ReSAKSS Regional Analysis onAgricultural Expenditures and   Agricultural Policy Bias:   East and Central Africa  Babatunde...
Contents• Agricultural snapshots of:  – Ethiopia  – Kenya  – Rwanda  – Uganda  – Sudan
Agriculture in Ethiopia• Despite significant agricultural liberalization and  relatively robust growth in Ethiopia since 1...
Agricultural Policy Bias in Ethiopia• Taxation of agriculture increased in the 1980s and early 1990s but  has been less se...
Agricultural Spending in Ethiopia        • Ethiopia is one of a handful of African countries          that has relatively ...
Agricultural Investments in Ethiopia• To maximize poverty reduction in Ethiopia, agricultural  investments should focus on...
Agriculture in Kenya                                                  1990s        2000s        Current PeriodIndicator   ...
Agriculture for Development in Kenya•                          The greatest constraint to agricultural growth is limited p...
Agriculture in Rwanda• Agriculture is important in Rwanda:    – 90 percent of the population lives in rural areas    – The...
Agricultural Investment in Uganda• Over the past two decades, Uganda has experienced strong  economic growth, with nationa...
Taxation of Agriculture in Uganda• Agriculture in Uganda was lightly taxed in the 1960s• The burden of taxation increased ...
Sudan• Agriculture is the most important sector in Sudan’s  economy   – Accounts for close to 40 percent of the GDP   – Pr...
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ReSAKSS Regional Analysis on Agricultural Expenditures and Agricultural Policy Bias: East and Central Africa_2009

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ReSAKSS Regional Analysis on Agricultural Expenditures and Agricultural Policy Bias: East and Central Africa", presentation by Babatunde Omilola and Melissa Lambert. April, 2009.

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ReSAKSS Regional Analysis on Agricultural Expenditures and Agricultural Policy Bias: East and Central Africa_2009

