IFPRI            Overview of growth, public investments,              and future challenges for achieving                 ...
Global Initiatives       G8, G20 and other global initiatives increased        attention and financial commitments for ag...
Outline  Why   is Agriculture Important?  Current Trends: Public Spending and   Growth  Results from Modeling Work: Are...
Why is Agriculture Important?        Poverty Remains Largely RuralDespite recent urbanization trends, majority of the worl...
Link Between Agricultural Growth and Poverty Reduction          Poverty Reduction Elasticities of Agricultural Growth     ...
Agricultural Growth is Key for Poverty                                         Reduction                             Busin...
Agricultural Growth is More Pro-Poor               Ethiopia: 5% of GDP annual growth in both cases                        ...
Public Investment Impact                  Ghana        Uganda Tanzania Ethiopia China India                           Thai...
Current Trends:                                               Agricultural Expenditures by Region                         ...
Uneven progress towards 6% annual      agricultural growth across SSA countries                Annual Agricultural GDP Gro...
Uneven progress towards 10% budgetallocation to agriculture across SSA countries   African continent as a whole has not m...
Results from Modeling Work         Are Current Targets Enough?     Current and Required AgGDP Growth Rates to Meet Poverty...
Agriculture Financing Gaps to Meet MDG 1Under current agricultural spending                             Under CAADP-level ...
Agriculture Spending and Poverty                      Reduction   Number of people lifted out of poverty by 2015, under cu...
Strengthening Global Efforts for               Agricultural Development   Need to ensure that the political statements an...
Global Agricultural and Food                Security Program (GAFSP)     Proposed multilateral mechanism to assist in the...
Setting the Right Priorities    Returns to public spending vary drastically across     different types of investment and ...
Setting the Right Priorities     “One-size-fits-all” strategies do not work: different      spending priorities are neede...
How to Approach Governance Reforms?     Need to strengthen capacity to use resources more      efficiently through govern...
Governance Challenges     Global       » Failure of global institutions to predict and         coordinate past response t...
Future Directions  Country       and regional level capacity   building  Emerging issues, including:        » Climate ch...
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Overview of growth, public investments, and future challenges for achieving MDG and CAADP goals_2010

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"Overview of growth, public investments, and future challenges for achieving MDG and CAADP goals", presentation by Shenggen Fan at the USAID, IFPRI Financial Gap Analysis Workshop held at the World Bank, January 7, 2010.

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Overview of growth, public investments, and future challenges for achieving MDG and CAADP goals_2010

