Navigating the Effects of Climate Change and Fiscal Policy on Food Security in Sub Saharan Africa

Caspah Lidiema^1, and Sonal Katyal²

¹Independent Researcher, Nairobi, Kenya

²Faculty of Transformational Economics, James Lind Institute, Geneva, Switzerland

Cite this paper:
Caspah Lidiema and Sonal Katyal. Navigating the Effects of Climate Change and Fiscal Policy on Food Security in Sub Saharan Africa. Journal of Finance and Economics. 2025; 13(3):124-138. doi: 10.12691/jfe-13-3-5

Abstract

The interplay between climate change, fiscal policy and food security is complex and vital for Sub-Saharan countries which predominantly rely on rain-fed agriculture. The rapid rising of temperatures; unpredictable dry spells and episodes of excessive rains affect food production exacerbating existing vulnerabilities related to food insecurity and poverty due to reduced income to farmers and entire population who rely on agricultural supply chain. This study therefore is geared towards determining the effect of climate change and fiscal policy on food insecurity Sub Saharan Africa. A dynamic panel model using the System of Generalized Method of Moments (GMM) estimators was employed in this covering 28 countries. Results indicate that Rainfall and temperature exhibited significant but opposing effects on food security. Increased rainfall was associated with a small but statistically significant improvement in food security, while higher temperatures led to a significant decline. Additionally, Increased government spending on agriculture positively and significantly enhanced food security metrics. Finally, findings indicate the interaction term of institutional quality and fiscal policy positively and significantly impact food security with a notably strong coefficient. The study recommends that governments in sub-Saharan Africa should (i) develop climate-smart agricultural strategies by investing in water management (e.g., water harvesting, conservation techniques, irrigation infrastructure, and drought-resistant crop varieties); (ii) Increase budget allocations to agriculture to meet Maputo and Malabo declaration commitments and facilitate small-scale loans to farmers and (iii) Implement institutional reforms alongside targeted fiscal interventions to maximize the impact of agricultural and food system investments through robust institutions.

Keywords:
Climate Change food Security fiscal policy Sub-Saharan Africa

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