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Wendy Walker
EASSNovember 14, 2012
The views expressed in this paper are the views of the authors and do not necessarily reflect the views or policies of the Asian Development Bank (ADB), or itsBoard of Governors, or the governments they represent. ADB does not guarantee the accuracy of the data included in this paper and accepts no responsibility
for any consequence of their use. The countries listed in this paper do not imply any view on ADB's part as to sovereignty or independent status or necessarilyconform to ADB's terminology.
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Timeline of crises and responses Food and fuel crisis
Financial crisis
Findings from assessments of impacts Food Crisis
Financial Crisis
Conclusion
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Food and
fuel crisisFinancial
Crisis Dzud
NewInflation
2008 2009-2010 2010-2011 2012- ?
FNSWPP
SSSP
SocialWelfare
Law
February2012
PMT datacapacity
Foodstamps
DraftLawISDB
Medicard
FSPISDB
MedicardEducation
Smallgrants
Poverty
Benefit
End:CMP
Begin:HDF
EndHDF
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+30% inflation: highest in Asia
Food = highest consumption item (70%) for poor
Immediate impact: lower and less quality food consumption (particularlyfor women), postponing expenditures on education, health; limiting
travel; substituting energy sources; moving in with relatives Government Responses:
food donations: limited impact, difficult to implement equitably, timelag
Reliance on CSO not enough and not well distributed
Price protection sets off other instabilities
Request for Food Stamp Program from ADB
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Government budget received 40% of its revenuefrom mining prior to the crisis
Falling commodity prices had economy-wide
impacts and severely impacted Governmentrevenue
Transmission channels: Declining Exports, Imports, Tourism and Remittances;
The Banking Crisis and the Consequences of the Credit Freeze
Falling Government Revenue and Cross-the-Board Budget Cuts
The crisis highlighted the risks of linking socialbenefits to volatile commodity-based revenue
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Copper prices fell by60% from peak of$8,600/ton in 2008to $3,500/ton in April2009
State budget incomedecreased by 33 %(comparing1st Qrts
2008 to 2009) State budget deficit
increased by 4 times
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Social protection expenditures increased significantly from7.0% of GDP in 2001 to 11 % in 2008 and 12% in 2009.
Key SW expenditure: Universalbenefit to all hh with children
With the universalization of the CMP in 2006, the numberof social welfare beneficiaries soared from 160,000 in
2004 to more than 1 million in 2006.
The escalations in expenditures up to 2009 presented thechallenge of cutting entitlements (the total cost of CMP
was MNT 142 billion per year) to restore fiscalsustainability
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Food Crisis: Creation of the Food Stamp Programfocusing on most vulnerable hh, PMT
10,000MNT/adult, 5,000/child
Financial Crisis: Program loan with JICA (100m)
with conditions on targeting and consolidation ofbenefits; creation of medicard program;Education for the poor
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Food Crisis Quantitative food price increase impacts based on
HSES data
Qualitative recall of 2008 and 2010 increases
Financial Crisis (with WB) 4 rounds of qualitative research (May 2009-Jan
2011)
Herders,workers in non tradable sectors likeconstruction and services; youth and recent unigrads; self employed in rural areas
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Food Crisis Financial Crisis
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2008 food price shock
The 2008 food price shock, unit price in Tugrug
Item Before(Q3+4/2007)
After(Q3+4/2008)
Increasecomparedto before(%)
After(Q3+4/2009)
Increasecomparedto before(%)
Mutton 2478 2922 17.9 2319 -6.4
Beef 2766 3230 16.7 2801 1.2
Goat 1979 2247 13.5 1825 -7.8
Horse 1954 2264 15.8 2037 4.2
Bread 433 684 57.9 656 51.4
Rice 652 1189 82.4 1330 104.0
Flour, highest grade 641 1021 59.0 912 42.1
Flour, grade 1 587 910 54.8 755 28.4
Flour, grade 2 477 820 71.8 676 41.4
Potato 438 658 50.1 633 44.5
Cabbage 507 722 42.4 721 42.1
Carrot 514 746 45.0 741 44.0
Milk 574 856 49.2 845 47.2
Yoghurt 593 933 57.3 936 57.8
Dried curds 1605 2299 43.2 2416 50.5Horse milk 709 1053 48.5 1148 61.8
Curds 787 1055 34.0 1556 97.6
Source: HSES 2007/08 and 2009; units vary, e.g. kilogram for meats and litre for milk.
