Public expenditure on Agric. not well targeted – World Bank Report

A World Bank report has shown that spending on agriculture has not been well targeted, with government initiatives producing mixed results.

Some of such initiatives include the agricultural mechanization, the block farming, and the fertilizer programmes, as well as the national food buffer stock company.

These programmes tend to crowd out investment in proven strategies for promoting sustainable long-term productivity growth, such as encouraging the use of improved seeds and fertilizers, expanding irrigation networks and investment in public research and development.

The 3rd edition of the Ghana Economic Update, which focuses on agriculture as the engine of growth and jobs creation, recommends the need to improve the quality and effectiveness of public expenditure in the sector.

This is imperative in the context of the limited fiscal space of the country, where government channels scarce resources into investments in agricultural research and development and the expansion of irrigation networks to generate significant productivity.

Moreover, to boost rural income through agriculture, there is a need to re-direct sector expenditure to better target the commercialization of smallholder farmers and integrate these farmers into the sector.

A 2016 World Bank Agriculture Public Expenditure Review indicated that the country remains one of the front runners of spending on agriculture research in Africa.

However, this is only because only six countries in Africa had agriculture research expenditure above one percent of their respective agriculture GDP.

The Senior Agricultural Economist with the Bank, Hardwick Tchale said, “there is need to channel public resources into research to increase the use of technology, invest in irrigation infrastructure to increase productivity and mitigate the potential adverse effects of climate change, and leverage increased private sector investment in agriculture.”

The report further highlights the slowdown of the importance, which the agriculture sector had, with of the rising of the extractive sector.

The sector experienced its lowest growth of 0.8 percent in more than two decades in 2011, the same year in which the country started oil production in commercial quantities.

In contrast, the industrial sector grew by over 4 percent in the same year. Since then, even though the sector has shown some recovery, it has never fully recovered its former vibrancy.

The share of the agricultural sector in total GDP has fallen from 29.8 percent in 2010 to 18.9 percent in 2016.

Ghana’s agricultural Terms of Trade, measured as a ratio of food and non-food price indices has been on a declining path over recent years. Nevertheless, the sector remains an important contributor to the country’s export earnings and a major source of inputs to the manufacturing sector.

Two thirds of non-oil manufacturing depends on agriculture for raw materials, as agriculture and agribusiness account for a major share of all economic activities and livelihoods among smallholder farmers.

Despite its importance, fiscal appropriation to the sector is relatively small, and then on-going fiscal consolidation puts further pressure on the sectoral spending.

The sector has only benefited from just about 5.2 percent of total government spending between 2001 and 2014. This is well below the level committed under the 2003 Maputo Declaration, in which signatories committed to allocate at least 10 percent of their national budget to agriculture by 2008.

By 2014, the governments agriculture spending was as low as 1.3 percent of the total budget, far below the rates of regional comparators, such as Burkina Faso at 8 percent, Ethiopia (6 percent), Uganda (5 percent), and Kenya (4 percent).

Large portion of agricultural spending has being devoted to the cocoa subsector, whereas most of the public spending in agriculture is on operating expenses.

By Joshua W. Amlanu