  1. 1. ReSAKSS Regional Analysis onAgricultural Expenditures and Agricultural Policy Bias: East and Central Africa Babatunde Omilola and Melissa Lambert April, 2009
  2. 2. Contents• Agricultural snapshots of: – Ethiopia – Kenya – Rwanda – Uganda – Sudan
  3. 3. Agriculture in Ethiopia• Despite significant agricultural liberalization and relatively robust growth in Ethiopia since 1990, food security has not improved• Why? – Most of the cereals grown in Ethiopia are non-tradable – Cereal production is largely weather dependent – Only about 10 percent of the total cereal cropland is irrigated – Yield variability at the regional level is one of the highest in the developing world – Without technological innovation and reduction in transactions costs, relative stagnation in cereal production is unlikely to change
  4. 4. Agricultural Policy Bias in Ethiopia• Taxation of agriculture increased in the 1980s and early 1990s but has been less severe since as a consequence of reforms that devalued the currency, withdrew price controls and reduced and then eliminated export taxes• As a result, export volumes of all major exportable farm commodities have increased• Agricultural policy distortions still exist in Ethiopia today: – Control over input markets – Ad hoc government interventions in output (mainly cereal) markets – Disincentives through depressed prices, caused by the continuous inflow of food aid• Although farmers’ share of the fob prices increased in the 1990s, those shares remain low compared with those in neighboring countries
  5. 5. Agricultural Spending in Ethiopia • Ethiopia is one of a handful of African countries that has relatively consistently allocated 10 percent or more of their total budgets to agriculture since 1990 20AGRICULTURE SHARE (%) 15 10 5 0 AGRICULTURAL SPENDING SHARE IN TOTAL AGRICULTURAL SPENDING SHARE IN AGRICULTURAL GDP CAADP 10% TARGET
  6. 6. Agricultural Investments in Ethiopia• To maximize poverty reduction in Ethiopia, agricultural investments should focus on: – Staple crops • Largest share of smallholder income, so even a low growth rate of 1.5 percent would result in a decrease in the poverty rate to about 37 percent – Modern technology in livestock production – Enabling farmers’ access to productivity-enhancing inputs and markets • Irrigation • Adoption of improved seed and fertilizer – Growth in nontraditional exports and the coffee subsector would not have as significant an effect, as their share of agricultural GDP is small, and the more impoverished farmers usually cannot afford to make the investments to grow these types of crops• Combined growth in all subsectors would have the greatest effect on poverty because each subsector has important demand linkages with the others
  7. 7. Agriculture in Kenya 1990s 2000s Current PeriodIndicator Proportion Proportion Proportion YearNational Poverty Rate (%) 40.0 55.4 67.7* 20081 Dollar a Day Poverty Rate (%) 38.4 19.6 19.8* 2008Child Malnutrition Rate (%) 22.3 21.2 19.5* 2008Undernourished Population (%) 39.0 33.9 28.1* 2008Average GDP growth (%) 2.1 4.0 3.3 2008Average Agriculture GDP growth (%) 2.1 3.3 7.1 2007Agriculture Spending in National Spending (%) 6.0 4.0 4.8 2008Agriculture GDP in Total GDP (%) 29.7 28.7 27.7 2007 • Agriculture is the largest sector in Kenya, contributing almost 30% to GDP • It is the primary income source for rural inhabitants, who make up 85% of the population • Following independence until the early 1980s, agriculture in Kenya thrived • In contrast, the second 20 years of independence have been marked by agricultural and economic stagnation
  8. 8. Agriculture for Development in Kenya• The greatest constraint to agricultural growth is limited public investment, not policy distortions• The country is currently promoting an industrial-led development strategy which would result in a 46% poverty rate in 2015• An agricultural-led strategy would result in a greater decline in poverty from around 51.3% of the population in 2003 to 38.7% in 2015• Investments should target: – irrigation and research and extension to reach the 10 percent Maputo agricultural spending target – plus additional investments above the 10 percent target directed toward roads and market reforms 20SHARE OF AG SPENDING (%) 15 10 5 0 2005 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2006 2007 2008 AGRICULTURAL SPENDING AS A SHARE OF TOTAL SPENDING AGRICULTURAL SPENDING AS A SHARE OF AGRICULTURAL GDP CAADP 10% TARGET
  9. 9. Agriculture in Rwanda• Agriculture is important in Rwanda: – 90 percent of the population lives in rural areas – The national poverty rate is above 60 percent – The average amount of land per household is less than one hectare• Only a small percentage of rural households are involved in producing Rwanda’s main exports, which are tea and coffee• The others depend on staple crops (root crops and bananas, in particular) and livestock• The country imports a large amount of food, especially rice and maize, and the government has set high targets to increase the production of cereal crops• Growth in the staples subsector would be more pro-poor than would agricultural export–led growth• An agricultural growth rate of 9 percent, rather than 6 percent, would be needed to achieve MDG 1
  10. 10. Agricultural Investment in Uganda• Over the past two decades, Uganda has experienced strong economic growth, with national GDP growing above 5% per year• Agriculture, on the other hand, has lagged behind the rest of the economy with a far more modest growth rate of 2% per year• Uganda has experienced reductions in poverty and hunger that are sufficient to put it on track towards achieving MDG1 by 2015 – BUT the rate of poverty reduction, when combined with an expanding population, translates into an increase in the absolute number of poor people from about 8.46 million in 2005 to 10.15 million by 2015• Increased investments in agriculture would enable the country to firmly secure MDG1 while also achieving the CAADP target of 6 percent agricultural growth• This would lift an additional 2.9 million Ugandans above the poverty line and reverse the current trend of increasing absolute numbers of people in poverty
  11. 11. Taxation of Agriculture in Uganda• Agriculture in Uganda was lightly taxed in the 1960s• The burden of taxation increased significantly during the chaotic years of the 1970s and 1980s – Heavy taxation of exportables due to overvalued exchange rate (especially high for coffee)• Since the onset of agricultural liberalization at the beginning of the 1990s, the discrimination against agricultural production has been greatly reduced• The main challenge now facing the Ugandan government is to improve the competitiveness of agriculture through a supply-side investment strategy as the key element in its poverty reduction strategy
  12. 12. Sudan• Agriculture is the most important sector in Sudan’s economy – Accounts for close to 40 percent of the GDP – Provides a livelihood for more than 80 percent of the population – Employs about 70 percent of the active labor force• Sudan’s agricultural policies have provided government hegemony over production, marketing, and trade of farm products through a series of public-sector-led development plans, production and marketing parastatals, and close control of foreign exchange transactions with an overvalued currency

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