IDEAS home Printed from https://ideas.repec.org/p/imf/imfwpa/2024-184.html
   My bibliography  Save this paper

Investing in Climate Adaptation under Trade and Financing Constraints: Balanced Strategies for Food Security

Author

Listed:
  • Chen Chen
  • Koralai Kirabaeva
  • Danchen Zhao

Abstract

Financially constrained governments, particularly in emerging and developing economies, tend to face a fiscal trade-off between adapting to climate change impacts and pursuing broader development goals. This trade-off is especially relevant in the agriculture sector, where investing in adaptation is critical to ensure food security amidst climate change. International trade can help alleviate this challenge and reduce adaptation investment needs by offsetting agricultural production shortages. However, in the presence of trade fragmentation, the adaptive role of trade diminishes, exacerbating food insecurity and increasing investment needs for adaptation. In this paper, we present a model to guide policymakers in deciding on the cost-efficient balance between investing in adaptation in the agricultural sector versus in broader development under financing and trade constraints. We apply the model to Ghana, Egypt, and Brazil, to examine the adaptation-development trade-off and highlight factors that would potentially lower adaptation investment needs. These factors include trade openness, higher agricultural productivity and efficiency of adaptation spending, and reduced labor market distortions. The key takeaways from the model applications suggest that (i) promoting trade openness and accessing concessional finance for adaptation help tackle climate challenges and ensure food security in lower-income countries; and (ii) domestic structural reforms are necessary to facilitate adaptation investments and reduce investment needs, by improving labor market flexibility, adaptation efficiency, and agriculture productivity.

Suggested Citation

  • Chen Chen & Koralai Kirabaeva & Danchen Zhao, 2024. "Investing in Climate Adaptation under Trade and Financing Constraints: Balanced Strategies for Food Security," IMF Working Papers 2024/184, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:2024/184
    as

    Download full text from publisher

    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=553983
    Download Restriction: no
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:2024/184. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Akshay Modi (email available below). General contact details of provider: https://edirc.repec.org/data/imfffus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.