World Bank Country Manager Ina-Marlene Ruthenberg says Zambia’s past decade of economic growth was not sufficiently pro-poor and the benefits have mainly benefited the richer segments of the population in urban areas.
Speaking at Southern Sun Hotel in Lusaka during the launch of a new World Bank Economic Brief titled Reaping Richer Returns from Public Expenditures in Agriculture released yesterday, Ruthenberg called for improvement of public spending in agriculture.
“There remains a need to look closely at ways to improve public spending in agriculture to ensure the promotion of a non-copper economy and improved rural livelihoods. Low agriculture productivity is a key impediment to poverty reduction and has knock on effects in terms of gender disparities, land degradation and rapid deforestation,” said Ruthenberg.
According to the brief, growth of the economy is expected to increase to 4.1 per cent in 2017 and further to 4.5 per cent in 2018 and 4.7 per cent in 2019, from 3.4 per cent in 2016. Inflation declined to 6.5 per cent in May 2017 (from a peak of above 20 per cent in February 2016) and, together with a stable kwacha, led the central bank to ease monetary policy, thereby reversing the pressure on credit growth. The brief notes that the government has been making progress with its economic recovery plane ‘Zambia Plus’.
The forecast assumes that the government will continue to implement its economic recovery plan, the harvest and electricity production will be stronger because of the favourable weather, and copper production will increase because of the new and recently refurbished mines.
The report highlights that Zambia has successfully increased the production of crops (mostly maize), largely thanks to the increased size of areas under cultivation as opposed to improved yields. While public expenditures on agriculture have been increased over the past 15 years, the report urges better targeting of agriculture subsidies.
“There are four key steps to reform the FISP (Farmers Input Support Programme). First, the roll-out of the electronic voucher to all districts has long been discussed as a means of improving the quality of FISP, and remains crucial. The 2017 budget promised a full roll-out for the 2017-18 season, but this―based on current delivery challenges―appears to be too ambitious. Instead, a realistic timeline for 2017-19 should be drawn up. Second, the targeting of the program should be enhanced to make it more efficient and to reduce the overall cost (freeing up resources for complementary agriculture expenditures),” said the report.
“Third, there is need for a clear exit strategy: farmers should not receive subsides indefinitely. The program should sustainably raise productivity and incomes so that farmers can graduate from the subsidy program. Finally, there is a need to ensure that farmers can, in practice, select the inputs and the crops they grow. This is a crucial step for reversing the maize-centric status of Zambian agriculture. To improve the FRA (Food Reserve Agency), efforts are needed to ensure that the prescribed purchase limit is not exceeded. A monitoring system needs to be built to ensure that purchases relative to the limit can be tracked accurately.”
The report shows that government routinely spends 79% of the agriculture budget on FISP and the FRA. The ninth Zambia Economic Brief prepared by World Bank Senior Economist, Gregory Smith and others calls for reform of the two programmes.
“As these programs are improved, savings will be realised. These should be invested back into the sector in high-return areas such as R&D (Research and Development), extension services, irrigation, livestock development, infrastructure and technology. A careful strategy will also be needed to guide such expenditure, while more predictable flows of resources to the sector will help ensure there is an incentive to plan,” reads the report.
“… Since 2010, actual expenditure in agriculture has averaged just 80% of what was planned in the Budget Speech. Further, the FISP and FRA often over-spend relative to their budget allocation, further depleting the actual expenditure in other important areas within the sector and often resulting in substantial expenditure arrears.”