Agriculture and Economic Reform in Syria: Impacts on Poverty and Inequality

1. Agriculture and Economic Reform in Syria: Impacts on Poverty and Inequality Benedetto Rocchi and Donato Romano Department of Agricultural and Resource Economics University of Florence with the collaboration of the Rural Development Division at NAPC

2. A SAM of the Syrian economy: - households accounts (rural vs. urban, income deciles) - activities accounts (agriculture, food processing) Policy simulation assessment: - policy reform ( social market economy) impacts on poverty and inequality - changing environment: e.g. soaring food prices impacts on poverty and inequality Objectives

3. Account classification • 41 activities (from the NAPC Farming Systems Study + CBS data) • 25 crops • 3 livestock • 13 non-agricultural activities (8 food processing + 5 other acts.) • 51 commodities (from the NAPC Farming Systems Study + CBS data) • 23 crops • 8 animal products • 13 agricultural processed products • 7 other products • 22 institutions (from the SPC-UNDP Poverty Study + CBS data) • 10 rural households (per income deciles) • 10 urban households (per income deciles) • firms • government

4. Account classification • 3 value added (from CBS + IMF data) • hired labour • other factors • net fiscal revenue (taxes – subsidies) • 2 capital formation (from CBS data) • inventory change • investment • 3 rest of the world (from CBS data) • goods and services (current account) • financial flows (capital account) • net lending (lending – borrowing) • TOTAL: 122 accounts

5. SAM structure 51 41 3 20 1 1 2 3

6. Definition of policy reform scenarios • change in existing (sector) policies towards a less distorted environment: • dropping subsidies to agriculture and food processing production • reducing by 20% the price of strategic crops • abolishing the Price Stabilization Fund (food consumption subsidy) • alternative use of budget saving: • fiscal deficit reduction (= investment) • public expenditure increase (proportional to the current composition) • increase transfers to households

7. Policy reform impacts

8. Policy reform impacts on output

9. Policy reform impacts on income

10. Policy reform impacts on poverty

11. Soaring cereal prices: redistributive effects

12. The impact on poverty of soaring cereal prices

13. Conclusions • The estimated SAM for Syria is a suitable tool for policy impact simulations • Policy lessons: • crucial role of Government budget strategies on the outcomes of a given sector policy (reform) • importance of output growth for poverty reduction • existence of structural asymmetries in income distribution (e.g. rural vs. urban) • Limitations: • static model: only short-run impacts • the classification of household groups by deciles may change as a consequence of simulated policies

14. Conclusions • Future developments: • analyze alternative policy mixes - less ‘extreme’ policy mixes - impact of debt service of production loans on HHs - decrease in oil production  foreign exchange  access to international food market • alternative classification criteria for households sector (sector of occupation of the reference person, education level, composition of the household’s total income) • regional disaggregation of the Syrian SAM • CGE

15. The impact of an exogenous shock