There are two ways of examining the cost of not timely addressing the financing gap for the world to be on track to meet SDG Targets 2.1 and 2.2. Although it is not possible to realistically and fully estimate this gap, the different studies reviewed in the previous section indicate that it would be in the trillions of USD from today up until 2030. The first way to examine the cost of not bridging the financing gap is by measuring the millions of people that, by 2030 and beyond, will still be hungry, food insecure, malnourished and unable to afford a healthy diet, not to mention the medium- to long-term socioeconomic and health repercussions of this food insecurity and malnutrition.
The second way to examine the cost of inaction relates to the inefficiency, inequity and lack of sustainability with which current financing is being spent and allocated. In this section, reference is also made to the opportunity cost of not efficiently implementing and allocating public funds that are important for food security and nutrition.
Not bridging the financing gap will make hunger, food insecurity, malnutrition and unhealthy living prevail while costing trillions
Chapter 2 provides stark evidence of what business as usual means for hunger, food insecurity and malnutrition. Projections indicate that with a continuation of past trends, millions of people will still be undernourished by 2030 (see Chapter 2, Figure 3). Furthermore, for seven global nutrition targets, the progress will be less than needed to achieve the 2030 targets, and obesity is actually projected to increase in all regions and in almost all age groups (see Chapter 2, Figure 8).
Current amounts of financing are insufficient for the quantity and quality of programmes and interventions needed to eradicate acute and chronic food insecurity, which is affecting the people in most need of food assistance. Studies by the World Food Programme (WFP) show that failing to fund the assistance that must be provided to these people will have negative consequences for individuals, but also for local communities and even for donor countries. At the individual level, for example, estimates demonstrate that, on average, every percentage point cut in food assistance provided by WFP could push more than 400 000 additional people into emergency levels of hunger.36 Microsimulations indicate that halving the value of transfers to each beneficiary suffering from acute hunger in countries such as Afghanistan, Haiti, Iraq and Yemen could push an additional 7 million people into emergency or worse levels of acute food insecurity, up from the 2022 baseline of 14 million people.36
In the absence of more financing to scale up programmes and interventions to reduce hunger, people adopt negative coping strategies, but the consequences of these strategies do not necessarily materialize immediately. The Global Report on Food Crises 202437 notes that, to survive now, people tend to trade off their potential future food security and livelihoods by exhausting or selling their productive assets or cutting down on education, health care or other essential needs. For this reason, as well as because of the long-term health consequences of famine, several studies cited in the report calculate that early action saves money compared to belated action. The report also notes that many deaths can occur before a situation reaches famine level, which is often the scale of acute food insecurity that triggers the scaling up of assistance.
For local communities, there is evidence of a high risk that inadequate assistance increases social tensions, such as conflict over land and limited resources, and contributes to national and regional destabilization.38 In protracted situations without prospects of return, resettlement or a sustainable life outside of a camp, it has been found that refugees may be at higher risk of being targeted and recruited by militant and extremist groups,39 which in turn fuels regional or even international conflict, further exacerbating food insecurity and malnutrition.40 Humanitarian inaction can further imply lost opportunities to facilitate post-conflict recovery and peacebuilding, thereby setting the stage for future exodus, as some studies have observed.41, 42
For donor countries, inadequate assistance can have a higher financial cost than adequate assistance. This especially holds true for assistance for forcibly displaced people – whose number has skyrocketed in recent years43, 44 – when they reach the Global North.45 According to preliminary ODA estimates, member countries of the Development Assistance Committee spent USD 31 billion on in-donor refugee costs in 2023, which is more than the USD 25.9 billion that the same countries spent on humanitarian aid.46
While there are short-term urgencies that need more financing, including for humanitarian aid, failing to finance the actions that will once and for all address the main determinants of food insecurity and malnutrition will result in an even bleaker future when it comes to the likelihood of meeting SDG Targets 2.1 and 2.2. This action failure will result in higher social, economic and environmental costs.
