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close this bookAid to Agriculture: Reversing the Decline - Food Policy Report (IFPRI, 1993, 24 p.)
View the document(introduction...)
View the documentPreface
View the documentPayoffs to Investment in Agriculture
View the documentRole of Aid in Agricultural Investment
View the documentChanging Patterns of External Assistance to Agriculture
View the documentTrends and Outlooks for Major Donors
View the documentDeveloping-Country Responses
View the documentReasons for the Decline
View the documentProspects for the Future
View the documentConclusions

Developing-Country Responses

How declining external assistance affects agricultural development in developing countries depends to a large extent on the reactions of these countries to the cutbacks. Do local governments increase their recurrent and investment budgets for agriculture in order to substitute for reduced donor contributions? This partly depends on whether external assistance was used to expand agricultural investment or whether it was used as an opportunity to divert local government funds to other activities. An added complication is the structural adjustment programs that many developing countries had to adopt during the 1980s. These programs typically caused significant reductions and shifts in public budgets, the effects of which are difficult to distinguish from the effects of cutbacks in agricultural assistance.

A review of 18 countries for which there are comparable statistics indicates that in nine countries there was a decline in agricultural investment and in seven there was almost no change (Table 3). Only two countries showed a substantial increase in the spending on agriculture. In Ghana, for instance, the share of expenditures on agriculture in total government expenditures declined from around 12 percent in 1980-81 to around 4 percent in 1987-88. Bangladesh, Brazil, India, Indonesia, Mali, Mexico, Tunisia, and Venezuela also reduced the percentage spent on agriculture in the 1980s.22 There were several factors behind declining support to agriculture. With the move to major macroeconomic reforms, agriculture ministries generally experienced a loss of power vis-is finance ministries, which then translated into reduced budgetary support for agricultural activities. In some instances, when donors cut assistance to agriculture, recipient countries were unable to provide substitute funding.

22. Note that a number of the larger countries, particularly in Latin America, decentralized their budgets. In such cases, analyzing time-series data on central government spending is of limited value. Analysis must be done on a case-by-case basis, employing in-depth knowledge of specific country circumstances.

Table 3 - Support to agriculture by selected developing countries

Country

Agriculture Expenditure
Share of Total Expenditure
(Latest Year)a

Change Since the Early 1980s


(percent)


Bangladesh

4.2

-

Brazil

1.7

-

Burkina Faso

5.1

»

Costa Rica

4.1

+

Egypt

4.9

»

Ghana

3.5

-

Indiab

13.7

-

Indonesiab

8.3

-

Kenya

14.6

+

Malawi

12.2

»

Mali

4.8

-

Mexico

2.9

-

Morocco

5.5

»

The Philippines

6.6

»

Thailand

9.1

»

Tunisia

8.1

-

Venezuela

3.0

-

Zimbabwe

11.1

»

Source: International Monetary Fund, Government Finance Statistics Yearbook (various years).

a Mostly 1990; some are 1989 figures.
b Consolidated General Government.
- = Significant decline.
+ = Significant increase.
» = Barely any change.

In Brazil, total support to agriculture clearly dropped during the first half of the 1980s, rapidly increased during 1985-87, and then sharply decreased again by the end of the decade.23 Among the components of agricultural support, support to science and technology increased during 1980-83, decreased during the next five years, and then rose substantially to the end of the decade. Support for irrigation increased steadily from 1985. No trend is discernable for agricultural extension. These types of long-term support actually increased in real terms for 1980-90. However, they were dwarfed by government expenditures on purchases of food for public stocks and provision of highly subsidized agricultural credit (it is questionable whether these items should be considered as support to agriculture, but they are, nevertheless, in the budget). Brazil followed a "tax and compensate" form of government intervention in the agricultural sector from 1950 to the mid-1980s, which appears to have generally hindered agricultural performance.24

23. The section on Brazil is based on a case study by E. Contine and S. A. Vosti, "Support to Agriculture - What Does It Mean, What Does It Mask, and How to Move Ahead: The Case of Brazil," (IFPRI, Washington, D.C., 1992, mimeographed).

24. For a comparative study of the causes and consequences of agricultural taxation and price and exchange rate disincentives for agriculture, see A. O. Krueger, M. Schiff, and A. Valdes, A World Bank Comparative Study: The Political Economy of Agricultural Pricing Policy, Vol. 5, A Synthesis of the Political Economy in Developing Countries (Baltimore, Md., U.S.A.: Johns Hopkins University Press, 1992).

There were several countries, including Burkina Faso, Egypt, Malawi, Morocco, Pakistan, the Philippines, and Thailand, that did maintain a constant share of total government expenditure to agriculture during the 1980s. However, except for Malawi and Thailand, most of these countries spent a pretty low proportion of their government expenditures on agriculture (about 5 percent) in the first place.

Only in two countries did the share of government expenditure on agriculture rise during the 1980s, but to low levels: from about 3 percent to 4 percent in Costa Rica and from about 7 percent to 11 percent in Kenya.