Wendy Walker EASS November 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 its Board 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 necessarily conform to ADB's terminology.

Timeline of crises and responses Food and fuel crisis Financial crisis Findings from assessments of impacts
Food Crisis Financial Crisis

Conclusion

2008

2009-2010

2010-2011

2012 -?
New Inflation

Food and fuel crisis

Financial Crisis

Dzud

FNSWP P

SSSP

PMT data capacity Food stamps

End: CMP Begin: HDF FSP

Social Welfare Law February 2012

ISDB Medicard Education Small grants

End HDF

Draft Law ISDB Medicard

Povert y Benefit

+30% inflation: highest in Asia Food = highest consumption item (70%) for poor Immediate impact: lower and less quality food consumption (particularly for 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, time lag Reliance on CSO not enough and not well distributed Price protection sets off other instabilities Request for Food Stamp Program from ADB

Government budget received 40% of its revenue from mining prior to the crisis Falling commodity prices had economy-wide impacts and severely impacted Government revenue 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 social benefits to volatile commodity-based revenue

Copper prices fell by 60% from peak of $8,600/ton in 2008 to $3,500/ton in April 2009 State budget income decreased by 33 % (comparing1st Qrts 2008 to 2009) State budget deficit increased by 4 times

Social protection expenditures increased significantly from 7.0% of GDP in 2001 to 11 % in 2008 and 12% in 2009. Key SW expenditure: Child Money Program Universal benefit to all hh with children With the universalization of the CMP in 2006, the number of social welfare beneficiaries soared from 160,000 in 2004 to more than 1 million in 2006. The increases were not related to poverty incidence, but to the interplay of political pressures and the universal coverage of social cash transfers. The escalations in expenditures up to 2009 presented the challenge of cutting entitlements (the total cost of CMP was MNT 142 billion per year) to restore fiscal sustainability Key = Targeting and Consolidation

Food Crisis: Creation of the Food Stamp Program focusing on most vulnerable hh, PMT

10,000MNT/adult, 5,000/child
Financial Crisis: Program loan with JICA (100m) with conditions on targeting and consolidation of benefits; creation of medicard program; Education for the poor

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 like construction and services; youth and recent uni grads; self employed in rural areas

Food Crisis Financial Crisis

2008 food price shock

The 2008 food price shock, unit price in Tugrug
Item Before (Q3+4/200 7) 2478 2766 1979 1954 433 652 641 587 477 438 507 514 574 593 1605 709 787 After (Q3+4/200 8) 2922 3230 2247 2264 684 1189 1021 910 820 658 722 746 856 933 2299 1053 1055 Increase compared to before (%) 17.9 16.7 13.5 15.8 57.9 82.4 59.0 54.8 71.8 50.1 42.4 45.0 49.2 57.3 43.2 48.5 34.0 After (Q3+4/200 9) 2319 2801 1825 2037 656 1330 912 755 676 633 721 741 845 936 2416 1148 1556 Increase compared to before (%) -6.4 1.2 -7.8 4.2 51.4 104.0 42.1 28.4 41.4 44.5 42.1 44.0 47.2 57.8 50.5 61.8 97.6

Mutton Beef Goat Horse Bread Rice Flour, highest grade Flour, grade 1 Flour, grade 2 Potato Cabbage Carrot Milk Yoghurt Dried curds Horse milk Curds

Source: HSES 2007/08 and 2009; units vary, e.g. kilogram for meats and litre for milk.

2007-2009 quantitative findings: caloric intake

Caloric intake per adult equivalent per day: before and after price hike Caloric intake for PMT household per adult equivalent per day: before and after price hike

Source: HSES 2007/08 and 2009

Source: HSES 2007/08 and 2009

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)

Quantity consumed

Dietary diversity

Quality of food

We cant always buy fresh meat, so sometimes well have to use some spare products like heart, liver, lung, or ground meat. (FGD, Bayanzurkh)
We buy our food in the soum shop. We rarely go to Ulaangom city, because the expenses are highThe transportation fee increased from 2500MNT to 3000MNT because of the petrol cost. (FGD, Uvs)

Shopping habits

2007-2009 quantitative findings: health

All households: No real impact on health seeking behaviour. Expenditure on treatment 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

Mean amount spent (Tugrug) on treatment: PMT

PMT households: Minor changes on health seeking behaviour. Drastic cuts on their health expenditure especially in the short term Even in the medium term, health expenditure remains lower than before the shock.
Source: HSES 2007/08 and 2009

2010-2011 qualitative findings: health

Health expenditure
Due to the fact that we do not have cash available in hand, I cannot afford medicines for my two sick children. The medicine for my children used to be 420 MNT, but now it is 650 MNT. (FGD, Songino Khairkhan) People usually buy medicines in small amounts because they cannot afford the whole package. (Doctor, SXD) They often ask us for cheap and ordinary tablets. We prescribe the medicines they ask (Doctor, Bayanzurkh) My two kids had long coughs; however I gave them my urine against their high temperature. At the end they got pneumonia and were treated in hospital (FGD, Khovd) My children get sick easily because of low immunity. A family doctor advised that we give them healthy quality food but I cannot afford them. (Interview, SXD).