A study has found that the cost of inaction on stunting represents annually at least USD 135 billion (between 0.01 percent and 1.2 percent of national GDP across countries) in lost sales, in addition to a monthly income loss by private sector workers ranging between USD 700 million in the Near East and North Africa and USD 16.5 billion in East Asia and the Pacific.47 The African Union Commission and WFP have put the cost of child undernutrition (including the cost to health and education systems and the productivity loss) in 21 African countries at USD 15.3 billion per year in 2025, assuming efforts to reduce it would stay at existing levels.48
The World Obesity Atlas 2023,49 based on another global study,50 estimates the worldwide economic impact of overweight and obesity at USD 3.3 trillion in 2030 and USD 4.3 trillion in 2035 (in constant 2019 USD). Studies have also estimated that without further interventions, childhood and adolescent obesity would translate into economic losses at constant 2020 USD (due to higher health care expenditure and reduced wages and productivity) in the range of USD 1.84 trillion in Mexico51 and USD 31.6 trillion in China,52 over the periods 2026 to 2090 and 2025 to 2092, respectively.
As explored in Chapter 2, countries are increasingly facing multiple simultaneous nutrition challenges in the form of the coexistence of undernutrition and overweight and obesity. The double burden of malnutrition (DBM) confers a serious and negative economic impact on individuals and populations. What is more concerning is that severe levels of this double burden are shifting towards the poorest countries. In contrast to the 1990s, when the DBM was typically seen in the highest income bracket countries among LMICs, it nowadays predominates in the poorest LMICs, particularly in Southern and Eastern Asia and sub-Saharan Africa. This will likely have implications for countries’ ability to address malnutrition in all its forms. Estimates suggest that all undernutrition, micronutrient deficiencies and overweight cost the global economy an estimated USD 3.5 trillion per year.33 Addressing multiple forms of malnutrition makes most sense in the face of such evidence. If actions are not accelerated to address them simultaneously, countries stand to face high costs across the spectrum of disease, especially given the interconnections between various forms of malnutrition across the life course and across generations. The 2021 Global Nutrition Report 202134 provided an updated estimate that the total economic gains to society of investing in nutrition could reach USD 5.7 trillion a year by 2030 and USD 10.5 trillion a year by 2050 (all in constant 2021 USD).34
Although some transformative policies and legislation for better and more sustainable production may cost billions of USD that will need to be financed, the cost of not mobilizing such financing would easily be in the trillions of USD. The Food and Land Use Coalition’s Global Consultation Report estimated that current food and land-use systems generate worldwide health, nutrition and environmental costs that amounted to USD 12 trillion a year in 2018 prices (of which USD 2.7 trillion were due to obesity and USD 1.8 trillion were due to undernutrition), which could rise to USD 16 trillion a year by 2050 under a continuation of current trends in malnutrition, global warming, ecosystem degradation and biodiversity loss.53
The 2020 edition of this report provided evidence that under current food consumption patterns, diet-related health costs linked to mortality and non-communicable diseases are projected to exceed USD 1.3 trillion per year by 2030. On the other hand, the diet-related social cost of greenhouse gas (GHG) emissions associated with current dietary patterns is estimated to be more than USD 1.7 trillion per year by 2030.7 Similar evidence from another study shows that in the absence of interventions, covering the income gap of those who cannot afford a healthy diet will cost USD 1.4 trillion annually by 2030. The interventions recommended in this study would cut this amount to USD 428 billion, but additional financing would be required to finance them.35
FAO’s The State of Food and Agriculture 202354 report found that – with a very high degree of confidence, using national-level assessment for 154 countries – the global quantified hidden costs of agrifood systems amount to USD 10 trillion or more at 2020 purchasing power parity (PPP). Interestingly, this study finds that the dominant quantified hidden costs are those arising from dietary patterns that increase the risk of diseases and may lead to lower labour productivity.54
No doubt, these findings reveal the urgent need to factor these hidden costs into decision-making to transform agrifood systems before the cost and financing needed to address them become completely out of reach for governments. This implies addressing the issues of unhealthy dietary patterns, which will necessitate significant additional financing for policies, legislation and interventions.