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2007-2009 quantitative findings: caloric intake
Caloric intake per adult
equivalent per day:
before and after pricehike
Caloric intake forPMT
household per adult
equivalent per day: before andafter price hike
Source: HSES 2007/08 and 2009 Source: HSES 2007/08 and 2009
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2010-2011 qualitative findings: food security
Last year we had meat dishes at least twice a day. Now
we have it once in the evening. (FGD, Bayanzurkh)
My family has stopped having vegetables on our meals.
Every day it is the same. We eat meat and flour and
nothing else. (FGD, Bayanzurkh)
Wecant always buy fresh meat, so sometimes well have
to use some spare products like heart, liver, lung, or
ground meat. (FGD, Bayanzurkh)
Dietary diversity
Quality of food
Shopping habits
Quantity consumed
We buy our food in the soum shop. We rarely go toUlaangomcity, because the expenses are highThetransportation fee increased from 2500MNT to 3000MNTbecause of the petrol cost. (FGD, Uvs)
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2007-2009 quantitative findings: health
Mean amount spent (Tugrug) on treatment: PMT
All households: No real
impact on health seeking
behaviour. Expenditure ontreatment is not affected
strongly. Increase from
39,921 MNT before the hike
to 39,653 MNT and 40,670
MNT in the short and
medium term
PMT households: Minor
changes on health seeking
behaviour. Drastic cuts on
their health expenditureespecially in the short term
Even in the medium term,
health expenditure remains
lower than before the shock.
Source: HSES 2007/08 and 2009
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2010-2011 qualitative findings: health
Due to the fact that we do not have cash available inhand, I cannot afford medicines for my two sick children.
The medicine for my children used to be 420 MNT, butnow it is 650 MNT. (FGD, Songino Khairkhan)
People usually buy medicines in small amounts because
they cannot afford the whole package. (Doctor, SXD)Drug dosage
Generic drugs
Health
consequences
Health expenditure
My two kids had long coughs; however I gave them myurine against their high temperature. At the end they gotpneumonia and were treated in hospital (FGD, Khovd)
Informal treatment
My children get sick easily because of low immunity. Afamily doctor advised that we give them healthy qualityfood but I cannot afford them. (Interview, SXD).
They often ask us for cheap and ordinary tablets. We
prescribe the medicines they ask(Doctor, Bayanzurkh)
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2007-2009 quantitative findings: education
School attendance is not affected by the food price hike For PMT eligible households, education expenditure remained constant before and
after the shock
However, the most interesting finding here is that the receipt of assistance foreducational expenses (mainly from relatives/friends) increased drastically with the
shock for PMT eligible.
Percentage of children who received any assistance for educational expenses: PMT eligible
Source: HSES 2007/08 and 2009
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2010-2011 qualitative findings: education
There have been incidents when we decrease ourexpenditure to bear the cost of our childrens education.
We never ask our children to leave school. But wedecrease our food consumption so that our children canbe well educated. (Interview, Bayanzurkh)
Indirect expenditure
Education
outcomes
Attendance
Yes, the food price rises affects educationoutcomes. When I worked as the teacher of primary
school, there were kids who did not consume foodfor long periods as the parents were unemployed. Ifprices keep going up, then such parents will not beable to afford for any food for their children. Forsuch kids, it will be really difficult to make an effortand concentrate on their studies. (Interview with
teacher, Uvs)
He does not have any books to study because the
books cost a lot of money. He does not do hishomework at all.(Interview, Bayanzurkh)
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2010-2011 qualitative findings: relationships
My husband is furious of it. When he arrives from his workin the evening, we talk about our money problems to him.Then he may be tired of it.[FGD Bayanzurkh]
Mutual support
Shame
Stress
I feel ashamed from other people, when I meetsomeone I know. I hardly ever meet my friends andclassmates because I have nothing nice to wear.(FGD, Bayanzurkh)
People want to help each other, but theythemselves do not have extra things to offerothers. So, people usually are not helping eachother, just barely meeting their own needs. (FGD,Bayanzurkh)
Scores from happiness rankings normally
reducingdiscussions indicate that this is related to price
rises.
