirements and
 to achieve food security.

 2.5.1 Programme food aid to mitigate market supply deficits

 A market supply/import deficit (B-A) determines the potential scope for programme food aid
 to the extent that programme food aid deliveries substitute for commercial food imports.
 Such a substitution is desirable or necessary if a country is short of foreign exchange.
 Programme food aid has, in this case, the main function of foreign exchange support. As the
 effective demand for food exceeds domestic production and market supplies, food (aid)
 imports can be monetised up to the amount of a prevailing deficit, without the risk of market


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