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Case Study

Market Functionality Index: Assessing the functionality of selected markets for cash-based assistance

June 2023 — By World Food Programme

Markets are functional. While there remain variations from market to market, Sri Lanka’s markets currently have a wide range of products, adequate physical availability of essential goods, a resilient supply chain and sufficient levels of hygiene and cleanliness.

Overall market functionality remains conducive to the use of cash-based transfers, while mitigation measures are essential to keep this from deteriorating. However, markets with especially high levels of risk associated with the use of cash-based transfers must remain flexible to shift to mixed modalities and/or in-kind food assistance.

Spikes and instability in prices pose threats to market functionality in Sri Lanka. In March 2023, 17 percent of households were moderately acute food insecure, according to the WFP-FAO Joint Crop and Food Security Assessment Mission. Households are forced to adopt food and livelihood coping strategies to put food on the table. Volatile and unpredictable prices can undermine the economic decision-making for producers and importers.

Several mitigation measures should be put in place to safeguard against price-related risks for cash-based transfers. These include continuing to strengthen market monitoring, and adapting to price fluctuations, such as by calculating the minimum expenditure basket, and adjusting the transfer values as needed.