FINANCING FOOD INSECURITY RISK — A PROACTIVE APPROACH: THE MAURITANIA NATIONAL FUND FOR FOOD AND NUTRITION CRISIS RESPONSE By Rafael Van der Borght, Oscar A. Ishizawa, and Matthieu Lefebvre SASPP Policy Note Series NOTE 8 | MARCH 2023 SASPP Policy Note Series 2 NOTE 8 | MARCH 2023 KEY RECOMMENDATIONS Mauritania is highly exposed to recurrent and extreme droughts resulting in food security crises. The Government of Mauritania, with support from the World Bank, has introduced a new institutional and operational framework for the coordination and funding of responses to food security crises in the country. Established as part of this reform, as the financial backbone of this framework, The National Fund for Food and Nutrition Crisis Response (FNRCAN) aligns and optimizes the financing for responses to food security crises. The key outcomes of FNRCAN will be to: • Enhance ex-ante financial planning for a more efficient and transparent use of resources. • Optimize the use of public resources through a comprehensive risk financing strategy. • Secure the national budget from the fiscal impacts of climate-related shocks and contribute to the sustainability of public finances. To ensure its continued sustainability, FNRCAN requires consistent support from its partners to: • Strengthen and expand local technical capacity. • Secure high–level political support and alignment with regional early warning system. • Ensure continued financing. 1 Introduction In Mauritania, recurrent droughts are exacerbating FIGURE 1. already high levels of food insecurity and threatening Climate-Driven Rural Food Insecurity Variations in poverty reduction efforts. Approximately one in every Mauritania five Mauritanians are permanently food insecure. In a country that has only one rainy season each year, rural food insecurity variations are largely driven by the timing and quality of the rainy season1 (see Figure 1). For example, significant rainfall deficits during the 2011 rainy season resulted in crop failures, water shortages, lack of pasture and livestock losses. Consequently, during the 2012 lean season, an estimated one million people — nearly 27 percent of Mauritania’s total population — experienced food insecurity2. A similar pattern was seen with the 2022 food security crisis, which was preceded by rainfall deficits during the 2021 rainy season. Food security crises in Mauritania are expected to worsen as the impacts of climate change further intensify droughts and flood events in the country. Source: Food Security Monitoring Surveys. Note: The orange and green dotted lines represented the average food insecurity rates in post- harvest and lean seasons respectively. SASPP Policy Note Series 3 NOTE 8 | MARCH 2023 2 Impact of pre-FNRCAN responses to food security crises Mauritania has historically lacked a clear financial FIGURE 2. architecture for government responses to food security High Volatility of Public Expenditure Allocated to Food crises, threatening the state budget and public finances. Insecurity These responses were largely ad-hoc and reactive, including their financing mechanisms. For example, the 50 Government response to the 2012 food security crisis 45 entailed an unplanned expenditure equivalent to 10 40 percent of its annual budget, negatively impacting the 2012 35 budget deficit. Funding for this response was mobilized 30 through a combination of donor support and budgetary 25 reallocations made at the expense of other growth– 20 enhancing investments. Furthermore, a historical analysis 15 of national budget expenditure for the period 2010–2020 10 reveal highly volatile public spending in response to food 5 security crises, channeled through multiple budget lines 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020* across different ministries (see Figure 2). The absence of Free Distribution Prime ARC Replica EI-Maouna Cash Transfer ex-ante financial planning impaired efficient budgetary Cattle Feed National Stock Annual Average Replenishment management and delayed response efforts, compounding Source: BOOST database the initial impacts of these crises. Note: The green dotted line represents the yearly average amount of public expenditures allocated to respond to food insecurity crisis. Activities displayed here are funded through a mix of government resources and donor support. 3 The political and strategic context for the FNRCAN The National Fund for Food and Nutrition Crisis Response plan (PNR) which detail intervention procedures to affected (FNRCAN) is part of a broader set of efforts to improve households, and budget requirements to finance the the responsiveness of social protection programs. response to recurrent food and nutritional security crises. In 2019, the Government of Mauritania, with technical Central to its Decree, DCAN stated the need to establish a and financial support from the World Bank, embarked “fund aimed at financing [the annual national response plan] on an ambitious reform to establish a new overarching PNR” (article 13, Decree 061-2021), thereby establishing the institutional framework for the prevention of and response FNRCANs as the financial arm of DCANs. This integrated to food security crises. The outcome of this process was approach is crucial to the success of the reform: DCAN a streamlined and unique coordination mechanism to is a multi-stakeholder framework for programming and respond to food security crises: the National Mechanism prioritizing responses to food and nutritional security crises, for Prevention and Response to Food and Nutritional while the FNRCAN, the financial arm, would consolidate, Crises (Dispositif National de Prévention et de Réponse channel and optimizes the financing for their response aux Crise Alimentaires et Nutritionnelles, DCAN). Since (see Figure 3). 