Ethiopia

Economics of Resilience to Drought: Ethiopia Analysis (January 2018)

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SUMMARY OF KEY FINDINGS

AIM

The aim of this study is to investigate the impact of an early humanitarian response and resilience building on humanitarian outcomes in the Tigray and Somali regions of Ethiopia, both in terms of cost savings, as well as the avoided losses that can result from a more proactive response. The study investigates existing data and empirical evidence, and uses this to model the relative costs of different response scenarios.

KEY FINDINGS

The impacts of drought on households are complex and interrelated, with spikes in need arising from a combination of physical changes to rainfall, fodder and vegetation, price changes in local markets, as well as other factors such as the quality of institutional response and conflict, for example. Further, high impacts of drought in one year can have strong effects on households’ abilities to cope in subsequent years.

It is very hard to measure this complex web of interactions and outcomes empirically. Hence, this analysis combines empirical evidence with the Household Economy Approach (HEA) to model the potential impact of different response scenarios over 15 years, for a population of 8.7 million across 17 livelihood zones. The model is dynamic, allowing impacts in one year to carry forward into subsequent years, and hence gives a nuanced prediction of how different interventions may affect humanitarian need over time.

Key Findings:

• An early humanitarian response would save an estimated US$965 million on cost of response alone over a 15-year period. When avoided income and livestock losses are incorporated, an early humanitarian response could save US$1.2 billion, or an average of US$151 million per year.

• Safety net programming at a transfer level of US$245/US$262 per household reduces the net cost of humanitarian response, saving an estimated US$1.2 billion over the cost of a late response. When this figure is adjusted to account for the benefits of the transfer beyond filling the food deficit, a safety net scenario saves US$1.4 billion over the cost of a late response.
When avoided losses are incorporated, a safety net transfer could save US$1.9 billion, or an average of US$127 million per year.

• A resilience building scenario that results in an additional increase in income of US$120 per household reduces the net cost of humanitarian response by an estimated US$1.2 billion over the cost of a late response. When this figure is adjusted to account for the benefits of the transfer beyond filling the food deficit, a resilience scenario saves US$1.7 billion over the cost of a late response. When avoided losses are incorporated, resilience building could save US$2.2 billion, or an average of US$150 million per year.

• Investing in early response and resilience measures yields average benefits of $3.3 for every $1 invested in the Somali region, and US$2.4 for every $1 invested in Tigray.

• When these estimates are applied to total U.S. Government (USG) spending on emergency food aid in Ethiopia, the USG could have saved US$1.2 billion over 15 years, a savings of 35% of total emergency spend.