Key Findings andPolicy Implications

Olivier Ecker

Conrad Hotel, CairoFebruary 28, 2017

Book Launch

Malnutrition lowers children’s educational achievements, reduces adults’ income opportunities, deepens poverty, and slows economic growth.

While undernutrition is still the main nutritional problem in the developing world, overnutrition is rising rapidly—especially in middle-income countries.

Along with North America, MENA and LAC have the highest obesity rates, with more than 30% among women.

Rising rates of overweight/obesity go along with a growing prevalence of non-communicable diseases (incl. type 2 diabetes, coronary heart disease, stroke, hypertension), increasing private and public health care costs.

Background & Motivation

Two major nutritional challenges:

1. Double burden of malnutrition (DBM): Simultaneous presence of chronic undernutrition and overnutrition

2. Growth-nutrition disconnect (GND): High economic growth was not accompanied by declining prevalence of chronic undernutrition.

Both nutritional challenges are exceptionally pronounced in Egypt compared to other countries.

Growing evidence suggests that economic and social policies and programs may contribute to the rapid rise of overnutrition and the DBM in developing countries.

Egypt: Nutritional Challenges

DBM: Country ComparisonRelationship between the prevalence of female overweight and child stunting

Arab world

Africa south of the Sahara

Latin America and Caribbean

East Asia and Pacific

West, Central, and South Asia and Eastern Europe

North American and Western European high-income countries

Source: Own representation based WDI data (World Bank 2014).

DBM in Egypt

DBM at

population level DBM at

family level DBM at

individual level

Child

stuntingChild

overweightFemale

overweightFemale obesity

Stunted child with overweight

mother

Stunting and overweight in

children

Total 31 29 73 34 22 14

Urban 32 29 74 34 25 15 Poorest Q5 33 26 73 31 22 13

Richest Q5 29 30 72 31 23 15

Rural 31 29 71 34 21 13 Poorest Q5 32 27 62 25 18 14

Richest Q5 30 34 79 42 22 15

Prevalence of malnutrition (%) in 2011

Source: Own calculation based on 2011 HIECS data (CAPMAS & WFP 2011).

1. The nutrition transition: Shifts in dietary patterns and physical activity levels, associated with economic development and urbanization

2. Economic crises and rising poverty

3. Insufficient nutrition-sensitive investment, esp. water and sanitation infrastructure and primary healthcare (incl. maternal and child health and nutrition programs)

4. The food subsidy system

The first three drivers alone cannot explain Egypt’s global exceptionalism and the observed patterns of malnutrition among the Egyptian population.

Four Key Drivers

The food subsidy system—as in place until May 2014—was ineffective in reducing chronic undernutrition and may have contributed to sustaining and even aggravating the DBM (and the GND) in Egypt, through two effects:

1. Direct effect: Creating incentives for overconsumption of calorie-rich foods and unbalanced diets

2. Indirect effect: Making public funds allocated to food subsidies unavailable for potentially more nutrition-beneficial spending

Empirical analysis: Statistical evidence for the existence of causal relationships between received food subsidies and the nutritional status of young children and their mothers

Hypothesis & Research Objective

Two separate food subsidy programs:1. Baladi bread & flour program: General subsidy; EGP 0.05

(<1 US cent) per bread loaf, fixed since 19892. Ration card program: Restricted to cardholders; monthly

quotas of cooking oil, sugar, rice (and black tea) at fixed prices

Monthly quotas per household and prices under the ration card program in 2011

Egypt’s Food Subsidy System until May 2014

Oil Sugar Rice Quota per registered person (kg) 0.5 1 n.a.

Additional quota per registered person (kg), with maximum allowance of 4 persons 1 1 2

Subsidy price (EGP/kg) 3 1.25 1.5

Average market price (EGP/kg) 8 5.5 3.5

Average subsidy rate (%) 63 77 57 Source: Own calculation based data from MOSS (2012) and 2011 HIECS data (CAPMAS & WFP 2011).

Food Subsidy Beneficiaries in 2011

Source: Own calculation based on 2011 HIECS data (CAPMAS & WFP 2011).

Coverage of the food subsidy system was broad:• 84% of all households consumed Baladi bread, flour, or both.• 68% of all households had ration cards, and almost all used them.

Subsidies received from the ration card program were higher among rich beneficiaries than poor beneficiaries per person.

Distribution of household ration cards and registered persons

Poorest Q5 Second Q5 Third Q5 Fourth Q5 Richest Q5 Total Households holding ration cards (%) Total 72 72 68 68 62 68 Urban 62 60 61 62 54 60 Rural 75 77 75 75 76 76

Family members registered on household ration card as proportion of actual household members (%) Total 90 101 114 127 167 119 Urban 94 112 118 144 182 130 Rural 89 96 107 117 150 112

All subsidized food items were rich in carbohydrates (providing calories) and poor in micronutrients (vitamins and minerals).

