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close this bookAid to Agriculture: Reversing the Decline - Food Policy Report (IFPRI, 1993, 24 p.)
View the document(introduction...)
View the documentPreface
View the documentPayoffs to Investment in Agriculture
View the documentRole of Aid in Agricultural Investment
View the documentChanging Patterns of External Assistance to Agriculture
View the documentTrends and Outlooks for Major Donors
View the documentDeveloping-Country Responses
View the documentReasons for the Decline
View the documentProspects for the Future
View the documentConclusions

Changing Patterns of External Assistance to Agriculture

External assistance to agriculture in low-income countries totaled about US$ 10 billion in 1990.4 About $5.5 billion, or 55 percent, originated from multilateral institutions, and about $4.6 billion from bilateral donors. The share of agriculture in total development assistance was about 14 percent.5

4. Unless otherwise indicated, aid figures are in 1985 U.S. dollars.

5. This is in percent of total official development finance (ODF); using official development assistance (ODA) as a denominator would disregard the issue of debt forgiving - a declining share for agriculture results in both cases.

Major changes have taken place in the size, pattern, and use of agricultural assistance since the mid-1970s.6 Following the 1973/74 food crisis, external assistance to agriculture in low- and middle-income countries increased rapidly (Figure 2). Concerned about high food prices and impending food shortages, donors expanded their aid commitments to agriculture7 by more than 30 percent (adjusted for inflation) between 1975 and 1980. However, in the first half of the 1980s, slow growth in the industrialized countries and declining total aid flows led to a decline in agricultural assistance (Tables 1 and 2).

6. Data for this analysis were compiled from annual reports, direct requests, and secondary sources. Data on bilateral assistance were provided by the OECD Statistical Division. Information for the EC was obtained from the EC Statistical Division.

7. Agricultural aid commitments include concessional as well as nonconcessional loans and grants. A loan is defined as concessional if it has at least a 25 percent grant element. Agricultural assistance does not include food aid.


Figure 2 - Total assistance to agriculture, 1974-90

Source: See Table 1.

Table 1 - Agricultural development assistance by bilateral and multilateral donors, 1980-90

Organization

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990


(US$ million, in 1985 dollars)

World Bank

4,491

4,427

3,420

3,976

3,580

3,749

4,699

2,772

4,089

3,030

3,012

OECD countries (bilateral)

3,645

3,225

2,839

3,255

2,733

3,375

3,498

3,680

4,435

3,488

3,607

Inter-American Development Bank

809

813

460

526

892

321

624

532

319

539

263

African Development Banka

213

215

247

282

205

424

596

842

381

488

563

Asian Development Bankb

617

647

661

710

663

718

622

639

620

797

674

European Communities

429

342

391

385

328

334

500

897

694

680

735

Organization of Petroleum Exporting Countries












Bilateral

174

379

861

238

269

192

263

123

121

266

223


Multilateral

174

205

200

241

261

267

419

259

197

243

150

International Fund for Agricultural Development

586

297

488

273

196

184

128

209

160

208

287

United Nations Development Programme

265

255

221

182

146

146

170

135

163

171

173

Consultative Group on International Agricultural Research

156

154

160

177

178

170

188

191

193

184

175

Food and Agriculture Organization of the United Nations

147

160

152

154

166

175

182

175

170

168

190

Total

11,706

11,072

10,100

10,398

9,619

10,055

11,891

10,453

11,544

10,263

10,051

Bilateralc

4,248

3,946

4,091

3,877

3,331

3,901

4,262

4,699

5,251

4,433

4,565

Multilaterald

7,458

7,127

7,023

6,520

6,288

6,153

7,629

5,754

6,293

5,830

5,486

Sources: World Bank, Agriculture and Rural Development Department; Organization for Economic Cooperation and Development, Statistics Department; Inter-American Development Bank Annual Report; African Development Bank Annual Report; Asian Development Bank Annual Report; European Communities, Statistics Department (Lomountries); EC Annual Report 1990; and Food and Agriculture Organization of the United Nations, Statistics Department.

a Figures for 1980 and 1981 were extrapolated from total bank lending in respective year and relative share of agriculture in 1982.

b Figures for 1980-1989 are three-year moving averages.

c Bilateral includes Organization for Economic Cooperation and Development (bilateral), Organization of Petroleum Exporting Countries (bilateral), and European Communities.

d Multilateral includes World Bank, Inter-American Development Bank, African Development Bank, Asian Development Bank, Organization of Petroleum Exporting Countries (multilateral), International Fund for Agricultural Development, United Nations Development Programme, Consultative Group on International Agricultural Research, and Food and Agriculture Organization of the United Nations.

Table 2 - Bilateral official agricultural development assistance, grants, and loans of OECD countries, 1980-90

Country

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990


(US$ million, in 1985 dollars)

Australia

31

58

59

29

50

44

61

41

51

75

55

Austria

1

2

3

3

1

2

5

5

9

8

8

Belgium

...

21

10

9

24

30

44

68

52

35

44

Canada

101

302

95

237

222

277

161


219

181

121

Denmark

40

23

67

49

24

67

58

75

153

100

38

Finland

22

16

16

24

23

26

50

...

51

71

102

France

357

403

384

500

293

378

459

502

584

430

527

Germany

514

331

272

274

221

250

333

438

465

261

352

Ireland

...

...

...

...

