Download ROLE OF AGRICULTURE IN ECONOMIC DEVELOPMENT AND …

BY
Ian Kumwenda
Agricultural and Natural Resources
Management Consortium
Background
 Agriculture has a multifunctional role to play in
economies
 Apart from providing food and fibre, agriculture is the
main source of economic growth in Malawi and most of
sub Saharan Africa
 Growth originating from agriculture is known to be twice
as effective in reducing poverty as GDP growth originating
from outside agriculture (World Bank, 2008)
Background continued
 These attributes make agricultural development a vital
means of achieving growth & poverty reduction
 This presentation will highlight the following:
 Trends in economic dev in Malawi and agric investment
 Awareness and commitment to using agriculture for
economic development
 Key lessons in using agriculture for growth and poverty
reduction
Trends in economic growth and poverty
reduction
•years registering
–ve growth rates
such as 1980,
1992, & 1994 & in
the early 2000s
are characterized
by low & erratic
rainfall
•Confirms growth
affected by
climatic factors
Trends cont’d
 Recent statistics show improved performance
 Growth rates of 8.6% (2007), 9.7% (2008) and projected
7.9% in 2009
 Attributed to good weather conditions & the improved
access to farm inputs
 Overall poverty rate has remained the unchanged between
1998 (54.1%) and 2005 (52.4%)
Investment in Agriculture
 Several agriculture development programmes have been
implemented
 Starter pack programme 1997-1999
 Target Input Programme between 2000 & 2004,
 Input Subsidy from 2005 to date
 The main aim of these programmes has been to improve
productivity of smallholder agriculture to achieve food
security and reduce poverty
Investment in Agriculture
Figure 3: Annual growth in GDP from 2000 - 2007
Evidence of contribution
 The annual economic growth in national income appears
to respond to increase in agriculture investment
 Investment in agriculture has contributed to this good
economic performance in two ways
 the direct effect on access to seed & fertilizer has
increased production & resulted in growth of agriculture
GDP.
Inflation & public investment in agriculture
 Since 2006 overall
inflation rate has
been going down
due to continued
fall in food prices
Interest rates & public investment in agriculture
Impact of investment on poverty reduction
 The recent poverty assessment was in 2005 that put the
proportion of poor at 52.4%.
 However, several direct & indirect benefits accrue to
beneficiaries of the program & are more likely to
contribute to increased income/reduction in poverty
Awareness and commitment to using agriculture
 Policy framework
 Economic growth & poverty reduction in Malawi is guided by
the Malawi Growth &Development Strategy (MGDS) for the
next five years, from 2006/07 to 2010/2011 fiscal years.
 The growth will emanate from growth in agriculture,
manufacturing, mining as well as service sectors.
 Agriculture is recognized as a priority sector but only as far as
provision of food and not as a lead sector for eonomic growth.
 Civil society
 Civil society advocacy & contribution to economic management in
Malawi is spearheaded by the Malawi Economic Justice Network
(MEJN).
 Agriculture shall be a priority for government budgeting in order to
achieve food security
 In terms of economic growth & poverty reduction MEJN emphasizes
on prudent management of macro-economic variables ( 2004, 2009)
 This aims at facilitating the development of the manufacturing sector
as a lead sector for growth.
National Resource Allocation (Budget)
 Agricultural sector was treated as a number 3 priority in
late 1990s & early 2000s & entails research & extension.
 The recent years show increasing allocation to the
agriculture sector.
 The major beneficiary of the increased agriculture
expenditure in the latter years is the input price subsidy
programme.
Table 3: Government Priorities based on Budget Statements
Year
1996/97
1997/98
1998/99
1999/00
2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
2006/07
Priority 1
Education
Education
Education
Education
Education
Health
Education
Education
Education
Priority 2
Health
Health
Health
Health
Health
Education
Health
Health
Health
Agriculture
Information &
Tourism
Agriculture
Transport
Infrastructure
Priority 3
Agriculture
Agriculture
Agriculture
Agriculture
Agriculture
Water &
Sanitation
Priority 4
Priority 5
Roads
Roads
Roads
Roads
Water and
Sanitation
Community
Services
Agriculture
Agriculture
Water and
Sanitation
Roads
Agriculture
Agriculture
Water and
Sanitation
Transport
Trade &
Private Sector
Development
Energy
Water and
Sanitation
Rural
Development
Roads
Industry
Science &
Technology
Awareness cont’d
 Individual nations pledged under the CAADP to allocate
a minimum of 10% of total national budget to the
agriculture sector.
 This
is recognition of
the fact that increasing
investments in the agricultural sector is necessary for the
sector to contribute substantially to economic growth &
meeting the first millennium development goal.
Agriculture expenditure as a percentage of total public
expenditure
18
16
14
Percent
12
10
8
6
4
2
0
99/00
00/01
01/02
02/03
03/04
Year
04/05
05/06
06/07
 However, increase in expenditure is due to the subsidy
but other crucial areas such as research and extension
receive little funding
 This lack of a sustainable approach to agriculture
development seems to suggest that agriculture is still
being used to meet the short term food requirements of
the country and not long term development needs
.
Conclusion
 There are direct & indirect effects of agriculture
growth/investment
on
national
income,
inflation,
interest rates, exchange rates & other macro economic
variables
 However, not all investment in agriculture sector will
lead to these positive trends; caution must exercised in
selecting the strategy for channeling investment in
agriculture
Conclusion cont’d
 Little emphasis has been put on agriculture as a lead
sector for growth & poverty reduction by both the public
policy framework
 However, in terms national budgets, agriculture now a
priority receiving the largest share but it is mostly
recurrent & not development expenditure
RECOMMENDATIONS
 Need to investment in less vulnerable means of
production such as irrigation.
 Dialogue is still necessary to achieve the full recognition
of agriculture not only as a vital sector in economic
development but its potential to be the lead sector for
growth