However, child stunting is often caused by micronutrient deficiencies and inadequate child feeding practices.

Two interlinked food consumption effects of the food subsidies:1. Incentives to (over)consume cheap, calorie-rich foods, lowering the cost

of becoming overweight/obese income effect of price reduction2. Incentives to consume cheaper, unbalanced diets, relative to diversified,

micronutrient-rich diets substitution effect of price reduction

When household (real) incomes decrease and prices of nutritious free-market foods rise, such as during economic crises, the effects become more pronounced.

Nutritional Effects of Food Subsidies

Engel curve estimations suggest that the consumption of (subsidized) oil, sugar, and rice increases with rising household income ( normal goods), whereas the consumption of Baladi bread and flour decreases ( inferior goods).

The subsidized calorie amount was too high when compared to common recommendations for healthy diets:For an average 4-person household (with all members registered):>90% (>1,700 kcal/d per person) of minimum calorie requirements (for low PAL)

Nutritional Effects of Food Subsidies

Quasi-experimental impact evaluation methods:• Propensity Score Matching with binary treatment (PSM)• Propensity Score Matching with continuous treatment: Dose-Response

Model (DRM)

Model estimations (42):• Separate by urban/rural areas and the food subsidy programs: PSM for

effects of ration card program participation, DRM for subsidy level effects of the ration card program and the Baladi bread & flour program

• Outcome var.: Child HAZ, stunting; child BMIZ, overweight, obesity; maternal BMI, overweight, obesity; child stunting & overweight; stunted child with overweight mother; child & maternal overweight; household dietary diversity, consumption of main food groups

• Indep. var.: household income quintile, characteristics, location• Treatment var. in DRM: Consumed calories from subsidized foods

Methodology

Household Income, Expenditure, and Consumption Survey (HIECS), 2010/11

Special module on household food security and anthropometry of children and women in 2010/11 HIECS round• Subsample: 11,802 households (visited in 2011) = 49%

Unique dataset, because of detailed information on household food consumption, food subsidies, and nutritional status

Data

There is no evidence that the food subsidies led to improved nutrition.

The ration card program had stronger (adverse) nutritional effects than did the Baladi bread & flour program.

The negative nutritional effects were greater in urban than rural areas.

Ration-card-program participation had no clear nutritional effects. It is the received subsidy amounts that mattered for nutritional outcomes!

Estimation ResultsDose-response functions (selected):Ration card program in urban areas

Probability of mothers being overweight

Probability of children being overweight

x = subsidy levels in beneficiary households

Among urban beneficiary households of the ration card program ... the probability of maternal

overweight increases the probability of child overweight

increases children’s HAZ tends to decrease the probability of children being

overweight and stunted increases the consumption of meat & fish,

milk & dairy products, and legumes decreases

… with increasing subsidy levels.

Estimation ResultsDose-response functions (selected):Ration card program in urban areas

Child height-for-age z-score (HAZ)

x = subsidy levels in beneficiary households

Probability of children being stunted and overweight

Findings provide a strong public health rationale for reforming the Egyptian food subsidy system.

Nutritional concerns—especially related to overnutrition—should be considered in the reform.

The basket of subsidized foods should be better aligned with beneficiaries’ nutritional needs.

Subsidies for calorie-rich, non-staple foods (cooking oil, sugar) should be phased out.

Diversified diets and consumption of micronutrient-rich foods should be promoted.

Policy Implications from the empirical analysis

The fixed-quota scheme of the ration card program should be abolished to allow beneficiaries more flexibility in choosing foods according to their individual needs.

The fixed-price regime of the system should be phased out to avoid price distortions and related consumption incentives.

Household eligibility for food subsidies should be reviewed, and food subsidies (or any alternative assistance) should be better targeted to the needy population.

Benefit differentiation corresponding to beneficiaries’ neediness should be (re)introduced.

Policy Implications from the empirical analysis

In June 2014, the Egyptian government began to reform the food subsidy system.

Several changes already made are consistent with the reform recommendations from this study and can be expected to reduce—but not eliminate or even reverse—the adverse nutritional effects of the food subsidies.

For further reforms, there are two long-term options for more nutrition-sensitive social protection programs:• Food voucher program with complementary nutrition education

(e.g., Supplemental Nutrition Assistance Program – Education, SNAP-Ed, of the United States)

• Conditional cash transfer program(e.g., Progresa-Oportunidades of Mexico)

Current Reform & Reform Options