# 1. Introduction

Subsidized or free distribution of food has been a mainstay of social protection programs in many countries and accounts for significant portions of the countries’ safety net spending. For example, one of the world’s largest food transfer schemes, and one of the largest social safety net programs in India, is the Targeted Public Distribution System (TPDS). The program provides rice, wheat, sugar, edible oils, and kerosene at highly subsidized prices to families below the poverty line. The program reaches almost 800 million people, and at $7 billion per year, constitutes almost 1 percent of India’s GDP (World Food Programme 2014, Alderman, Gentilini and Yemtsov 2018). Indonesia’s flagship food subsidy program, _Rastra_ , was a targeted rice subsidy program. In 2016, it reached 15.5 million households and absorbed more than half of total social assistance expenditure (Rp 21 trillion) (Alderman, Gentilini and Yemtsov 2018), although it has now been phased out and replaced with a targeted e-voucher assistance program to reduce inefficiencies from distribution losses and improve targeting (World Bank 2020).

Iraq too has one of the largest food distribution programs in the world, the Public Distribution System (PDS). The PDS was instituted in 1990 in response to food shortages after the UN-imposed sanctions. In 1996, Iraq was allowed to import food under the Oil for Food Program. PDS played an important role in meeting the minimum caloric needs of Iraq’s population during the period of sanctions. When the program was initiated, ten items were subsidized. Presently, under the PDS, households receive four food items every month: wheat flour, rice, sugar and vegetable oil. In 2018, the spending on PDS approximated 1.7 trillion Iraqi dinars, or 1.4 billion USD<sup>3</sup> , and it accounted for approximately 2.3 percent of the 2018 current expenditure.

Unlike the targeted food programs in India and Indonesia, the PDS program in Iraq is universal and has played an important role in all Iraqi households’ budgets and expenditures. In 2007, rations provided 1,998 calories per person per day on average, accounting for 85 percent of required calories and 68 percent of actual calories consumed, with the proportion as high as 78 percent for the poor (World Bank 2010). In 2012, food receipts from the PDS provided about 70 percent of total calories of the poorest 40 percent of the population (World Bank 2014). Even the richest quintile drew 45 percent of its calories from PDS receipts. The value of PDS-sourced food accounted for 30 percent of food expenditure and 16 percent of total expenditure of the poorest decile. Simulations show that removal of the PDS without a compensating measure would have deleterious effect on poverty headcount, depth of poverty, and inequality (World Bank 2010).

Given the preeminence of PDS receipts in household welfare, this paper examines whether the in-kind food transfer had similar impacts during the period of conflict. Specifically, the study assesses the role Iraq’s PDS program played in mitigating the potential loss of welfare induced by forced displacement and an economic crisis. Iraq was buffeted by two severe crises in 2014. Starting early 2014, triggered by the Daesh’s campaign of violence against civilians and counter operations by the military, people in northwest Iraq started fleeing to safer areas. At its peak, in March 2016, 3.4 million Iraqis were displaced internally - net of returnees (IOM 2019).<sup>4</sup> The active hostilities ended with the ouster of Daesh from Mosul in

> 3 At the exchange rate of 1 USD = 1194.46 Iraqi dinars

> <u>(https://www.xe.com/currencyconverter/convert/?Amount=1&From=USD&To=IQD)</u>

> 4 Since IOM started tracking in 2014, more than 6 million people (15% of the population) have been displaced internally in Iraq. While the majority (4.5 million) have returned, 1.4 million are still displaced within the country (IOM 2019).

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