"Public Sector Budget Allocation to Agriculture and Effeciency of Resource Use: A Review of Status, Trends and Implications." presentation by Babatunde Omilola at the CAADP Donors and Partners Meeting, Sept. 6, 2009.
Public Sector Budget Allocation to Agriculture and Effeciency of Resource Use: A Review of Status, Trends and Implications_2009
Public Sector Budget Allocation toAgriculture and Efficiency of Resource Use:A Review of Status, Trends and Implications Babatunde Omilola Africa-wide Coordinator Regional Strategic Analysis and Knowledge Support System (ReSAKSS) CAADP Donor and Partners Meeting, Addis Ababa, Ethiopia September 6, 2009
Background• Recent increase in attention and financial commitments for agriculture for development – WDR 2008, CAADP and Maputo Declaration, G-8 pledge in 2009• These are positive developments in public sector budget allocation to agriculture, but now focus needs to shift from quantity to quality of spending• This will require a review of recent spending levels and areas to identify challenges and opportunities for improvement
Outline• Regional review of public expenditures: How is Africa performing compared to other regions?• Overview of trends of agriculture spending in Africa – Spending levels: Progress towards the Maputo Declaration CAADP 10% target – Spending intensity – Donor financing to agriculture• Case studies of 3 African countries to highlight spending patterns, looking at: – Sources and composition of spending – Efficiency of resource use• Summary and conclusions
1. Regional review of public expenditures:How is Africa performing compared to other regions?
Public expenditures across world regions, 2000 international dollars, billions 50002000 international dollars, billions 4500 4000 3500 3000 1980 1990 2000 2005 2500 2000 1500 1000 500 0 SSA (13 countries) N. Africa (3 countries) LAC (16 countries) Asia (11 countries) Total (43 countries) Spending in SSA and N. Africa Total spending increased by 6 increased by 3.7 percent from 1980- percent from 1980-2005, the 2005. In SSA alone, spending majority of which was from Asia increased by 4.9 percent Source: Calculated using data from International Monetary Fund’s (IMF) Government Financial Statistics Yearbook
How have governments allocated their total spending? Since 1980, the share of spending on health, education and agriculture in SSA has increased slightly while spending on defense has declined. 100% 90% 80%Share of total spending, % 70% Other 60% Defense 50% Social Security 40% T&C Health 30% Education 20% Agriculture 10% 0% 1980 1990 2000 2005 1980 1990 2000 2005 1980 1990 2000 2005 SSA Asia LAC The share of spending on agriculture in SSA increased since 2000 but remains at the 1980 level and below 10%. Sources: Calculated using data from International Monetary Funds Government Finance Statistics
Agriculture expenditures across regions Agriculture expenditures by region, Agriculture expenditures by region as 2000 international dollars (billions) share of agriculture GDP Agriculture expenditure share of agriculture 16 2502000 international dollars, billions 14 200 12 10 GDP, % 150 8 100 6 4 50 2 0 0 1980 1990 2000 2005 1980 1990 2000 2005 North Africa SSA LAC ASIA TOTAL North Africa SSA LAC ASIA The level of agricultural spending is Yet as a share of agriculture GDP, much higher in Asia than in N. Africa, expenditures on agriculture are highest SSA and LAC in N. Africa – but still lowest in SSA. Sources: Calculated using data from International Monetary Funds Government Finance Statistics
2. Agriculture spending in Africa Country Progress towards the Maputo Declaration target
Level of spending: Are countries making progress towards the Maputo Declaration target? • The African continent as a whole has not met the 10% target (current spending at 6-8 percent) • But, this varies by country Only 8 countries have Agricultural Expenditures as a share of total (%), 2007 met the 10% 25 target 20 CURRENT, 2007 (Unless otherwise noted) 15% 10 5 0 Central African… Madagascar** Ghana**** Guinea Bissau*** Morocco** Gabon*** Mali Nigeria DRC** Egypt** Swaziland** Benin**** Burundi*** Tunisia** Chad*** Kenya**** Uganda**** Tanzania** Malawi Sudan*** Zambia* Gambia*** Senegal Niger* Cote dIvoire Lesotho** Togo Mauritius** Namibia** Ethiopia** Rwanda Botswana Mauritania*** Mozambique** Guinea*** Cameroon** Zimbabwe** Burkina Faso* *=2006; **=2005; ***=2004; ****=2008 estimates Sources: Various, compiled by ReSAKSS.
Have countries increased their spending in response to the 2003 Maputo Declaration?• At the continental level, Level of agricultural spending as a share of total spending, 2002-2007 agricultural spending nearly doubled between 70.0% 2000 and 2005 60.0% % of reporting countries• In 2003, only 3.2% of countries allocated 10% 50.0% or more of their budgets 40.0% to agriculture – This increased to 33.3% 30.0% in 2006 before slightly falling to 25% in 2007 20.0%• 9 countries increased 10.0% their allocations from 0.0% less than 5% spending to 5-10% spending 2002 2003 2004 2005 2006 2007 Less than 5% 5%-10% More than 10% Sources: Various, compiled by ReSAKSS.
