afrol News, 24 May - An export ban place on Sudanese livestock in 2000 has had a multitude of consequences, a new study shows; most of them unexpected. O the short run, meat and food prices were lowered in Sudan, even leading to a dramatic all over drop in inflation. On the long run however, loss of income and wealth is the result.
The ban on livestock export was placed on Sudan as a result of an outbreak of the highly contagious animal disease Rift Valley Fever in early 2000. The importance to Sudan's economy was significant as the livestock sector accounts for an estimated 20 percent of GDP and roughly 15 percent of that time's total export value. A just released study by Rodney Ramcharan of the International Monetary Fund (IMF) has looked into the consequences.
Ramcharan argues that the livestock export ban's impact "differed significantly from a straightforward terms of trade shock." He attributes this to the underdevelopment of finance markets in the region and the special value of livestock to rural households not measurable in monetary terms. Still, he concludes "the loss of livestock export markets may have dramatically diminished the value of household wealth denominated in livestock and significantly increased poverty."
In a novel approach, the paper uses consumer price data "to better gauge the livestock ban's economic impact." While prices generally have fluctuated according to season, in mid-2000 there indeed occurred an unusual and significant decline in livestock prices. Ramcharan argues that this sudden decline "would lower household wealth and, thus, overall aggregate demand." In line with this, he finds that prices on other agricultural products also start dropping, as is inflation.
- In the short run, changes in livestock export revenues are negatively related to changes in food price inflation: an increase in livestock exports is associated with a general decline in food prices, the study says. This finding suggests that "when food prices are low, farmers increase livestock exports in order to supplement their incomes."
The results of Ramcharan's study are consistent with the literature in this area, which argues that livestock can act as an important buffer commodity in largely agrarian societies. Therefore is serves as a source of wealth and in times of poor harvest, livestock sales can help smooth consumption.
As a result of the export ban, pastoralists seemed to "have flooded the local market with livestock, leading to the observed sharp decline in food prices." In Sudan, with its widespread poverty, food makes up most of the family budget and agricultural and livestock products make up most of the family income.
- The export ban, by increasing local supply of meat and lowering income played a large role in the observed decline in both food and non-food inflation, the study concludes. There was no doubt that the economic impact had been significant, even on the Sudanese exchange rate.
Due to the poor existence of data at a lower economic level, Ramcharan's study cannot disclose the even more interesting effects of the export ban in local communities. Household level and employment/income data were not accessible, Ramcharan lamented.
Sources: Based on Ramcharan/IMF