public sector budget allocation to agriculture and effeciency of resource use: a review of status,...
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"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.TRANSCRIPT
Public Sector Budget Allocation to Agriculture and Efficiency of Resource Use: A Review of Status, Trends and Implications
Babatunde OmilolaAfrica-wide Coordinator
Regional Strategic Analysis and Knowledge Support System (ReSAKSS)
CAADP Donor and Partners Meeting, Addis Ababa, EthiopiaSeptember 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
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
SSA (13 countries) N. Africa (3 countries) LAC (16 countries) Asia (11 countries) Total (43 countries)
20
00
inte
rnat
ion
al d
olla
rs, b
illio
ns
1980 1990 2000 2005
Total spending increased by 6 percent from 1980-2005, the
majority of which was from Asia
Spending in SSA and N. Africa increased by 3.7 percent from 1980-
2005. In SSA alone, spending 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?
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1980 1990 2000 2005 1980 1990 2000 2005 1980 1990 2000 2005
Shar
e o
f to
tal s
pen
din
g, %
OtherDefense Social Security T&C Health Education Agriculture
SSA Asia LAC
The share of spending on agriculture in SSA increased since 2000 but remains at the 1980 level
and below 10%.
Since 1980, the share of spending on health, education and agriculture in SSA has increased slightly while spending on defense has declined.
Sources: Calculated using data from International Monetary Fund's Government Finance Statistics
Agriculture expenditures across regions
0
50
100
150
200
250
1980 1990 2000 2005
20
00
inte
rnat
ion
al d
olla
rs, b
illio
ns
Agriculture expenditures by region, 2000 international dollars (billions)
North Africa SSA LAC ASIA TOTAL
0
2
4
6
8
10
12
14
16
1980 1990 2000 2005A
gric
ult
ure
exp
end
itu
re s
har
e o
f ag
ricu
ltu
re
GD
P, %
Agriculture expenditures by region as share of agriculture GDP
North Africa SSA LAC ASIA
The level of agricultural spending is much higher in Asia than in N. Africa,
SSA and LAC
Yet as a share of agriculture GDP, expenditures on agriculture are highest
in N. Africa – but still lowest in SSA.
Sources: Calculated using data from International Monetary Fund's 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
0
5
10
15
20
25
Gu
ine
a B
issa
u*
**
Gab
on
**
*
DR
C**
Co
te d
'Ivo
ire
Mo
rocc
o*
*
Cen
tral
Afr
ican
…
Mau
riti
us*
*
Leso
tho
**
Rw
and
a
Egyp
t**
Cam
ero
on
**
Bo
tsw
ana
Bu
run
di*
**
Ken
ya*
***
Swaz
ilan
d**
Uga
nd
a***
*Su
dan
***
Nam
ibia
**
Tan
zan
ia**
Mau
rita
nia
***
Be
nin
***
*
Tun
isia
**
Nig
eria
Zim
bab
we*
*
Zam
bia
*
Togo
Mad
agas
car*
*
Gam
bia
***
Mo
zam
biq
ue*
*C
had
***
Gh
ana*
**
*
Mal
i
Mal
awi
Eth
iop
ia*
*
Sen
egal
Gu
inea
***
Nig
er*
Bu
rkin
a Fa
so*
%
Agricultural Expenditures as a share of total (%), 2007
CURRENT, 2007 (Unless otherwise noted)
*=2006; **=2005; ***=2004; ****=2008 estimates
Sources: Various, compiled by ReSAKSS.
Only 8 countries have met the 10%
target
Have countries increased their spending in response to the 2003 Maputo Declaration?
• At the continental level, agricultural spending nearly doubled between 2000 and 2005
• In 2003, only 3.2% of countries allocated 10% or more of their budgets to agriculture– This increased to 33.3%
in 2006 before slightly falling to 25% in 2007
• 9 countries increased their allocations from less than 5% spending to 5-10% spending
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
2002 2003 2004 2005 2006 2007
% o
f re
po
rtin
g co
un
trie
s
Level of agricultural spending as a share of total spending, 2002-2007
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 country's 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
0
20
40
60
80
%
Agricultural expenditures as a share of agricultural GDP, 2007
CURRENT, 2007 (Unless otherwise noted)
*=2006; **=2005; ***=2008 estimates
The range is considerable
(1 to 60%)
On aggregate , Africa spends between 5-7% of agricultural GDP on agriculture,
compared to 15% in Asia during its Green Revolution
Sources: Various, compiled by ReSAKSS.
Development Assistance for African agriculture
Since 1995, official development assistance (ODA) to agriculture in Africa has fallen and has been less than ODA to emergency relief and food aid
Sources: OECD statistical portal, accessed November, 2008.
Average agricultural aid to Africa, by country
• Agriculture has not been prominent on the donor agenda, perhaps not because of any conscious decisions but due to pressure to broaden the aid agenda• It is crucial for development agencies to also commit to the 10% budgetary allocation to agriculture Source: OECD statistical portal, accessed November, 2008.
0
1
2
3
4
5
6
7
8
Ave
rage
agr
icu
ltu
ral a
id a
s a
shar
e o
f to
tal
aid
, %
All countries spent less than 10% of aid
budgets on agriculture
3. Country case studies
Nigeria, Zambia and Malawi
Public spending for agriculture has been increasing in the case study
countries
0
2
4
6
8
10
12
14
16
18
20
2000 2001 2002 2003 2004 2005 2006 2007 2008
Agr
icu
ltu
re e
xpen
dit
ure
sh
are
in t
ota
l (%
)
Malawi Nigeria Zambia
Sources: Various, compiled by ReSAKSS.
And this funding increase has predominantly come from government sources
0
200
400
600
800
1000
1200
1400
1600
1800
2000
2000 2001 2002 2003 2004 2005 2006 2007 2008
Year
ZMK
' bill
ion
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
Sources of agriculture spending in Zambia (ZMK billion) 2000-2008
0
5000
10000
15000
20000
25000
2000 2001 2002 2003 2004 2005 2006 2007
Mal
awi K
wac
ha
(mill
ion
s)
Total agriculture spending Gov. of Malawi Ag Spending Donor Ag Spending
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
Composition of Agricultural SpendingGhana
(2000-2005)Malawi
(2000-2007)Nigeria
(2001-2005)Zambia
(2000-2008)Price support 20.2Inputs 43.5 39.7Food Security 50.5 22.0Livestock 2.7 3.3Fishery 3.2 1.1Crops, livestock and fishery (aggregated) 23.7Forestry 3.5 7.3 4.1Cocoa 62.2Research & Extension 10.6 13.0 21.7
Spending has been directed to different priority areas: Ghana has focused on one particular crop (cocoa),
while Nigeria, Malawi and Zambia have invested most heavily into input support.
Malawi’s input support programs fall under their nutrition
and food security 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
0
20
40
60
80
100
120
140
2000 2001 2002 2003 2004 2005 2006 2007
Rat
io o
f ac
tual
to
bu
dge
ted
agr
icu
ltu
re
exp
end
itu
res
Nigeria Malawi PEFA target
• From 2000 to 2004/5, both countries’ budget execution was poor at a range of 48-85%
•This meant that up to 52% of budgeted resources for agriculture were not being spent
•In recent years, both countries have overspent 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
Thank you!