1. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE sustainable solutions for ending hunger and poverty Ghana Strategy Support Program Public Agriculture Investments to support MIC Sam Benin Tewodaj Mogues Godsway Cudjoe Josee Randriamamonjy 16 th November 2007 Accra

2. Ghana Strategy Support Program INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 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?

3. Ghana Strategy Support Program INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 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

4. Ghana Strategy Support Program INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 4 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 Estimating investment-growth elasticity in Ghana’s agriculture sector data and methods

5. Ghana Strategy Support Program INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 5 Public agriculture expenditure spatial distribution and trends

6. Ghana Strategy Support Program INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 6 Returns to public agriculture expenditure results 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%

7. Ghana Strategy Support Program INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 7 Estimated effects of public expenditure on agricultural growth examples from other countries ElasticitySource Agriculture spending Extension0.11–0.16USA (Huffman and Evenson 2006) Research0.13–0.19 Research 0.19Uganda (Fan et al. 2004) Research0.25India (Fan et al. 2000) Development0.17Rwanda (Diao et al. 2007) Aggregate0.36Africa (Fan and Rao 2003) Non-agriculture spending India (Fan et al. 2000) Soil and water cons.0.01 Rural roads0.24 Feeder roads 0.14Uganda (Fan et al. 2004) Murram roads Education 0.25 0.33

8. Ghana Strategy Support Program INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 8 Public agriculture expenditure required to raise agriculture growth from 5.3% to 6.0% additional 1,912 billion Cedis ($0.2 billion) per year

9. Ghana Strategy Support Program INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 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

10. Ghana Strategy Support Program INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 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

11. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE sustainable solutions for ending hunger and poverty Ghana Strategy Support Program Thank you

12. Ghana Strategy Support Program INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 12 10% budget allocation to agriculture examples from other countries Source: AU 2007

13. Ghana Strategy Support Program INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 13 Returns to public agriculture expenditure National0.18* Spatial disaggregation South0.05 North (Northern and Upper Regions)0.28* Agro-ecology Coastal0.05 Forest0.08 Southern Savanna0.05 Northern Savanna0.28*