Happiness
Isolation
Our children are growing up thinking we dont haveanything, so its affecting their future socialstatuswhen they see a rich child, they isolatethemselves from him. (FGD, Songino Khairkhan)
Urban
phenomenon?
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2010-2011 qualitative findings: Debt
We always take loans. The shop owners have a fullbag of the human development money books in it.
The frequency of loans is increasing this year incomparison with last year. Focus group discussion,Uvs.
Asset sales
Goods on credit
and borrowing
I do not have any jewels left because I lost all ofthem to pawn shops as a result of not paying backthe money to them on time. (FGD, Bayanzurkh)
Urban areas largely
Some livestock sold in rural areas as lastresort
Some shops charge interest
Unreliable credit system
Tense relationships
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2010-2011 qualitative findings: Employment
Why?
Transport price increases and mining revenues lead to inflation but not to employmentcreation
Global price inflation does not lead to higher employment
Result
Poor households find it harder to cover essential expenditures but not to findemployment
Rising prices Falling unemployment
Rising prices No change in
unemployment
Theory
Practice
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Four rounds of qualitative: May 2009,September 2009, January 2010, November2010
Transmission channels: Labor market effects
Price shocks
Social changes
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Increased unemployment, reduced salaries and intensified competition for jobs especially
in the informal sector Bargaining power of employers increased (longer working hours,
delays in wage payment and getting less than minimum wage orhiring for short probation periods and then terminated)
discriminatory hiring practices (especially for women) becamemore prevalent based on age, gender and appearance Reductions in sales and profits of small businesses: reduced
demand and depreciation of Mongolian currency; loss of accessto credit; increased selling on credit
Higher transport costs contributed to shift from wage labor tounpaid activities like gardening in urban areas
Long term: even with labor market improvements migrants andlow skilled workers continued to suffer from poor enforcementof labor contracts, low salaries and poor working conditions
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Food price inflation was still high Fall in price of cashmere and livestock products with
depreciation of national currency shifted terms of tradeagainst herders
Big impact because of loans at high interest rates based onprojections for cashmere and meat
Costs of schooling and university increased at the peak ofthe crisis
Herder resilience strongly correlated to herd size (under100 most affected)
Long Term: Economic recovery accompanied by continuedrise in consumer prices. Higher prices for cashmere andskins improved herder livelihoods. Impact of govt socialtransfers in HDF and education subsidies helped.
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Changes in gender roles Women shift fromnon-income domestic work to incomegenerating activities
Increased self esteem and role in hh decision
making Increase apathy, alcohol abuse and crime
especially for youth Rise in domestic violence
Long term: difficult to measure womencontinued in economic activities but otheraspects not readily discussed
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Reduced consumption Diversification of income sources Increased reliance on government assistance (HDF, food stamps,
herder programs) Increased assistance from donors and NGOs Illegal gold ming as diversification strategy and safety net
(women and children involved) Increased borrowing from financial institutions but worse loan
conditions Increased rural-urban migration Reliance of family and community support
Long term: improvements in livelihoods for all were observed inthe 4th round of research. Those who had lost major assets(herders) and faced new vulnerabilities (migrants) could coverfood expenses, but little more. Bank loans without collateralremained inaccesible
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Both crisis reveal a number of economic and social vulnerabilitiesand weaknesses of social safety nets Longer term recovery in both cases for the poor is more than
anticipated and often does not reach where they were before Women played a large part in building resilience of hh and
negotiating strategies to adapt to crises
Mongolia invested in creating social protection systems to betterprepare for the future (PMT, initiation of targeted benefits,emergency warning system with social indicators)
But. Looking forward Growth is back (17%), but so is increasing
inequality These dynamics of vulnerability, resilience and responses to
shocks have important implications for planning for inclusivegrowth, addressing inequality and preparing for future shocks
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