...

3

4

4

4

3

3

Italy

42

32

116

197

154

144

355

543

432

386

268

Japan

449

513

421

387

513

699

491

627

1,031

681

1,023

Netherlands

397

304

175

180

136

100

283

377

282

293

217

New Zealand

16

16

12

4

6

11

5

4

6

...

2

Norway

75

82

62

53

83

68

59

53

37

71

47

Sweden

62

87

86

70

73

67

13

107

63

101

126

Switzerland

32

62

44

68

40

79

75

88

101

94

84

United Kingdom

104

76

71

103

128

94

89

124

126

133

201

United States

1,402

897

948

1,082

740

1,037

950

623

769

565

388

Total

3,647

3,224

2,839

3,254

2,733

3,375

3,498

3,680

4,435

3,488

3,607

Source: Organization for Economic Cooperation and Development, Statistics Department.

Commitments to agriculture picked up again in 1986 as the World Bank and regional banks8 sharply increased their lending to agriculture. However, this rebound did not so much represent a marked increase in assistance, compared with the level at the beginning of the decade, as it did a reversal of the decreased levels of 1982-85. Moreover, the increase was in nonconcessional, or general, lending; concessional lending (including grants) continued to decline. In 1987, agricultural assistance again declined, even as total development assistance significantly increased, driving down agriculture's share in total aid (Figure 3). There was a second rebound in 1988, again led partly by the World Bank and partly by bilateral donors such as Japan, which increased its agricultural commitments by 64 percent.

8. These include the African Development Bank, the Asian Development Bank, and the Inter-American Development Bank.


Figure 3 - Share of agriculture in total assistance by bilateral and multilateral donor agencies, 1980-90

Source: Computed from Table 1.
Note: ODF = official development finance (total assistance).

The 1988 assistance level was not maintained, and the 1980s ended with a clear downward trend in aid to agriculture, even as donors actually increased total assistance to developing countries by 5 percent between 1987 and 1990. Recent developments in project funding, personnel, and reorganization at major donor agencies suggest that this downward trend will continue in the 1990s.

Thus, after rapidly increasing in the 1970s, external assistance to agriculture in low-income countries leveled off and, in fact, declined during the 1980s, from about US$ 12 billion to $10 billion (in constant 1985 U.S. dollars). The share of agriculture in total development assistance declined from 20 percent in 1980 to 14 percent in 1990.

For many developing countries, the decline of external agricultural assistance in the first part of the 1980s was moderated to some extent by a strong U.S. dollar during that period, which increased its purchasing power on international markets. But by the end of the decade, a weakened dollar exacerbated the observed decline in the absolute volume of agricultural aid.

Less Aid but More Donors

Although the contribution of major donors declined during the 1980s, other donors entered the aid arena. Among the multilateral donors, the regional banks, some United Nations agencies, and the Organization of Petroleum Exporting Countries (OPEC) maintained or expanded their share of total agricultural assistance. The World Bank sharply cut its lending to agriculture.9 As a group, multilateral institutions reduced their agricultural assistance commitments from US$ 7 billion to less than $6 billion (in constant 1985 U.S. dollars), lowering their share of total agricultural assistance from 64 to 55 percent over the decade.

9. World Bank, "Agricultural Sector Review Paper" (World Bank, Agricultural and Rural Development Department, Washington, D.C., 1992, mimeographed).

Bilateral donors slightly increased their overall commitments to agriculture during the 1980s, from US$ 4.3 billion to $4.6 billion. Changing priorities led to major shifts among bilateral donors. The United States reduced agricultural aid to the extent that its share of total bilateral agricultural aid steadily decreased from more than 30 percent in the early 1980s to less than 15 percent in 1989/90. In 1987, Japan overtook the United States as the largest single bilateral donor to agriculture. By 1990, one-quarter of total bilateral agricultural assistance came from Japan. Italy and several smaller European countries also significantly expanded their agricultural aid programs.

Regional Distribution

A greater share of agricultural assistance was redirected to Africa during the 1980s. Africa's share of such assistance increased from 22 percent in 1980 to 31 percent in 1990.10 Given the concentration of poor countries in Africa, this may be a justifiable change in relative allocations. Over the same period, Latin America's share decreased from 24 to 15 percent. South and East Asia and the Pacific continued to capture the lion's share of all assistance for agriculture, between 40 and 50 percent, with the share slightly increasing toward the end of the decade. The Near East's share hardly changed.

10. FAO, The State of Food and Agriculture (Rome: FAO, 1991).

Subsectoral Distribution

A smaller share of total agricultural assistance was allocated to land and water development activities, including irrigation, in the second half of the 1980s.11 Cuts were also made in assistance to research, rural development initiatives, and extension. Macroeconomic reforms and agro-industrial development - activities that affect farmers only indirectly - received sizable attention, following a drop in their share in the mid-1980s. Support for structural adjustment efforts steadily increased from 1 percent in 1982 to 10 percent in 1989. The livestock, forestry, and fishery subsectors received slightly more emphasis toward the end of the 1980s.

11. FAO, State of Food and Agriculture.

While it seems appropriate that assistance be cut back to those parts of the agricultural sector that have a less than satisfactory record of success, it is worrisome that assistance to research, rural development, and extension, with a proven record of high returns, was cut back as well. Cutting this assistance may seriously affect the long-term growth potential of agriculture.