Public Agriculture Investments to support MIC

1. Public Agriculture Investments to support MIC Sam Benin Tewodaj Mogues Godsway Cudjoe Josee Randriamamonjy 16th November 2007 Accra

2. Rationale for public investments • Public investment is instrumental in: • Improving public services • Attracting private investment and inputs • Broad strategic questions from a macro or rural development perspective: • What is the level of investments needed to raise agriculture growth from 5.3 to 6.0 percent? • Can the current budget cover these investments? • If not, what is the funding gap? Page 2

3. Estimating public agriculture expenditure required to raise agriculture growth • Effect of public investment in agriculture and rural areas on agriculture production and productivity • Effect of public investment on private investments in agriculture • Effect of private investments in agriculture on agriculture production and productivity • Investment-Growth Elasticity percentage increase in agriculture growth due to 1 percent increase in public agriculture investment • Additional public agriculture investment = (additional agricultural growth / elasticity ) * unit investment Page 3

4. Estimating investment-growth elasticity in Ghana’s agriculture sectordata and methods • Data • Public agriculture expenditure (PAE) data, 2002-2006 • Agricultural Services Sub-sector Investment Project (AgSSIP) • Government allocation to MOFA • Household agriculture production data: GLSS5 • Agriculture output (crops, livestock, fishery, forestry) • Investments (tractors, livestock, outboard motors, etc.) • Inputs (seed, fertilizer, feed, fuel, labor, etc.) • District level data on access to other public services, etc: (2003 CWIQ, 2000 Census, Ministries, etc.) • Econometric methods Page 4

5. Public agriculture expenditurespatial distribution and trends Page 5

6. Returns to public agriculture expenditureresults of econometric estimations • Expenditure-Growth Elasticity = 0.17 • One percent increase in public agriculture expenditure leads to 0.17 percent increase in agriculture production • To raise agriculture growth from 5.3% to 6.0%, public agriculture expenditure has to grow by an additional 3.9% Page 6

7. Estimated effects of public expenditure on agricultural growthexamples from other countries Page 7

8. additional 1,912 billion Cedis ($0.2 billion) per year Public agriculture expenditure required to raise agriculture growth from 5.3% to 6.0% Page 8

9. Conclusions • Since Ghana is already close to achieving the agricultural growth rate target of 6.0, it needs to raise growth in PAE by only 3.9% • This will raise the share of PAE in total expenditure from 8.5% to 11.5% by 2015 • This is consistent with the Maputo declaration of allocating at least 10% of national budgetary resources to the agriculture sector Page 9

10. Issues • Achieving higher efficiency of public spending • Reallocation of public agriculture expenditure resources • Function (R&D, extension, irrigation, input support, etc.) • Spatially (region, district, north-south, agro-ecology) • Raising additional resources Page 10

11. Thank you

12. 10% budget allocation to agricultureexamples from other countries Source: AU 2007 Page 12

13. Returns to public agriculture expenditure Page 13