Nepal's Looming Food Crisis- How Global Events Impact Our Food Security?
Nepal is widely regarded as an agricultural nation, yet ironically the nation still needs to import food items worth $1 billion annually to feed its own population. The import of food items in Nepal has only been accelerating in the past decade. Our biggest imports have been rice and cereals such as wheat, rye, oats, barley, etc, along with fruits, nuts, and vegetables.
This rising import bill for food is a growing concern for the nation. We have become completely dependent on other nations even for basic needs like food. Furthermore, it widens Nepal's trade deficit, keeping the county under economic strain, as foreign currency flows out of our nation.
Adding to this issue, is the soon-to-rise global prices of food items caused by Russia backing out of the Black Sea Grain initiative. Ukraine and Russia are two of the biggest producers of food crops. Ukraine is home to 25% of the world’s famously fertile, black soils making it one of the biggest producers and exporters of food items such as corn, wheat, maize, sunflower meal, oil, etc. Many countries in the European Union (EU) depend on its exports, not to mention developing nations that receive food from Ukraine as humanitarian aid. Similarly, Russia with its massive size and varying climactic conditions makes it ideal for agricultural activities. In this way Russia and Ukraine both collectively form the backbone of global food security.
Precisely because of this, it was a worldwide concern when these nations went to war in February of last year as many feared global food shortages and inflation on food prices. Yet a couple of months later in July, Turkey and the United Nations managed to broker a deal between Russia and Ukraine that permitted Ukrainian ships carrying grains to cross the black sea corridor and reach the rest of the world. Under this agreement, Ukraine exported 33 million metric tonnes of food grains. The World Food Programme (WFP) also shipped 750,000 tonnes of food grain from Ukraine as an aid to countries such as Afghanistan, Kenya, Somalia, Sudan, etc. This initiative led to a 23% fall in food prices keeping the supply of food items stable even during war.
Unfortunately, Russia backed out of this agreement on Monday, 24th July 2023. Claiming that they have been not able to export their own agricultural products as they were supposed to. But many speculate this action was a reaction to the recent attacks in Crimea. Ukraine now can no more safely export food grains and food items out of the Black Sea corridor which has caused global prices of food grains to rise. Russia pounded Ukrainian food export facilities on Friday,21st July 2023, and seized ships in the Black Sea.
The US Ambassador to the UN, Linda Thomas-Greenfield says that Russia is holding humanity hostage. This act can severely harm global food security as global prices for food grains skyrocket. "Some will go hungry, some will starve, many may die as a result of these decisions," says Martin Griffiths, adding that 362 million people in 69 countries are in need of humanitarian aid. Aid is provided by the UN with the help of Ukraine. The world might face a global food security crisis, if Russia does not opt back into this deal. The rise in food prices will escalate the cost of living in the EU and the rest of the world. Many other industries will be impacted as well.
The ripple effects of this incident will definitely be seen in Nepal as well. Nepal imports cereals, fruits, vegetables, seeds, oils, and readymade food items and is dependent on these imports. Many EU nations and Asian nations depend on Ukraine for food products. These countries will also need to find alternatives to fulfil their food demands, which will mean a rise in global import prices. The global shortage in the supply of food items will lead to global inflation of food prices. Thus Nepal will have to pay more for the imports. Consequently, the import bill of Nepal will rise further widening the trade deficit of the nation. More importantly, this will also severely affect the middle and lower income families in Nepal as a major portion of their income will be spent on food. There might be a scarcity of food in the market along with massive inflation in prices. Findings show a 10% rise in food prices correlates to a 4% rise in the nation's poverty.
Additionally, the Zero Hunger Strategic Review (ZHSR) conducted in 2017-18 reveals that the country still suffers from severe food insecurity and malnutrition. The WFP aids Nepal in food security, nutrition, emergency preparedness and response in support of the nation's goals to achieve its Zero Hunger goal. With Ukraine being key to supporting WPF's food aid programs, the pressure of providing for all the citizens in the country now falls on to the government. And if the government is negligent, many starve severely bringing down the quality of life of individuals in the nation.
Nepal imports items worth $200 million from Ukraine, majority of which includes animal and vegetable fats and oils, oil seeds, grains, fruits, vegetables, tea, coffee, spices etc which we will now be deprived of. To make matters even worse, India has decided to ban its export of rice owing to a bad monsoon this year, damaging crops. India is the world's biggest rice exporter. Due to this decision the global price of food grains is to rise further. Heavy rains in Punjab and Haryana have led to severe damage to crops while inadequate rainfall in other states have led to a fall in plantation of paddy. There has already been an 11.5% rise in the price of rice in India, in order to control the inflation of food prices in the country the Indian government has made the decision to halt all export of rice. The Indian government might have also taken this prompt decision because Russia backed out of the Black Sea grain initiative so as to prepare itself for the potential global food security crisis.
This past fiscal year Nepal imported 200 million kilograms of rice from India. Making Nepal dependent on India for one of the most consumed food items in the nation. The halting of rice exports from India was furthered by global inflation in prices of food grains and processed food items due to Russia backing out of the Black Sea grain initiative. Nepal is currently looking down towards a massive food shortage and inflation in food prices, which can potentially drag thousands into poverty and risk thousands to malnutrition and even starvation. If the government does not find alternatives soon.
Negligence in the modernization of agriculture and advancement in agriculture-related infrastructure has led the country to this point. Furthermore, farmers are not being able to make a proper living due to many businesses and businessmen taking advantage of them by not giving proper prices for their production. Then later selling them at massively inflated prices for their own profit. This has left the country not even being able to feed itself properly. Talks with Russia are still ongoing and the black sea initiative might be reinstated but this is a sign that we need to start being self-sufficient in the sectors in which we actually can be self-sufficient.
Authored by Bishesh Shrestha
Bishesh Shrestha is an intern at our company. Shrestha is a recent International Baccalaureate (IB) graduate from Lalitpur-based Ullens School. He possesses a keen interest in the realms of finance and economics.
