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Nepal Agriculture Public Expenditure
Review: Successes and Challenges in
Aligning Impact and Spending
Krishna Prasad Pant, Nepal Government
Mona Sur, The World Bank
NEPAL
r
m
u
B h
u
a
M
Dad eld hura
u
u
oi
Kalikot
D p
China
Achh am
Kan ch anpur
Dailekh
Mu st ang
Jajarkot
Kailali
Rukum
Manan g
Surkhet
Kathmandu
Myangd i
Salyan
Bardiya
Rolpa
Bag lung
Kaski
Lamjung
Parbat
Gorkha
Ban ke
Pyuth an
Gulmi
Rasuw a
Dan g
Syangja
Tanahun
Arghakhanch i
Nuwakot
Palpa
Dhading
Sind hupalchowk
Kat hmandu
Kapilb ast u
Rupendehi
Nawalparasi
Dolkha
Bhaktapur
Chitw an
Tapleju ng
Solu khumbu
Sankhu wasabha
Lalitpur
Kavre
Makawan pur
Ram echh ap
Okhaldhu nga
Parsa
Sind huli
Khotang
Bara
Rautahat
Sarlah i
Udayapu r
Maho ttari
Dhanusha
Terhat hum
Bhojpur
Dhankuta
Ilam
Siraha
Sun sari
Sapt ari
India
Mo rang
Jh ap a
Agriculture in Nepal
•
•
•
•
Employ 2/3 of labor force
Involves 3.36 million households
Average land holding 0.79 ha
Contributes 32% of GDP
% Contribution to the AGDP
1. Crops
66.16
2. Livestock
25.68
3. Forestry
8.07
4. Fisheries (inland)
0.09
GDP growth and agriculture
Agriculture
Industry
GDP (at producer's price)
8
6
%
4
2
0
-2
2002
2003
2004
2005
2006
-4
-6
Fiscal year ending
2007
2008
Budget Process
National Planning
Commission
Ministry of Finance
Ministry of Agriculture
and Cooperatives
Dept.
Agri
Program
Directors
Dept.
Livestock
Program
Directors
Dept. Food
Tech
Program
Directors
District
Agencies
Dept.
Coop
Program
Directors
Regional level Offices (Agri., Livestock, Food Tech, Coop)
Allocation of the budget higher than
ceiling depends on
• Strength of the proposed program
• Political favor of the Ministers
• Favor given by the Ministry of Agriculture
while negotiation
• Strength and lobby of the Departments
• Strength, lobby and personal influence of
the Program Director
• Intention and ability of the program director
to consume the fund
Recurrent expenditure in agriculture (nominal)
3,000
Agriculture
Irrigation
Forest
2,500
Rs million
2,000
1,500
1,000
500
0
2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07
Capital expenditure in agriculture (nominal)
Rs million
4,000
3,500
Agriculture
Irrigation
Forest
3,000
2,500
2,000
1,500
1,000
500
0
2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07
19
90
/9
19 1
91
/9
19 2
92
/9
19 3
93
/9
19 4
94
/9
19 5
95
/9
19 6
96
/9
19 7
97
/9
19 8
98
/9
19 9
99
/0
20 0
00
/0
20 1
01
/0
20 2
02
/0
20 3
03
/0
20 4
04
/0
20 5
05
/0
20 6
06
/0
7
Rs billion
Government expenditures (nominal)
140.00
120.00
100.00
Total
Agriculture
80.00
60.00
40.00
20.00
0.00
19
90
19 /91
91
19 /92
92
19 /93
93
19 /94
94
19 /95
95
19 /96
96
19 /97
97
/
19 98
98
19 /99
99
20 /00
00
20 /01
01
20 /02
02
20 /03
03
20 /04
04
20 /05
05
20 /06
06
/0
7
Percent
Expenditure in agriculture as percent of
total expenditure
Government expenditure
20.0
18.0
ODA
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
Synthesis
• Nobody denies the role of agriculture in Nepalese
economy
• Public expenditure in agriculture is insufficient
• Allocation of expenditure to different sub-sectors not based
on analysis, but on hunch and power play
• Recurrent public expenditure in agriculture is increasing
faster than the capital expenditure
• Expenditure in agriculture is not increasing as it increased
in other sectors
• ODA is not in favor of agriculture
• DFID-ARD Analysis of Public Expenditures in Agriculture
derives some hard facts.
2%
Land Reform and Survey
Industry
Others-Social
Constitutional Bodies
Communications
Forest
General Administration
Agriculture
Drinking Water
4%
Irrigation
Health
Local Development
12%
Road Transportation
Electricity
Police
Defense
Miscellaneous
Internal Loan Payment
External Loan Payment
Education
Nepal - Public Expenditures by Sector,
1999-2003
16%
14%
Public expenditures on Ag/Ag GDP= 4%
10%
8%
6%
3.8%
2.9%
1.9%
0.7%
0%
Impact of Agricultural Public Expenditures on
Household Welfare & Agricultural Production
Outcome Variable
Data
Maize value
District level
Rice value
Irrigation
Agriculture
Roads
IV
NE
14.85%
4.39%
District level
IV
NE
13.84%
6.34%
Wheat value
District level
IV
NE
NE
5.17%
Vegetables value
District level
Cross-sectional
household data
IV
NE
NE
NE
Jacoby
16.62% - 36.86%
NA
26.41% - 60.78%
Panel data
IV
3.92%
0.92%
6.43%
Panel data
Cross-sectional
household data
IV
NE
NE
NE
SE
9.61%
1.36 - 2.98%
30.25%
Plot values
Consumption per
capita
Agricultural Income
per capita
Consumption per
capita
Methodology
NE: No Effect; NA: Not Applicable; IV: Instrumental variable; SE: Simultaneous equations