Agriculture Reference
In-Depth Information
FIGURE 2.1
Values of cereal imports as a percentage of foreign exchange reserves,
1965-2001
Value (percent)
600
550
500
450
400
350
300
250
200
150
Bangladesh
India
Philippines
Indonesia
100 percent
Pakistan
100
50
0
1962
1965
1968
1971 1974
1977
1980
1983 1986
1989
1992
1995 1998 2001
dex, indicates that the situation has improved dramatically over the past three
decades (Table 2.5). To better understand the magnitudes of improvement, let
us consider the Indian case in 2004. During June-July 2004, total foreign cur-
rency reserve in India was US$120 billion and rice was selling in the world mar-
ket at US$185 per ton. Thus, buying all 25 million tons of rice available in the
world market would take less than 5 percent of Indian foreign currency re-
serves—quite a contrast to the situations of drought years in the mid-1960s!
The improvements in other countries are also remarkable. Except Bangladesh,
which continues to receive large amounts of food aid, and Pakistan, where im-
port values were high for a couple of years in the 1990s, the value of total cereal
imports in most of these countries now constitutes only a small fraction of their
total foreign currency reserves. Thus, international liquidity is no longer a ma-
jor constraint, and hence these countries can use world markets to meet their
food security objectives more efficiently.
The central message from this section is that the rationales used to justify
the policy of intervention in grain markets have changed. However, we note that
the analyses are based on aggregate macro-level data and hence do not capture
regional variations in access to infrastructure or institutions, such as credit and
insurance, which are important for risk management. Therefore, governments
will continue to have legitimate roles to play in those circumstances.
12
The
Bangladesh case study highlights that the government took these considerations
12. We thank an anonymous reviewer for making this suggestion.