Not improving execution and the quality of spending will also be costly
Even if more financing for food security and nutrition becomes available, changes and reforms are necessary to guarantee a higher execution and quality of spending. Governments in many countries find it difficult to execute the budgets they have funded. A study by FAO’s MAFAP programme finds that 21 percent of the public budget on food and agriculture was left unspent across 13 sub-Saharan African countries between 2004 and 2018, undermining transformative investments. In addition to concerns with regard to weak public financial management, this study noted that agriculture is a seasonal business, and funds may be disbursed at the wrong time or periodicity. Furthermore, it notes that regarding civil servants’ salaries, which are more predictable and easier to implement than investments, the relative share of public spending in the agriculture sector is much lower than in other sectors. The significant reliance on donor funds, that are more difficult to implement, further contributes to the low execution rates of agricultural budgets. It should be noted, however, that execution rates can vary across sectors even within infrastructures. A World Bank study found execution ratios of 94 percent for roads versus only 75 percent for the power sector,55 and differences in execution rates can even be observed within one country over time, even over short periods, as is shown in public expenditure reviews for some African countries.x
Some of the financing available may nonetheless not be utilized in the most cost-effective, equitable and environmentally sustainable manner in countries across all income groups. Billions of USD are financing some poorly designed and distortive government policies and subsidies that are not only inequitably targeting producers but are also harming rather than helping efforts to achieve SDG 2 and are behind some of the hidden costs discussed above. In 2021, FAO, the United Nations Environment Programme and the United Nations Development Programme estimated that – with a continuation of past trends – the total agricultural producer support in LICs, LMICs and UMICs would reach USD 1.3 trillion in 2030; of this, USD 1 trillion would provide support through border measures (mainly import tariffs and duties) and USD 276 billion would finance fiscal subsidies (for inputs and production).57
Beyond the billions of USD currently allocated to support food and agriculture, there is also a significant opportunity cost of not repurposing some of these resources to achieve better outcomes for people, the economy and the planet. This opportunity cost may itself be important to reduce the financing gap to meet SDG Targets 2.1 and 2.2. The 2022 edition of this report2 analysed several scenarios of repurposing some of the worldwide support to food and agriculture, which accounted for almost USD 630 billion per year, on average over the period from 2013 to 2018. It showed that repurposing some of this support to increase the availability of nutritious foods to consumers, in particular, can result in making a healthy diet less costly and more affordable, globally and particularly in MICs. The scenarios showed the potential global gains of repurposing in terms of GDP growth, poverty reduction, and GHG emissions reduction. A similar study by the World Bank and the International Food Policy Research Institute for 79 countries (including OECD member states) found that the bulk of transfers to producers are provided through measures that the OECD refers to as “potentially most distorting”, and they amounted to USD 456 billion per year from 2016 to 2018. For a scenario where a portion of said support is repurposed for increased spending on green innovations, this study finds that by 2040, global real income would increase by 1.6 percent while global extreme poverty, the cost of a healthy diet, and overall emissions from agriculture would decrease by, respectively, 1 percent, 18 percent and 40 percent compared to a business-as-usual projection.58 No doubt, repurposing some of the worldwide support to food and agriculture is an important move to improve food security and nutrition outcomes and this would help to reduce the financing needed to meet SDG Targets 2.1 and 2.2.
In practice, however, governments in LICs, but also perhaps in some LMICs, do not provide significant support to food and agriculture due to fiscal constraints. For this reason, a new FAO study developed for this report has evaluated what would happen if the limited budget allocated to the agriculture and livestock sectors were reallocated optimally across support measures (i.e. subsidies, investments, services) and commodities, without changing the current budget, in six sub-Saharan African countries.59 The results are staggering: The opportunity of achieving higher agrifood output, creating thousands of off-farm jobs in rural areas and allowing millions of people to get out of poverty and afford a healthy diet will be lost unless these countries’ governments optimize the way in which they allocate their budget across the agriculture and livestock sectors (Box 11). Taking advantage of this opportunity will help these countries reduce their financing needs to meet SDG Targets 2.1 and 2.2. While optimizing policies will be important mostly in LICs, but also in MICs, there is evidence that diminishing marginal returns to additional public spending over time increases the marginal costs to achieve development goals;27 hence, public spending optimization must be a recurrent action of policymaking.
