Methodology for measuring government expenditures in

support of food and agriculture sector

development

Joanna Komorowska

Outline• Key concepts• MAFAP classification• Budgetary transfers versus revenue

foregone• Mapping aid onto government

expenditures• What will we learn from the PE indicators?

Motivation• Agriculture’s key role in raising incomes, reducing

poverty and improving food securityReflected in 2003 Maputo declaration

• Important to be able to analyse the performance of expenditures – but there is a lack of systematically organised data

• African governments recognise the need to gather such information on a regular basis in order to make evidence-based policy choices

Having an economically meaningful classification system is a pre-requisite for policy analysis and efficient budgetary processes

The main principles of classification of policy measures in MAFAP

• Seek to measure all expenditures that are supportive of sectoral development (both from national resources and aid)

• Seek to monitor both, the level and the composition of expenditure measures Complementarities and trade-offs between

spending in different categories

The main principles of classification of policy measures in MAFAP• Primary focus on food and

agriculture sector, but possible to include forestry and fisheries

• Seek to capture related public expenditures in rural areas Important role in ag sector

development

Key concepts: what policies to consider?• That generate monetary transfers to:

▪agricultural agents individually▪agricultural agents collectively ▪rural sector more generally

Objectives or economic impacts of policies not considered

General policies not considered, even if they generate transfers to agricultural producers

agriculture-specificagriculture-specific

agriculture supportiveagriculture supportive

The main principles of classification of policy measures in MAFAP• Seek to distinguish between

different economic characteristics of expenditure measures

The main categories differ depending on The main categories differ depending on how policy measures are how policy measures are implementedimplemented and and

not their objectives or impactsnot their objectives or impacts

Discussion question 1

What information should be considered to understand how policy measures are implemented?

Information on policy implementation• Who is the recipient • What is the basis for payment (area,

income, unit of output etc.)• Commodities covered• Conditions attached to obtain the

payment

The way in which measures are implemented matters - examples1. Input subsidies in China2. Extension services in Uganda

Input subsidies in China• Comprehensive Subsidy on Agricultural

Inputs introduced in 2006Objective: to compensate grain producers

for an increase in prices of agricultural inputs such as fertilisers, pesticides, plastic films and diesel

Implementation: payment per unit of land, not necessarily to buy inputs

Conclusion: direct payment supporting farmers’ incomes

Extension services in Uganda• NAADS responsible for extension

services provision“classical” extension services, but also

input subsidies: although officially input subsidies were

abolished, subsidised inputs are distributed through other channels, particularly agencies providing extension services

(Uganda case study after WB2010)

MAFAP classification(see handout with categories and their

definitions)I. Agriculture-specific policies1.1. Payments to the agents in the agro-food

sector: producers (e.g. input subsidies), consumers, input suppliers, processors, traders, transporters

1.2. General sector supportII. Agriculture supportive policies: rural

education, health, infrastructure

MAFAP classificationI.1. 1. Payments to

producers• Payments based on output• Input subsidies:

variable inputs capital on-farm services

• Income support• Other

I.1. 2. Payments to consumers

• Food aid• Cash transfers• School feeding

programmes• Other

I.2. General sector support: ag. research, technical assistance, training, extension, inspection, infrastructure, storage, marketing and other

Discussion question 2Are the proposed MAFAP categories exhaustive? What other categories of spending might be present in Tanzania?

Budgetary transfers versus revenue foregone• Transfers in support of food and

agriculture sector development may be provided in two forms: actual budgetary transfers (such as

production subsidies) and the revenue foregone by the

governments (such as tax concessions)

Estimating budgetary transfers• Complete coverage of institutions,

administrative levels and financing instrumentsImportant to identify all budgetary

expenditures in support of food and agriculture sector regardless their: source of funding (national or aid) public institutions involved administrative level financing instrument used

Estimating budgetary transfers• Budget planning versus actual

spendingBoth should be collectedActual spending should be used in

the classification and other calculations

Contrasting the two will feed into the PE efficiency analysis

Estimating budgetary transfers• Treatment of one-off investments

versus recurrent expendituresBoth should be includedBoth should be recorded on annual

basis using information on actual year-to-year spending

Estimating budgetary transfers• Treatment of policy administration costs

Generally should not be included in the classification

Exception: when support is provided via services e.g. extension, research or inspection

Excluded admin costs will be collected separately to contribute to the PE efficiency analysis

Discussion question 3How to estimate policy administration costs associated with policy transfers in support of food and agriculture sector development?

Estimating revenue foregone• Support may be provided in forms that do

not imply actual transfers from the budget:Tax concessions (income, VAT on inputs, fuel)

Most common in Africa?Preferential lending (from the bank to ag.

producers)Administered input prices (SOE charging

lower prices for inputs to ag. producers)

Estimating revenue foregone• A largely empirical and potentially

complex task• Only those should be captured that

unambiguously provide support to agriculture and can be measured in a reasonable time frame and with adequate accuracy

Estimating revenue foregone• Tax concession can be measured by

establishing counterfactual and quantifying monetary value of the tax reduction by comparing the value of tax revenues from the counterfactual and the target group.

Discussion question 4

What types of revenue foregone measures are present in Tanzania? How can they be estimated?

•DAC donors•Other bilateral•Other multilateral

DONORS

•Central government•Local government•Specific projects

conducted by NGOs or international organisations

National budgets •Agriculture specificPayments to agents in

agro-food sectorGeneral sector

support•Agriculture

supportive MAFAP public

expenditure classification

CRS, AidDataCRS, AidData

budgetbudget

Mapping aid onto national expenditures

Mapping aid onto national expenditures• Recording aid flows at every step of

its distribution will help to:Clarify how effective donors are in

disbursing committed moneyEstablish the extent to which aid is

provided for a specific purpose or in a form of general support to the budget

Establish the extent to which disbursed aid was actually spent

Discussion question 5Is it possible to establish a direct link between donor commitments and disbursements and budgeted amounts and actual spending at the national level?

Potential problems related to classification of expenditures

measures• Disaggregation of programmes may be

difficultSolution: estimate using expert consultations

and/or allocation keys• Classification categories may not be

exhaustiveSolution: classify to the most suitable “other”

categoryCategories will be revised periodically to adapt

to the existing expenditures measures

What information are we looking for?• Policies that generate transfers in support

of food and agriculture sector including: Detailed description of policy

implementation criteria (for whom, how, for which commodity, under which conditions)

Actual expenditure Source of funding (national and/or aid) Government level (national/subnational)

at disaggregated level at disaggregated level (MAFAP classification)(MAFAP classification)

What information are we looking for?• General characteristics of spending:

Proportion of admin costs in total expenditures Recurrent versus development budget Ratio of actual spending and budget

allocations Share of aid in budget allocations and share of

aid in actual spending Aid type – loans versus grants Off-budget expenditures

at aggregated level (derived indicators)at aggregated level (derived indicators)

What will we learn?• Proposed indicators seek to keep track of both the level

and composition of expenditures (national and aid)How much of budgetary allocations are disbursedWhether they address the investment needsCorrespondence of spending with stated

objectivesTrade-offs and complementarities between

different spending categoriesRole of aidEffectiveness – economic impact?

THANK YOU