2021, the DCAN produces the annual national response (c) Photographer Annie Spratt, 2020 SASPP Policy Note Series 4 NOTE 8 | MARCH 2023 FIGURE 3. Institutional Arrangements of the DCAN and the FNRCAN The FNRCAN was formally created on May 11, 2022 (Decree institutional structure and key operating principles of the 068-2022), as a Specially Allocated Budget (BAS). All FNRCAN were defined under a restrained working group FNRCAN disbursements must be aligned with the PNR and led by the Food Security Commission (CSA), and comprised comply with the fund’s operational manual currently under of the Ministry of Finance, the Ministry of Economic Affairs, development. The Government of Mauritania has allocated the World Bank, the World Food Programme, and the AFD. funds to the FNRCAN under the 2023 budget law4, and Operating principles and governance arrangements were development partners such as the French Development further detailed by the joint Ministry of Finance-CSA bylaw Agency (AFD) and the World Bank have already committed 1312 of December 12, 2022 (see Figure 4). to actively contribute to the FNRCAN. The legal and FIGURE 4. Schematic Outline of the FNRCAN SASPP Policy Note Series 5 NOTE 8 | MARCH 2023 4 Key advantages of the FNRCAN The FNRCAN is a consolidated budget account to optimize capitalizing resources beyond the annual budget cycle, and channel financing for responses to food security and as well as the ability to finance insurance premiums or nutritional crises. Major sources of funding will include the costs related to other risk transfer instruments. The donors contributions, national budget allocations, pay–outs potential savings made during ‘non-crisis years’ could for from risk transfer instruments, and undisbursed balances example be used to increase reserves and/or leverage from previous years. The three expected key benefits of additional resources through a risk-layered strategy. In having a dedicated financial instrument as the FNRCAN this setting, the choice of the main parameters of the are as follows: African Risk Capacity (ARC) insurance product currently used by the country (i.e. attachment and exhaustion • Enhances ex-ante financial planning for a more points, premium amounts) could be articulated with efficient and transparent use of resources. By bringing the level of reserves hold by the FNRCAN, thereby all resources under a unique dedicated fund with its own optimizing the use of scarce public resources and operational manual, the FNRCAN provides a clear, rule- ensuring a higher level of coverage in the event of based mechanism for allocating, disbursing, monitoring, severe crises. and auditing funds. Pre-arranged access to immediate liquidity in the event of food security crises is key to • Secures the national budget from the fiscal impacts enable early and efficient humanitarian response efforts. of climate-related shocks and contributes to the As a unique platform for financing food insecurity sustainability of public finances. As a separate crises, the FNRCAN also ensures a coordinated and financing vehicle to absorb the costs associated with harmonized approach among Government entities food insecurity crises, FNRCAN mitigates climate risks and (inter)national humanitarian and development within the broader fiscal risk management strategy of partners, further reducing transactional costs and the Government. By acting as a buffer for government improving efficiency. This harmonized approach will expenditure, it helps to safeguard programmed also help promoting a greater complementarity of investments in social or growth–enhancing sectors donors’ contributions with other financing sources. from emergency budgetary reallocations. This limits disruptions to budget execution, strengthens budget • Optimizes the use of public resources through credibility and accountability mechanisms and improves the elaboration of a comprehensive risk financing overall public financial management practices in the strategy. The FNRCAN is providing the foundation to country. develop a more comprehensive risk financing strategy in the upcoming years. Its financial architecture allows 5 Full operationalization and sustainability of the FRNCAN The FNRCAN is expected to begin operation during the To ensure sustainability of the FNRCANs, consistent 2023 lean season. The FNRCAN operational manual, donor engagement will be required to strengthen local currently being finalized with the support of development technical capacity, secure high–level political support, partners, features