"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.

1. Public Sector Budget Allocation to
Agriculture 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

2. 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

3. 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

4. 1. Regional review of public
expenditures:
How is Africa performing compared to other
regions?

5. Public expenditures across world regions,
2000 international dollars, billions
5000
2000 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

6. 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 Fund's Government Finance Statistics

7. 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
250
2000 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 Fund's Government Finance Statistics

8. 2. Agriculture spending in Africa
Country Progress towards the Maputo
Declaration target

9. 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 d'Ivoire
Lesotho**
Togo
Mauritius**
Namibia**
Ethiopia**
Rwanda
Botswana
Mauritania***
Mozambique**
Guinea***
Cameroon**
Zimbabwe**
Burkina Faso*
*=2006; **=2005; ***=2004; ****=2008 estimates
Sources: Various, compiled by ReSAKSS.

10. 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.

11. 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
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 estimates
On 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

12. 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.

13. 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 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.

14. 3. Country case studies
Nigeria, Zambia and Malawi

15. 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 Zambia
Sources: Various, compiled by ReSAKSS.

16. And this funding increase has predominantly
come from government sources
Sources of agriculture spending in Zambia (ZMK billion) 2000-2008
2000
1800
1600
1400
1200
ZMK' 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

17. 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
25000
Malawi 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

18. 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 input
Spending has been directed to different priority areas: support programs fall
Ghana has focused on one particular crop (cocoa), under their nutrition
while Nigeria, Malawi and Zambia have invested most and food security
heavily into input support. component.

19. 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

20. 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

21. 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

22. 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

23. Thank you!