An Optimal Rice Policy for Sierra Leone : Balancing Consumer and Producer Welfare

Rice is a staple food in the West African nation of Sierra Leone with little difference in consumption between poor and wealthy households. Rice production is also an important source of livelihood with half of all households, three-quarters of rural households and about two-thirds of poor households grow rice. The final price of rice in the domestic market is an important policy issue. The policy challenge is complicated by the fact that poor households, which earn the bulk of their income from rice production, also purchase rice when own production is inadequate. Under the broad assumption that money income is a reasonable measure of well-being, this paper develops a simple model of the Sierra Leone rice sector and applies procedures to determine key outcomes in terms of domestic production, imports, and exports under conditions that maximize consumer's and producer's surplus. The paper finds that the rice sector is operating at a suboptimal level. In addition, simulations suggest that an optimal policy path to balance consumer and producer welfare and meet the higher societal objective of creating jobs requires a moderate level of tariff on imported rice, combined with structural policies to improve the productivity of the sector.