financial, budgetary, and accounting and ensure continued financing: processes, as well as guidance on procurement, internal and external control, and monitoring and evaluation. The • Strengthen local technical and operational capacity: FNRCAN manual will be a living document, with key learnings The CSA, as authorizing officer of the FNRCAN, will from audits and other reviews incorporated regularly. In require capacity and training support in financial 2023, the FNRCAN will initially fund cash-transfers activities, management, accounting, and procurement to ensure with the objective that as the FNRCAN refines its financing the efficient functioning of the FNRCAN. and operational capacity, funding will progressively allow to cover other components of the PNR, including food • Secure high-level political support: An active coalition distribution, support to farmers, and child malnutrition. of donors aligned with the aims of the FNRCAN This phased approach will enable key actors involved in will help to garner support for this new finance the implementation of the PNR to become familiar with mechanism among key stakeholders. Key ministerial processes and requirements of the FNRCAN, ensuring an and intermediary stakeholders may be reluctant to efficient transition to this new financing approach for food relinquish their discretionary powers and influence and nutritional insecurity risk. through the consolidation of all public resources under the FNRCAN. SASPP Policy Note Series 6 NOTE 8 | MARCH 2023 • Ensure continued financing: Prior to the FNRCAN, initial capitalization and extraordinary contributions in the response to food insecurity crises was largely the event of a severe food security crisis are likely to financed through ad-hoc donor support, with the be required5. To accommodate various requirements, risk of potential overlaps or redundancies in donors these contributions can either provide fungible support support. The financial credibility of the FNRCAN relies to the FNRCAN or target a specific component of the on its ability to efficiently and transparently channel PNR (e.g. temporary cash transfers, child and mother funds with a measurable impact. Although its financial nutrition interventions…). Likewise, contributions can sustainability will continue to require donors’ support. be disbursed in single tranches or be programmed as In fact, both direct financial contributions to accelerate multi-year contributions spanning various lean seasons. 6 CONCLUSION The government of Mauritania has established the FNRCAN as a key financial mechanism for government response to food security crises in the country. FNRCAN will allow the rapid, coordinated, and optimized deployment of public resources where and when they are needed most in times of food security crisis. With full operationalization beginning in the 2023, consistent development partner engagement is needed to strengthen and expand the FNRCAN capacity. (c) Photographer Annie Spratt, 2020 SASPP Policy Note Series 7 NOTE 8 | MARCH 2023 ENDNOTES 1 Mauritania has only one rainy season running from June to October. The main harvest takes place between September and November. Following this main harvest, food stocks gradually decline until the lean season (May–August of the next year), typically characterized by lower food reserves and rising food insecurity. 2 Authors calculations based on the 2012 Food Security Monitoring Survey. 3 Mauritanie - Revue des Dépenses Publiques : Pistes pour Maintenir la Viabilité Budgétaire et Soutenir Une Reprise Economique Plus Inclusive Apres la COVID-19 -: World Bank Group 4 Under title 34 of the 2023 budget law, an amount of US$16.9 million has been allocated to the FNRCAN. 5 The risk of recurrent drought-induced food insecurity can be quantified and, to some extent, financially managed. However, risks linked to other external shocks (e.g., shock on international food prices, public health-related emergencies) or future climate change can significantly increase pressure on food security and are likely to require additional external support in case of occurrence. REFERENCES Food Security Monitoring Surveys. World Bank 2021. BOOST Database. https://www.worldbank.org/en/programs/boost-portal World Bank 2021. Mauritanie Revue des Dépenses Publiques: Pistes pour Maintenir la Viabilité Budgétaire et Soutenir Une Reprise Economique Plus Inclusive Apres la COVID–19 (French). Washington, D.C.: World Bank Group. https://documents.worldbank.org/en/publication/documents-reports/documentdetail/315091634652104601/pistes-pour-maintenir-la-viabilite-budgetaire-et-soutenir-une-reprise- economique-plus-inclusive-apres-la-covid-19 ACKNOWLEGEMENTS SASPP is a multi-donor trust fund managed by the World Bank that supports the strengthening of adaptive social protection systems in the Sahel (Burkina Faso, Chad, Mali, Mauritania, Niger and Senegal) to enhance the resilience of poor and vulnerable households and communities to the impacts of climate change. The program is supported by Denmark, France, Germany and the United Kingdom. NOTE DESIGN: ANDRES DE LA ROCHE / ADELAROCHEDESIGNS.COM For more information saspp@worldbank.org www.worldbank.org/saspp