Changing Patterns of External Assistance to Agriculture

External assistance to agriculture in low-income countries totaled about US$ 10 billion in 1990.⁴ About $5.5 billion, or 55 percent, originated from multilateral institutions, and about $4.6 billion from bilateral donors. The share of agriculture in total development assistance was about 14 percent.⁵

^4. Unless otherwise indicated, aid figures are in 1985 U.S. dollars.

^5. This is in percent of total official development finance (ODF); using official development assistance (ODA) as a denominator would disregard the issue of debt forgiving - a declining share for agriculture results in both cases.

Major changes have taken place in the size, pattern, and use of agricultural assistance since the mid-1970s.⁶ Following the 1973/74 food crisis, external assistance to agriculture in low- and middle-income countries increased rapidly (Figure 2). Concerned about high food prices and impending food shortages, donors expanded their aid commitments to agriculture⁷ by more than 30 percent (adjusted for inflation) between 1975 and 1980. However, in the first half of the 1980s, slow growth in the industrialized countries and declining total aid flows led to a decline in agricultural assistance (Tables 1 and 2).

^6. Data for this analysis were compiled from annual reports, direct requests, and secondary sources. Data on bilateral assistance were provided by the OECD Statistical Division. Information for the EC was obtained from the EC Statistical Division.

^7. Agricultural aid commitments include concessional as well as nonconcessional loans and grants. A loan is defined as concessional if it has at least a 25 percent grant element. Agricultural assistance does not include food aid.

Figure 2 - Total assistance to agriculture, 1974-90

Source: See Table 1.

Table 1 - Agricultural development assistance by bilateral and multilateral donors, 1980-90

Organization		1980	1981	1982	1983	1984	1985	1986	1987	1988	1989	1990
		(US$ million, in 1985 dollars)
World Bank		4,491	4,427	3,420	3,976	3,580	3,749	4,699	2,772	4,089	3,030	3,012
OECD countries (bilateral)		3,645	3,225	2,839	3,255	2,733	3,375	3,498	3,680	4,435	3,488	3,607
Inter-American Development Bank		809	813	460	526	892	321	624	532	319	539	263
African Development Banka		213	215	247	282	205	424	596	842	381	488	563
Asian Development Bankb		617	647	661	710	663	718	622	639	620	797	674
European Communities		429	342	391	385	328	334	500	897	694	680	735
Organization of Petroleum Exporting Countries
	Bilateral	174	379	861	238	269	192	263	123	121	266	223
	Multilateral	174	205	200	241	261	267	419	259	197	243	150
International Fund for Agricultural Development		586	297	488	273	196	184	128	209	160	208	287
United Nations Development Programme		265	255	221	182	146	146	170	135	163	171	173
Consultative Group on International Agricultural Research		156	154	160	177	178	170	188	191	193	184	175
Food and Agriculture Organization of the United Nations		147	160	152	154	166	175	182	175	170	168	190
Total		11,706	11,072	10,100	10,398	9,619	10,055	11,891	10,453	11,544	10,263	10,051
Bilateralc		4,248	3,946	4,091	3,877	3,331	3,901	4,262	4,699	5,251	4,433	4,565
Multilaterald		7,458	7,127	7,023	6,520	6,288	6,153	7,629	5,754	6,293	5,830	5,486

Sources: World Bank, Agriculture and Rural Development Department; Organization for Economic Cooperation and Development, Statistics Department; Inter-American Development Bank Annual Report; African Development Bank Annual Report; Asian Development Bank Annual Report; European Communities, Statistics Department (Lomountries); EC Annual Report 1990; and Food and Agriculture Organization of the United Nations, Statistics Department.

^a Figures for 1980 and 1981 were extrapolated from total bank lending in respective year and relative share of agriculture in 1982.

^b Figures for 1980-1989 are three-year moving averages.

^c Bilateral includes Organization for Economic Cooperation and Development (bilateral), Organization of Petroleum Exporting Countries (bilateral), and European Communities.

^d Multilateral includes World Bank, Inter-American Development Bank, African Development Bank, Asian Development Bank, Organization of Petroleum Exporting Countries (multilateral), International Fund for Agricultural Development, United Nations Development Programme, Consultative Group on International Agricultural Research, and Food and Agriculture Organization of the United Nations.

Table 2 - Bilateral official agricultural development assistance, grants, and loans of OECD countries, 1980-90

Country	1980	1981	1982	1983	1984	1985	1986	1987	1988	1989	1990
	(US$ million, in 1985 dollars)
Australia	31	58	59	29	50	44	61	41	51	75	55
Austria	1	2	3	3	1	2	5	5	9	8	8
Belgium	...	21	10	9	24	30	44	68	52	35	44
Canada	101	302	95	237	222	277	161		219	181	121
Denmark	40	23	67	49	24	67	58	75	153	100	38
Finland	22	16	16	24	23	26	50	...	51	71	102
France	357	403	384	500	293	378	459	502	584	430	527
Germany	514	331	272	274	221	250	333	438	465	261	352
Ireland	...	...	...	...	...	3	4	4	4	3	3
Italy	42	32	116	197	154	144	355	543	432	386	268
Japan	449	513	421	387	513	699	491	627	1,031	681	1,023
Netherlands	397	304	175	180	136	100	283	377	282	293	217
New Zealand	16	16	12	4	6	11	5	4	6	...	2
Norway	75	82	62	53	83	68	59	53	37	71	47
Sweden	62	87	86	70	73	67	13	107	63	101	126
Switzerland	32	62	44	68	40	79	75	88	101	94	84
United Kingdom	104	76	71	103	128	94	89	124	126	133	201
United States	1,402	897	948	1,082	740	1,037	950	623	769	565	388
Total	3,647	3,224	2,839	3,254	2,733	3,375	3,498	3,680	4,435	3,488	3,607

Source: Organization for Economic Cooperation and Development, Statistics Department.

