The proposed loan and grant for the emergency food assistance Project will provide short term transitional support to help the Government meet unexpected high expenditures for safety net programs for the poor and vulnerable affected by higher food, fuel and agricultural input prices. The proposed Project will finance Government's expanded compensatory safety net programs for the consumption and production of food by the poor and vulnerable in selected rural areas of seven provinces in the Tonle Sap Basin and in selected urban slums of Phnom Penh.
The Project will have three components:
(i) compensatory consumption support,
(ii) productivity enhancement support, and
(iii) capacity development for emergency response to the food crisis and project management.
|Project Rationale and Linkage to Country/Regional Strategy
Cambodia has been badly affected by soaring food prices. The domestic price of rice and fertilizer has doubled over past years, while meat and fish prices have increased 30% to 60%. The rice price increase has accentuated the vulnerability of food deficit households, including the urban poor. In addition, input price increases threaten immediate future food production as farmers reduce fertilizer use, thereby reducing paddy yield, which is one of the lowest in Asia even in the best years. Gasoline price increases have increased the cost of transport, processing, and water pumping for irrigation. Consequently, poverty and hunger have increased; migration to urban areas and movement of people across the borders (Thailand and Viet Nam) have also increased. School attendance has declined as children are reportedly joining the workforce in order to help families, and in some cases have stopped coming to classes because of the discontinuation of the school feeding program. Some families are selling land and other assets to buy food and necessities. Home-based crafts are on the decline because raw material prices have escalated.
The rate of inflation has been accelerated by the combined effects of the surge in the price of food, inputs, and fuel. The situation has created additional demands on the Government's limited revenue base, and threatened the livelihood of millions of vulnerable Cambodians. The Government recognizes the need to immediately strengthen safety-net programs for the most vulnerable population to cope with the drastic rise in their food bills. It has released 300 tons (t) of rice onto the open market in order to bring down rice prices. In addition, the Government has contributed 4,000 t of rice to the World Food Programme feeding program, including school feeding. It is under these dire circumstances that the Government has requested emergency assistance from the Asian Development Bank (ADB) to augment its ongoing efforts and help offset some of the short-term human costs of this exogenous shock.
The proposed Project is an integral part of the overall commitment made by ADB in May 2008 at its Annual General Meeting in Madrid, Spain to provide assistance to countries hit hard by food price rises. Those most vulnerable to food price shocks need to be protected from nutritional deprivation, erosion of their real purchasing power, and asset alienation. It is proposed that the project financing should be covered by ADB's Disaster and Emergency Assistance Policy to support urgent mitigation measures by the Government in order to tackle the food price crisis.