By HADI FATHALLAH and TIMOTHY ROBERTSON
Jordan has tried to use food reserves as a policy tool to prevent instability. But as the COVID-19 pandemic enters a second year, the economic costs of Jordan’s policy have become increasingly exacting, highlighting the need for increased food import efficiency.
Throughout 2020, King Abdullah of Jordan highlighted the relationship between food security and social stability as the country faces food insecurity resulting from the COVID-19 pandemic. Prior to the pandemic, Jordan had started stockpiling strategic food reserves – mainly wheat and barley, little of which is produced locally due to lack of water and land resources – in an attempt to maintain social stability. However, stockpiling food as a means to ensure stability comes at a high cost as Amman faces fiscal stress and economic pressures—impacting Jordanian households.
COVID-19 has brought additional stress to an already battered Jordanian economy. Since 2016, Jordan’s economy has not achieved an annual growth rate above 2 percent. Slow growth has led to high unemployment, particularly among women and youth – total unemployment reached around 25 percent in 2020 – and shrinking household income. The shocks of the global pandemic have disrupted tourism, one of the main pillars of the Jordanian economy, and has brought economic growth to a near complete halt. Consequently, Jordan’s economy has contracted by roughly 5 percent.
The strains on Jordanian food security have only increased as COVID-19 exposed structural challenges in the country’s food system. Fifty-three percent of Jordanians, around 3 million individuals, are vulnerable to food insecurity. Additionally, 3 percent of Jordanians, roughly 220,000 individuals, live in households that are food insecure. Residents in rural governorates are most susceptible to food insecurity. Al-Tafilah governorate registered the highest percentage of food insecure households, around 20 percent.
In order to adapt, up to 42 percent of Jordanian households have resorted to crisis strategies that compromise households’ future ability to handle shocks and productivity. The economic impact of the COVID-19 pandemic has forced households to cut spending on food. Fifty-five percent of households have used food-related survival strategies, including reducing the number of meals or the quality of diet to make ends meet. Around 28 percent of households have reported that their children went to bed hungry during the lockdown period.
Food insecurity extends to Jordan’s community of 1.1 million Syrian refugees. Data from August 2020 show that only 12 percent of refugee households are food secure. Likewise, 21 percent, over 130,000 individuals, of refugee households are classified as food insecure. These households have extreme food consumption gaps and often rely on potentially harmful strategies to get by that compromise future household productivity. Another 67 percent of refugee households are vulnerable, most of whom are dependent on temporary and informal jobs which have been severely limited by COVID-19 lockdowns.
Well before the start of the COVID-19 pandemic, Jordan had begun expanding its national food strategic reserves to mitigate the risks of food insecurity. The Jordanian government imported around 1.2 million tons of wheat and 600 thousand tons of barley –about 18 months of reserves. In 2020, Jordan produced a meager 25,000 tons of wheat due to lack of resources necessary for large scale cultivation. Total local production only amounted to enough for one week of domestic consumption— as such, Jordan normally imports around 70 percent of its staple food needs.
Following the crisis in 2008 and 2011 the government began building a stockpile to mitigate shortages or price fluctuations that might become a driver for social unrest. Food commodity prices have started to increase coinciding with the second wave of COVID-19 cases. Jordan’s imports of key staples such as corn, wheat, and rice are highly concentrated in some of the countries most affected by COVID-19. In the early days of the pandemic, Russia and Romania, which contribute the bulk of Jordan’s wheat imports, placed export restrictions. Though they were lifted after the first wave, they are now being re-imposed. Similarly, Egypt and India – main sources for legumes for Jordan – put restrictions on exports.
While strategic food reserves have reduced Jordan’s exposure to volatility in international food commodity prices, thereby protecting the country against a repeat of some of the social and political conditions of 2011, maintaining the food stockpile puts stress on the national budget at a time when Jordan is experiencing an unprecedented economic crisis. Since mid-2018, when Jordan started expanding its strategic reserve, the state has spent a total $1.1 billion on wheat and barley imports, roughly 1 percent of annual GDP, 3.5 percent of annual government revenues, and 3 percent of annual public expenditure. The supply chain costs for maintaining these imports, from transport to storage, costs around $40 million annually, around three months’ worth of wheat consumption.1 Meanwhile, COVID-19 continues to inflict increasing economic and fiscal costs. The space for government intervention will become more limited in the near term. The fiscal stress is not likely to be relieved by economic growth or increased government revenue in the short term as the private sector has struggled to weather diminished cash flow and decreased demand. The Jordanian government must decide what price it is ready to pay for its strategic food reserves in exchange for the physical, financial, and psychological security that it provides. The current policy of expanding the strategic food reserves prioritizes physical and psychological security over economic efficiency. As a result, Jordan pays above market prices and high supply chain costs to meet its needs.
On the Global Food Security Index, Jordan is nearly on a par with Tunisia and Algeria, and fares better than Syria and Yemen, both of which have endured ad cycle of conflict and food insecurity since 2011. Since 2018, Jordan has witnessed growing social instability characterized by large demonstrations against increasing taxation and rising prices reflecting the growing pressure on Jordanian households. These demonstrations echo the 2011-12 protests, which saw the sacking of three government cabinets in 18 months.
To avoid the pitfalls of previous governments, Jordan has tried to pursue a policy of maintaining strategic food reserves. Nevertheless, Jordan should manage the cost of food security, balancing increased reserve storage capacity with more efficient food import supply chains to decrease import costs and hedge commodity prices. Additionally, Jordan will need to manage other key factors—its trade balance, national debt, and fiscal as well as political constraints—if it wants to sustain its strategic food reserves policy.
*Carnegie
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