Commitments to agriculture picked up again in 1986 as the World Bank and regional banks⁸ sharply increased their lending to agriculture. However, this rebound did not so much represent a marked increase in assistance, compared with the level at the beginning of the decade, as it did a reversal of the decreased levels of 1982-85. Moreover, the increase was in nonconcessional, or general, lending; concessional lending (including grants) continued to decline. In 1987, agricultural assistance again declined, even as total development assistance significantly increased, driving down agriculture's share in total aid (Figure 3). There was a second rebound in 1988, again led partly by the World Bank and partly by bilateral donors such as Japan, which increased its agricultural commitments by 64 percent.

^8. These include the African Development Bank, the Asian Development Bank, and the Inter-American Development Bank.

Figure 3 - Share of agriculture in total assistance by bilateral and multilateral donor agencies, 1980-90

Source: Computed from Table 1.
Note: ODF = official development finance (total assistance).

The 1988 assistance level was not maintained, and the 1980s ended with a clear downward trend in aid to agriculture, even as donors actually increased total assistance to developing countries by 5 percent between 1987 and 1990. Recent developments in project funding, personnel, and reorganization at major donor agencies suggest that this downward trend will continue in the 1990s.

Thus, after rapidly increasing in the 1970s, external assistance to agriculture in low-income countries leveled off and, in fact, declined during the 1980s, from about US$ 12 billion to $10 billion (in constant 1985 U.S. dollars). The share of agriculture in total development assistance declined from 20 percent in 1980 to 14 percent in 1990.

For many developing countries, the decline of external agricultural assistance in the first part of the 1980s was moderated to some extent by a strong U.S. dollar during that period, which increased its purchasing power on international markets. But by the end of the decade, a weakened dollar exacerbated the observed decline in the absolute volume of agricultural aid.

Less Aid but More Donors

Although the contribution of major donors declined during the 1980s, other donors entered the aid arena. Among the multilateral donors, the regional banks, some United Nations agencies, and the Organization of Petroleum Exporting Countries (OPEC) maintained or expanded their share of total agricultural assistance. The World Bank sharply cut its lending to agriculture.⁹ As a group, multilateral institutions reduced their agricultural assistance commitments from US$ 7 billion to less than $6 billion (in constant 1985 U.S. dollars), lowering their share of total agricultural assistance from 64 to 55 percent over the decade.

^9. World Bank, "Agricultural Sector Review Paper" (World Bank, Agricultural and Rural Development Department, Washington, D.C., 1992, mimeographed).

Bilateral donors slightly increased their overall commitments to agriculture during the 1980s, from US$ 4.3 billion to $4.6 billion. Changing priorities led to major shifts among bilateral donors. The United States reduced agricultural aid to the extent that its share of total bilateral agricultural aid steadily decreased from more than 30 percent in the early 1980s to less than 15 percent in 1989/90. In 1987, Japan overtook the United States as the largest single bilateral donor to agriculture. By 1990, one-quarter of total bilateral agricultural assistance came from Japan. Italy and several smaller European countries also significantly expanded their agricultural aid programs.

Regional Distribution

A greater share of agricultural assistance was redirected to Africa during the 1980s. Africa's share of such assistance increased from 22 percent in 1980 to 31 percent in 1990.¹⁰ Given the concentration of poor countries in Africa, this may be a justifiable change in relative allocations. Over the same period, Latin America's share decreased from 24 to 15 percent. South and East Asia and the Pacific continued to capture the lion's share of all assistance for agriculture, between 40 and 50 percent, with the share slightly increasing toward the end of the decade. The Near East's share hardly changed.

^10. FAO, The State of Food and Agriculture (Rome: FAO, 1991).

Subsectoral Distribution

A smaller share of total agricultural assistance was allocated to land and water development activities, including irrigation, in the second half of the 1980s.¹¹ Cuts were also made in assistance to research, rural development initiatives, and extension. Macroeconomic reforms and agro-industrial development - activities that affect farmers only indirectly - received sizable attention, following a drop in their share in the mid-1980s. Support for structural adjustment efforts steadily increased from 1 percent in 1982 to 10 percent in 1989. The livestock, forestry, and fishery subsectors received slightly more emphasis toward the end of the 1980s.

^11. FAO, State of Food and Agriculture.

While it seems appropriate that assistance be cut back to those parts of the agricultural sector that have a less than satisfactory record of success, it is worrisome that assistance to research, rural development, and extension, with a proven record of high returns, was cut back as well. Cutting this assistance may seriously affect the long-term growth potential of agriculture.