Distorting agri-food policies in Iraq: implication for crop production, food security and water use

Iraq has faced significant security challenges due to wars and local conflicts over the past decades that have hindered its economic growth. These challenges have at times overshadowed the issue of a significant increase in families at risk of food insecurity in the country, exacerbated by poverty and scarcity of domestic production. To reduce the impacts of these challenges, successive governments have resorted to implementing many agri-food policies to encourage domestic production through subsidising the key crops on one hand, and to make food affordable for all citizens through providing the main staple food commodities at low prices through a public distribution system PDS policy on another hand. However, these policies have several negative consequences. They have burdened the economy of the country, putting the country fiscal budget under additional pressure. Moreover, the policy of production subsidies has had a significant impact on agricultural water demand, in what is a water scarce country. This research sheds the light on the motivations that stand behind these policies, as well as providing a clearer vision of the consequences of such policies, in terms of food self-sufficiency, equity, and water scarcity. Iraq's agri-food policies can be considered as a good example of highly distortionary policies that could prevent the country from achieving its goals and may even lead to greater burdens on the economy of the country. Iraq's economy has become less diversified during the last decade and more dependent on oil revenues than ever. Yet the oil sector employs only 1 % of the workforce in Iraq, so imposing inefficient policies to non-oil economic sectors such as agriculture is likely to have a greater impact on the Iraqi population than might have been anticipated (Sommer-Houdeville, 2017). This thesis explains the distortions caused by several of the most important food­related subsidies and assesses their performances. There are many aspects that need to be looked at accurately and in several respects. For example, particularly in a water-scarce country such as Iraq, increasing food production can improve food security but at the expense of water security. Conversely, relying on food imports can make the country less food secure, yet it might have an invisible positive impact as the embedded water in this importing food can play a key role to tackle domestic water shortages. According to Godfray et al., (2010) government investment in food production particularly in a lower-income country would have further impacts on increasing the competition for input resources such as water, land, and energy, which in the end might affect the food system itself. Iraq is striving for food security but there are no easy solutions. Subsidies have been used to promote food production and food affordability, hence ensure food security, yet at what cost to the country's economy and environment? The overarching aim of this study is to explain and assess the distortions caused by agri-food policies adopted by successive Iraqi governments. First, a careful assessment of the main agri-food policies adopted by the Iraqi government during the last two decades is undertaken. Then three interlinked research questions are answered. First, how does the government's current crop production subsidy policy affect farmers' crop choices and the profitability of their farming enterprises. This is achieved by measuring farmers' social and private profitability using a policy analysis matrix model, PAM. Four key crops are considered: wheat, barley, maize and rice. Primary data was collected, using a household survey of 155 farm households in Wasit governorate located in central of lraq, conducted in January 2017. The second research question asks the extent to which the crop production subsidy policy distorts demand for water in the agricultural sector. The water trade-offs between domestic production and imports are then considered using the concept of "virtual water" embedded in the imported crop. The third research question asks what the impact on inequality has been of the government's policy of subsidising all household consumption. The central message from this thesis is that there are no easy solutions for a country such as Iraq, given that the government must make a choice between growing a greater share of its staples, at a high cost in terms of water use and subsidies, and importing crops, which would reduce pressure on water demand and government finances, but reduce food security. This is particularly pertinent given how vulnerable food-importing countries are to price shocks, as evidenced by the food crisis of 2008, felt across the globe, a direct consequence of the harvest failure in Australia, a key grain exporting country. However, this thesis also demonstrates that better targeting of subsidies would lead to more equitable and efficient outcomes with respect to food security.