Drug dosage

Generic drugs

Informal treatment

Health consequences

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 for educational 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

2010-2011 qualitative findings: education

Attendance
There have been incidents when we decrease our expenditure to bear the cost of our childrens education. We never ask our children to leave school. But we decrease our food consumption so that our children can be well educated. (Interview, Bayanzurkh)

Indirect expenditure

He does not have any books to study because the books cost a lot of money. He does not do his homework at all. (Interview, Bayanzurkh) Yes, the food price rises affects education outcomes. When I worked as the teacher of primary school, there were kids who did not consume food for long periods as the parents were unemployed. If prices keep going up, then such parents will not be able to afford for any food for their children. For such kids, it will be really difficult to make an effort and concentrate on their studies. (Interview with
teacher, Uvs)

Education outcomes

2010-2011 qualitative findings: relationships

Happiness Scores from happiness rankings normally reducingdiscussions indicate that this is related to price rises. My husband is furious of it. When he arrives from his work in the evening, we talk about our money problems to him. Then he may be tired of it. [FGD Bayanzurkh]

Stress

Mutual support

Urban People want to phenomenon? help each other, but they

themselves do not have extra things to offer others. So, people usually are not helping each other, just barely meeting their own needs. (FGD,
Bayanzurkh)

Shame

Isolation

I feel ashamed from other people, when I meet someone I know. I hardly ever meet my friends and classmates because I have nothing nice to wear. (FGD, Bayanzurkh) Our children are growing up thinking we dont have anything, so its affecting their future social statuswhen they see a rich child, they isolate themselves from him. (FGD, Songino Khairkhan)

2010-2011 qualitative findings: Debt

Goods on credit and borrowing

We always take loans. The shop owners have a full bag of the human development money books in it. The frequency of loans is increasing this year in comparison with last year. Focus group discussion,
Uvs.

Some shops charge interest Unreliable credit system Tense relationships

Asset sales

I do not have any jewels left because I lost all of them to pawn shops as a result of not paying back the money to them on time. (FGD, Bayanzurkh)
Urban areas largely

Some livestock sold in rural areas as last resort

2010-2011 qualitative findings: Employment

Rising prices Falling unemployment Theory

Rising prices

No change unemployment

in

Practice

Why? Transport price increases and mining revenues lead to inflation but not to employment creation

Global price inflation does not lead to higher employment

Result

Poor households find it harder to cover essential expenditures but not to find
employment

Four rounds of qualitative: May 2009, September 2009, January 2010, November 2010 Transmission channels:
Labor market effects Price shocks Social changes

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 or hiring for short probation periods and then terminated) discriminatory hiring practices (especially for women) became more prevalent based on age, gender and appearance Reductions in sales and profits of small businesses: reduced demand and depreciation of Mongolian currency; loss of access to credit; increased selling on credit Higher transport costs contributed to shift from wage labor to unpaid activities like gardening in urban areas Long term: even with labor market improvements migrants and low skilled workers continued to suffer from poor enforcement of labor contracts, low salaries and poor working conditions

Food price inflation was still high Fall in price of cashmere and livestock products with depreciation of national currency shifted terms of trade against herders Big impact because of loans at high interest rates based on projections for cashmere and meat Costs of schooling and university increased at the peak of the crisis Herder resilience strongly correlated to herd size (under 100 most affected) Long Term: Economic recovery accompanied by continued rise in consumer prices. Higher prices for cashmere and skins improved herder livelihoods. Impact of govt social transfers in HDF and education subsidies helped.

Changes in gender roles Women shift from non-income domestic work to income generating 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 women continued in economic activities but other aspects not readily discussed

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 in the 4th round of research. Those who had lost major assets (herders) and faced new vulnerabilities (migrants) could cover food expenses, but little more. Bank loans without collateral remained inaccesible

Both crisis reveal a number of economic and social vulnerabilities and 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 better prepare 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 inclusive growth, addressing inequality and preparing for future shocks