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As of 2012, more than one million people in Gaza were living below the poverty line. Years of blockades and the depletion of natural resources have severely impacted prospects for economic development of the Gaza Strip. The already high unemployment rate in 2013 is expected to rise further with the suspension of economic activities through the tunnels and their final closure end of October 2013.
Given its importance in the local economy and diet, wheat flour was chosen as one of the three critical market systems for this study, while poor and very poor households were the target population. This study was intended to produce a valuable introductory analysis of the wheat flour value chain. It was in fact an early PCMMA, using 2013 as the baseline year and looking at two hypothetical but possible scenarios (a total closure of the border with Israel for two weeks and an interruption of the humanitarian distribution of wheat flour).
The wheat flour market system in Gaza is totally dependent on imports from Israel through the only functioning crossing, Kerem Abu Salem. The informal trade via the tunnels from Egypt has ceased completely since mid-October 2013. The production of wheat in Gaza is extremely limited, and the variety produced is used mainly for roasted wheat and cereal. The key actors in the chain are the importers of wheat grain, millers, medium and small retailers, UN agencies, bakeries and consumers. The functioning of this chain is influenced at different stages by the Israeli border authorities, the Ministry of National Economy and the prices of essential services. Due to low purchasing power and high food prices, poor households in Gaza are unable to afford diverse sources of carbohydrates; therefore, they rely on bread made of wheat flour for most of their daily carbohydrate needs. Given low income levels and limited employment opportunities, they depend on aid agencies for almost all of their wheat flour needs.
In case of the total closure of the Israeli border for two weeks, the market will not receive the supply of wheat grain through imports from Israel, which means that importers will not be able to supply mills, with implications for the whole market chain. Fortunately, there is enough stock in Gaza to meet the needs of the entire population for nearly a month. In addition, as the humanitarian corridor is only partially affected during complete closure of the border, it can be assumed that the UN agencies would still be able to maintain the coverage of their ongoing programs. The private sector would have to cover the remaining deficits and this would depend on the ability of the market to function regularly, in particular regarding the continuation of official imports.
In case international aid agencies cease wheat flour distributions, this assessment suggests that importers have the financial capacity to import large amounts on a regular basis and to provide the in-country storage facilities to meet the needs of the targeted population. However, the cessation of this food aid support would have a complex impact on local markets and the overall economy that direct importation could not alone resolve.
This report suggests two additional critical issues that need to be considered: price adaptations in case of increases in private demand and the purchasing power of the food aid beneficiaries. It recommends providing cash and/or vouchers for wheat flour to increase household purchasing power and creating strategic grain reserves in Gaza to control wheat flour prices.