Agriculture Spending Intensity• Measures government spending on agriculture relative to the size of that countrys agriculture sector• Calculated as the ratio of agriculture spending to agriculture GDP• Under this measure, more countries fall into the category of low budget support to agriculture Agricultural expenditures as a share of agricultural GDP, 2007 80 60 The range is CURRENT, 2007 (Unless otherwise noted) considerable% 40 (1 to 60%) 20 0 *=2006; **=2005; ***=2008 estimatesOn aggregate , Africa spends between 5-7% Sources: Various, compiled by ReSAKSS. of agricultural GDP on agriculture, compared to 15% in Asia during its Green Revolution
Development Assistance for African agricultureSince 1995, official development assistance (ODA) toagriculture in Africa has fallen and has been less thanODA to emergency relief and food aid Sources: OECD statistical portal, accessed November, 2008.
Average agricultural aid to Africa, by country 8 Average agricultural aid as a share of total All countries spent 7 less than 10% of aid 6 budgets on agriculture 5 4 aid, % 3 2 1 0• Agriculture has not been prominent on the donor agenda, perhaps not becauseof any conscious decisions but due to pressure to broaden the aid agenda• It is crucial for development agencies to also commit to the 10% budgetaryallocation to agriculture Source: OECD statistical portal, accessed November, 2008.
3. Country case studies Nigeria, Zambia and Malawi
Public spending for agriculture has been increasing in the case study countries 20 Agriculture expenditure share in total 18 16 14 12 10 (%) 8 6 4 2 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 Malawi Nigeria ZambiaSources: Various, compiled by ReSAKSS.
And this funding increase has predominantly come from government sources Sources of agriculture spending in Zambia (ZMK billion) 2000-2008 2000 1800 1600 1400 1200ZMK billion 1000 800 600 400 200 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 Year GRZ spending Donor Spending Total Public Spending In Zambia, fiscal dependence on development partners in agricultural spending declined from 48% in 2000 to 18% in 2008
Likewise, in Malawi, the donor share of total government spending on agriculture declined from 41% in 2000 to 23% in 2007, with a low of 12% in 2006. Sources of agriculture spending in Malawi, 2000-2007 25000Malawi Kwacha (millions) 20000 15000 10000 5000 0 2000 2001 2002 2003 2004 2005 2006 2007 Total agriculture spending Gov. of Malawi Ag Spending Donor Ag Spending
Composition of Agricultural Spending Ghana Malawi Nigeria Zambia (2000-2005) (2000-2007) (2001-2005) (2000-2008) Price support 20.2 Inputs 43.5 39.7 Food Security 50.5 22.0 Livestock 2.7 3.3 Fishery 3.2 1.1 Crops, livestock and fishery (aggregated) 23.7 Forestry 3.5 7.3 4.1 Cocoa 62.2 Research & Extension 10.6 13.0 21.7 Malawi’s inputSpending has been directed to different priority areas: support programs fall Ghana has focused on one particular crop (cocoa), under their nutritionwhile Nigeria, Malawi and Zambia have invested most and food security heavily into input support. component.
Investment gap ratio• Ratio of actual expenditures to budgeted expenditures• Public Expenditure and Financial Accountability (PEFA) best practice standard is no more than 3% discrepancy between budgeted and actual (equal to a ratio of 97%) – If the ratio is <97%, it means that the government is underutilizing approved funds – If the ratio is >100%, it means the government is overspending• Inefficient budget execution may negatively impact policy planning, design and implementation and make it difficult to attain goals and expected outcomes – Programs may have to change or end midstream if promised funding does not materialize – Also erodes the credibility that approved projects will actually be financed
Budget execution in case studies is poor, but improving 140 • From 2000 to 2004/5,Ratio of actual to budgeted agriculture 120 both countries’ budget execution was poor at a 100 range of 48-85% expenditures 80 •This meant that up to 60 52% of budgeted 40 resources for agriculture were not being spent 20 0 •In recent years, both 2000 2001 2002 2003 2004 2005 2006 2007 countries have overspent Nigeria Malawi PEFA target the budgeted amount
What are the reasons for poor budget execution?• In the countries studied, the gap between budgeted agriculture spending and actual has largely been driven by deviations in capital outlays, rather than recurrent spending• Budgets are formed based on demands of constituencies, while implementation often is tracked by fiscally restrained Finance Ministries• The trend of poor budget execution is not limited to agriculture, suggesting it is a general issue – not just an agricultural one• The recent overspending in Malawi is largely due to overruns in the costs of the subsidy programs
Conclusions• Governments and donors are increasing the quantity of agricultural spending: – In response to the 2003 Maputo Declaration – Donor spending has increased slightly, but not at the same rate as government spending • While this is good for national independence, it calls for development partners to step up to their commitments (“10 for 10”)• Now there is a need to focus on the quality of agricultural spending: – The investment gap ratio is dwindling, but more focus is needed to continue this trend, due to its importance for program effectiveness – Spending by the case study countries has focused largely on inputs – fertilizer, seeds – at the cost of investments that may have more long-term impacts • Investments in agriculture R&D, irrigation and rural infrastructure have larger, longer-lasting impacts on productivity