Food, Agriculture and Natural Resources Policy Analysis Network (FANRPAN) Food, Agriculture and Natural Resources Policy Analysis Network (FANRPAN)

Monitoring trends in public spending on agriculture: The Case of Malawi
Regional Strategic Analysis and Knowledge Support System (ReSAKSS) Working Paper No.9
September 2008
Daniel Njiwa, Ian Kumwenda, Innocent Thindwa, Pius Chilonda, Femi Olubode-Awosola and Adlai Davids

Executive Summary

This report presents the results of studies that explore trends in the magnitude, share and compositions of public spending on the agriculture sector in Malawi which comes under the Ministry of Agriculture and Food Security (crops, livestock and irrigation), Fisheries and Forestry. The aim of the studies was to analyze the recent trends in levels of public spending in agriculture and the progress Malawi is making towards achieving the AU/NEPAD target of allocating at least 10% of its national budget to the agriculture sector.

To achieve this, the studies used data from 1999/00 to 2006/07 on public spending on agriculture from the Ministry of Planning and Development. The public spending (a) as planned and disbursed (actual) and (b) on development (capital) projects vis-à-vis the recurrent projects and by sources, government versus donors was analyzed. Spending by functions in terms of crops, livestock, fisheries and forestry and trends in spatial or geographical allocation were also explored with trends analyses.

In addition, the studies aim to show whether resource potentials are explored in allocating public spending among development programs or subprograms as well as across agricultural development divisions.

The key findings are as follow:
  • There seems to be an increase in spending on agriculture since the Maputo Declaration in 2003. Malawi’s agriculture sector has reached an average of 9.52% of the national spending in the period under review (1999-2006) with proportions of over 10% over the past three fiscal years (2004/05, 2005/06 and 2006/07). The bulk of this spending was on subsidy programs. Growth in spending is higher after the Maputo Declaration indicating some shift in policy. The crops/livestock had the largest increase. A review of literature also shows that national priorities in terms of funding allocation have favored agriculture in the recent past
  • Substantial spending on agriculture seems to correlate with better agricultural growth except in financial years 2001/02 and 2004/05 when the sector performed badly, which can be easily attributed to droughts. The large spending in the financial year 2005/06 was due to major food imports and distribution costs after the drought year.
  • There seems to be an appreciable gap between the planned and actual spending before 2005/06. This gives an indication of budget deficits in public spending in agriculture. Recent trends (2005/06 and 2006/07) however have seen implementing institutions receiving more funds than requested.
  • Government contribution towards the development budget in agriculture has been low, i.e., averaging 14% against 80% from donors.
  • Agriculture (crops/livestock) followed by forestry accounts for the largest share of total spending for the sector. The crops/livestock function includes administrative and support services, extension and extension management services, nutrition and food security including subsidies, land and water management services including irrigation and lastly research and technology generation and development. This is a major area of spending on agriculture with an average of 79% of total spending in the past 8 years in cash terms and up to an average of 87% in real terms.
  • The huge spending on the subsidy program (which is largely recurrent) under “Agriculture” in the past 3 years influenced a shrink in the proportion of forestry and fisheries spending in both real and cash terms. The development budget did not offer a different perspective either.
  • Across the Agricultural Development Divisions (ADDs), government aggregate spending for agriculture is increasing with time. This is evident in almost all the eight ADDs of the country.
Not much general information that can guide policy response emanates from the trends and distributions. Government needs to continue allocating more resources to agriculture, specifically mfor forestry and the priority programs of the CAADP/ADP in order to achieve the desired growth. It is necessary to increase allocation to the development budget, which is currently being run under external donor support. Specific attention needs to be paid to the areas which really require that much of resources, depending on their agroecological characteristics and production potentials.

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