  1. 1. IFPRI Overview of growth, public investments, and future challenges for achieving MDG and CAADP goals Shenggen Fan International Food Policy Research Institute USAID/World Bank Workshop on “Agricultural investment priorities and financing gaps for achieving growth and poverty reduction targets: Review of evidence and methodology” January 7, 2010INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
  2. 2. Global Initiatives G8, G20 and other global initiatives increased attention and financial commitments for agriculture as a tool for development: » L’Aquila G8 Statement on Global Food Security: “We support the implementation of country and regional agricultural strategies through country-led coordination processes…. Investment in and access to education, research, science and technologies should be substantially strengthened at national, regional and international levels.” Need for credible commitments to support long term “agriculture for development” agenda, beyond price and political cycles However, capacity is often weak at the regional and country levelIFPRI
  3. 3. Outline  Why is Agriculture Important?  Current Trends: Public Spending and Growth  Results from Modeling Work: Are current targets enough?  Setting PrioritiesIFPRI
  4. 4. Why is Agriculture Important? Poverty Remains Largely RuralDespite recent urbanization trends, majority of the world’s poor will continue to live in rural areas for many decades to come Source: Ravallion et al. (2007) Note: Poverty line is set at $1.08/day
  5. 5. Link Between Agricultural Growth and Poverty Reduction Poverty Reduction Elasticities of Agricultural Growth SSA -1.83 South Asia -1.73 East Asia and Pacific -1.44 Eastern and Central Europe -1.57 Latin America -1.11 Middle East and North Africa -0.92 All Low Income Countries -1.6 Source: Christiaensen et al, 2006 Poverty Reduction Effect of Agriculture vs. Non-agriculture Led Growth Strategies Ethiopia Ghana Rwanda Uganda Zambia Agriculture-led GDP -1.7 -1.8 -1.4 -1.6 -0.6 growth Non Agriculture-led -0.7 -1.3 -0.8 -1.1 -0.4 GDP growth Source: Johnson et al, 2009
  6. 6. Agricultural Growth is Key for Poverty Reduction Business as usual Focus on agricultural growth SSA SSA 90.0 90.0Poverty rates (%) Poverty rates (%) 80.0 Actual trend 80.0 Actual trend 70.0 Last official 70.0 Last official MDG target trend MDG target trend estimate estimate 60.0 60.0 50.0 50.0 40.0 40.0 30.0 30.0 20.0 20.0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 IFPRI
  7. 7. Agricultural Growth is More Pro-Poor Ethiopia: 5% of GDP annual growth in both cases Ghana: 6% of GDP annual growth in both cases 3544 334240 3138 2936 2734 2532 2330 2128 1926 17 2003 2005 2007 2009 2011 2013 2015 2003 2005 2007 2009 2011 2013 2015 Rwanda: 6% of GDP annual growth in both cases Uganda: 7% of GDP annual growth in both cases 3661 335855 3052 2749 2446 2143 1840 1537 Ag-led growth Nag-led growth 1234 1999 01 03 05 07 09 11 13 15 2003 2005 2007 2009 2011 2013 2015 Ag-led growth Nag-led growth IFPRI
  8. 8. Public Investment Impact Ghana Uganda Tanzania Ethiopia China India Thailand Returns to agriculture or rural incomeSector (local currency/local currency spending)Agriculture 16.8 12.4 12.5 0.14 6.8 13.5 12.6Education -0.2 7.2 9.0 0.56 2.2 1.4 2.1Health 1.3 0.9 n.e. -0.03 n.e. 0.8 n.e.Roads 8.8 2.7 9.1 4.22 1.7 5.3 0.9 Ranking in returns to poverty reductionAgriculture n.e. 1 2 n.e. 2 2 1Education n.e. 3 1 n.e. 1 3 3Health n.e. 4 n.e. n.e. n.e. 4 n.e.Roads n.e. 2 3 n.e. 3 1 2Notes: “n.e.” indicates not estimated. Need for a review of recent spending levels and priorities to identify challenges and opportunities for improvement within developing countries Source: Mogues, Benin, and Fan (2008); Fan and Zhang(2004); Fan, Hazell, and Thorat (2000); and, Fan, Yu, and Jitsuchon,(2008)
  9. 9. Current Trends: Agricultural Expenditures by Region 2000 International Dollars Share of AgGDP 250 162000 International Dollars (billions) 200 12 150 (%) 8 100 4 50 0 0 1980 1990 2000 2005 1980 1990 2000 2005 SSA ASIA LAC TOTAL SSA ASIA LAC TOTAL Source: ReSAKSS, calculated using data from International Monetary Fund’s (IMF) Government Financial Statistics Yearbook
  10. 10. Uneven progress towards 6% annual agricultural growth across SSA countries Annual Agricultural GDP Growth (%), 2007 30 CURRENT, 2008 (Unless otherwise noted) 20 CAADP 6% BENCHMARK% 10 0 -10 *=2007; **=2006; and ***=2005 Source: World Bank (2009)
  11. 11. Uneven progress towards 10% budgetallocation to agriculture across SSA countries African continent as a whole has not met the 10% target (current spending at 6-8 percent) Source: Omilola (2009)
  12. 12. Results from Modeling Work Are Current Targets Enough? Current and Required AgGDP Growth Rates to Meet Poverty MDG (%)25 Annual AgGDP Growth Rates, 2000-200620 Required AgGDP Growth Rates to Meet MDG by 2015151050 Source: Johnson et al, 2009
  13. 13. Agriculture Financing Gaps to Meet MDG 1Under current agricultural spending Under CAADP-level agricultural commitments spending (10% of total spending) US$, constant 2007 (millions) US$, constant 2007 (millions) Source: Johnson et al, 2009
  14. 14. Agriculture Spending and Poverty Reduction Number of people lifted out of poverty by 2015, under current trends vs. after closing financing gap (millions) Ghana Uganda Liberia Under Current Senegal Scenario Zambia Malawi After Closing Rwanda Financing Gap Mali NigerMozambique Kenya Tanzania Ethiopia Congo, DR Nigeria 0 5 10 15 20 25 30 35 40 Source: Johnson et al, 2009
  15. 15. Strengthening Global Efforts for Agricultural Development Need to ensure that the political statements and financial pledges in support of agricultural and rural development are translated into actual actions and development outcomes Quantity plus Quality: Importance of coordination and sustainability Major Issues: » How to track donor commitments and disbursements? » How to coordinate across donors? IFPRI
  16. 16. Global Agricultural and Food Security Program (GAFSP) Proposed multilateral mechanism to assist in the implementation of donor pledges to scale-up agricultural and food security assistance Provides additional funds to fill financing gaps in support of country-led agriculture and food security programs Improves donor alignment around country programs by channeling multiple donor funds through unified global mechanism Places emphasis on public and private investments that » improve agricultural productivity » link farmers to markets » reduce risk and vulnerability » improve non-farm rural livelihoods » provide technical assistance and capacity building IFPRI
  17. 17. Setting the Right Priorities Returns to public spending vary drastically across different types of investment and regions within the same country Agricultural research, education, and rural infrastructure (especially low cost feeder roads) are the three most effective public spending items in promoting agricultural growth and poverty reduction  Evidence from China and Uganda indicates that it is often low cost infrastructure that has highest return in terms of growth and poverty reduction IFPRI
  18. 18. Setting the Right Priorities “One-size-fits-all” strategies do not work: different spending priorities are needed during different stages of development » During the first phase, spending should focus on reducing widespread poverty through broad-based economic growth that reaches rural areas » In subsequent phases, more direct attention should be focused on lagging sectors/regions in order to reduce poverty and income inequalities that arise and persist despite reforms Reforms in institutions and governance related to public spending IFPRI
  19. 19. How to Approach Governance Reforms? Need to strengthen capacity to use resources more efficiently through governance reforms: » Supply-side  Building administrative capacity via civil service reforms  Improving government procurement procedures and auditing systems to root out corruption » Demand-side  Strengthening governments’ accountability to citizens through a system of checks and balances  Empower the participation of citizens and non-state actors through greater decentralization Institutional/governance reforms need to address governance challenges at local, national, & global level IFPRI
  20. 20. Governance Challenges Global » Failure of global institutions to predict and coordinate past response to emergencies (e.g. food & financial crises) National » Low capacity and will to use agriculture for development » Lack of mechanisms and skills for cross-sectoral coordination Local » Low empowerment and capacity to set priorities and implement policies » Weak local accountability structures IFPRI
  21. 21. Future Directions  Country and regional level capacity building  Emerging issues, including: » Climate change » Financial crisis » Emerging players like Brazil, China, and IndiaIFPRI

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