BOX 11The opportunity cost of not repurposing budget allocations for the agriculture and livestock sectors in six SUB-SAHARAN African countries
The 2022 edition of this report2 analysed a scenario of what would happen if public spending across different support measures (i.e. extension services, fertilizer subsidies, investment in irrigation, investment in mechanization, investment in rural electrification, investment in rural roads, research and development, and seed subsidies) and commodities in the agriculture and livestock sectors were reallocated to pursue four objectives: maximize agrifood gross domestic product (GDP), maximize off-farm jobs in rural areas, minimize the incidence of rural poverty, and minimize the cost of a least-cost healthy diet. The reallocation is optimal because, given a set of preferences, the best possible outcome for the four objectives is obtained subject to a set of economic constraints. Using an innovative policy optimization modelling tool with data for Ethiopia, this optimization scenario was compared with a business-as-usual scenario whereby the current budget continued to be allocated without changes across support measures and commodities. The results showed that the optimal reallocation of the budget in 2025 would allow the Ethiopian Government to boost agrifood output, create thousands of off-farm jobs in rural areas, lift thousands of people out of poverty, and ensure that millions of additional Ethiopians could afford a healthy diet – without any additional fiscal costs.60
For this edition of the report, the analysis has been updated for Ethiopia and extended to include Burkina Faso, Ghana, Mozambique, Nigeria and Uganda.59 The potential gains from optimizing budget allocations are not estimated only for 2025 but also cumulatively up to 2030.
Results show that the budget would have to be reallocated very differently in these six countries for it to efficiently help governments improve on the four objectives (see Figure A), considering the differences in the effectiveness, coverage and unit cost of the different support measures or interventions. It is found that, for example, from 2025 to 2030, several countries would have to reduce average spending on irrigation (Ghana, Ethiopia, Nigeria and Uganda) or seed subsidies (Burkina Faso and Ghana), whereas other countries – or even the same countries in some cases – would have to step up spending on seed subsidies (Ethiopia and Mozambique), mechanization (Burkina Faso, Ghana and Nigeria) or extension services (Burkina Faso, Ghana, Nigeria and Uganda). Interestingly, while extension services would need to be prioritized in certain countries, in other countries these services would have to be the most deprioritized, at the cost of subsidizing more inputs and building more rural roads (Mozambique). The larger the required budget reallocations (e.g. Burkina Faso and Nigeria), the further away the country is from the optimal budget allocation. The reallocation across commodities is even more varied across countries, as is shown in the study59 – but not here for simplicity.
FIGURE A Optimal reallocation of public spending across support measures in the agriculture and livestock sectors to maximize agrifood GDP and off-farm employment in rural areas, and to minimize rural poverty and the cost of the least-cost healthy diet, 2025–2030
SOURCE: Sánchez, M.V., Cicowiez, M., Pernechele, V. & Battaglia, L. (forthcoming). The opportunity cost of not repurposing public expenditure in food and agriculture in sub-Saharan African countries – Background paper for The State of Food Security and Nutrition in the World 2024. FAO Agricultural Development Economics Working Paper. Rome, FAO.
The optimal budget reallocations, irrespective of their size in each country, can significantly increase the value for public money. At the country level, there would be significant efficiency gains in agrifood output, thousands of off-farm jobs would be created in rural areas, thousands of people would be lifted out of poverty, and millions could newly afford a healthy diet (Table A). Importantly, even if one of the objectives is to minimize rural poverty, the economy-wide gains would go beyond rural areas such that, as explained in the study, thousands of people would also be lifted out of poverty in urban areas.59 Gains would be seen immediately in 2025, the first year of budget optimization, but impressive gains would also build up over time to 2030 – except in Uganda where the required budget reallocations would be the most modest as this is the country where the current budget allocated to the agriculture and livestock sectors seems closest to the optimal allocation. Agrifood GDP would be 8 percent (Burkina Faso and Ghana) or even 11 percent (Nigeria) higher in 2030 compared with 2025. When summed up across the six countries, by 2030, almost 1 million off-farm jobs would be created in rural areas, 2.8 million people would be lifted out of poverty, and 16 million additional people would be able to afford a least-cost healthy diet, all with the same budget. In other words, not optimally repurposing the budget allocated to the agriculture and livestock sectors in these six sub-Saharan African countries would have a substantial cost.
TABLE A Potential socioeconomic gains resulting from optimally reallocating public spending across support measures and commodities in the agriculture and livestock sectors (deviations from a business-as-usual scenario)
SOURCE: Sánchez, M.V., Cicowiez, M., Pernechele, V. & Battaglia, L. (forthcoming). The opportunity cost of not repurposing public expenditure in food and agriculture in sub-Saharan African countries – Background paper for The State of Food Security and Nutrition in the World 2024. FAO Agricultural Development Economics Working Paper. Rome, FAO.
