Evaluations of the PSNP have shown that the program has significantly reduced food insecurity and distress sales of assets. Data collected for the 2014 PSNP highlands impact evaluation<sup>25</sup> show that food security has improved significantly in PSNP localities: the average PSNP beneficiary household reported a food gap of approximately 3 months between 2006 and 2010. This has dropped to 2.04 months in 2012 and 1.75 months in 2014. Moreover, the PSNP has led to a significant decrease in distress asset sales. While in 2010, 54% of public works beneficiary households made distress sales to meet food needs, by 2014, this has dropped to 25%. It has also been found that livestock holdings by the poorest PSNP public works participants have increased markedly, from 0.5 Tropical Livestock Units (TLU) in 2006 to 1.65 TLU in 2014.

Drought response through the PSNP is conducted through the use of the PSNP’s contingency budgets. Under the PSNP III program, which was in effect between 2009 and 2015, drought response was managed through the use of _woreda_ and regional contingency budgets, as well as the Risk Financing Mechanism (RFM). Thereby, _woreda_ contingency budgets were designed to address inclusion and exclusion errors<sup>26</sup> as well as unexpected needs of chronically food insecure households. Regional contingency budgets were designed to address unexpected needs of the chronically food insecure population, and transitory food insecurity. Regional contingency budgets were to be used prior to the release of funds under the RFM, unless the severity of the shock was beyond the capacity of regional budgets<sup>27</sup> . The PSNP III’s RFM was designed specifically to respond to drought shocks. In particular, the mechanism both extends the transfer amount to existing beneficiaries, and includes additional beneficiaries that suffer from food insecurity as a result of drought.

Under the PSNP IV, amendments have been made to the mechanisms to respond to drought. The PSNP IV came into effect in July 2015, and no longer includes a regional-level contingency budget, in order to have a more discretionary use of these resources in response to future shocks. Under PSNP III regional contingency budgets could be rolled forward to the next season, while under PSNP IV this is no longer possible. However, the program continues to use _woreda_ -level contingency budgets to address beneficiary inclusion and exclusion errors and minor transitory shocks. Major drought shocks are addressed, under PSNP IV, through its federal-level contingency budget, which has replaced the PSNP III’s RFM. Under PSNP IV, part of the core budget is allocated to scale up the activities of PSNP IV using the federal contingency budget (FCB) and in 2016 an amount of approximately US$ 50 m<sup>28</sup> was allocated for this purpose.

# III.2 Seasonal needs assessments and HRD process

Additionally to a response through the PSNP, drought risks within Ethiopia are typically addressed through the issuance of humanitarian appeals. Appeal numbers are determined based on a seasonal needs assessment conducted following the main harvesting seasons _meher_ and _belg_ .

> 25 See Berhane, Hirvonen and Hoddinott (2015).

> 26 An inclusion error may occur when a food secure household is erroneously included in the PSNP. An exclusion error would occur when a food insecure household is excluded from the PSNP. Inclusion and exclusion errors may arise for a diverse range of reasons, including a failure to review beneficiary lists on a regular basis at the _woreda_ level, migration or death of beneficiaries, misconceptions regarding the beneficiary selection criteria, and so forth. 27 See World Bank (2009).

> 28 This amount may be increased in the second half 2016 as part of the 2016/2017 annual PSNP plan.

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