|Aid to Agriculture: Reversing the Decline - Food Policy Report (IFPRI, 1993, 24 p.)|
World Bank and Regional Development Banks
World Bank assistance to agriculture declined during the 1980s. Only in 1986 did agricultural commitments in real terms exceed their 1980 level. As World Bank total lending increased during the 1980s, the share of agricultural aid declined from 30 percent in 1980 to 19 percent by the end of the decade. Nevertheless, the Bank remains the largest single donor to agriculture, providing about 30 percent of all agricultural assistance to low-income countries in 1989/90, though at the beginning of the 1980s its share had been almost 40 percent. However, the World Bank has recently made a commitment to increase agricultural lending activities.
The World Bank changed its agricultural lending policy during the 1980s. Agricultural loans were linked to major economic reforms made by developing countries. Adjustment loans that were quickly disbursed became more common and important. During 1986-88 these loans accounted for 20.8 percent of agricultural lending; for 1989-91 they accounted for 15.6 percent. Meanwhile, lending to area development and irrigation/drainage, or project-specific lending, fell from 33.8 percent of all agricultural assistance in 1980-89 to 20.8 percent in 1989-91.12 As the need for structural adjustment loans increased during the 1980s, agricultural projects lost out.
12. World Bank, "Agricultural Sector Review Paper."
Various other factors led to the downturn in agricultural lending by the World Bank.13 Pessimistic price projections for agricultural commodities at the beginning of the 1980s made a number of agricultural investment projects suddenly economically nonviable and less attractive. Relative to other sectors, agricultural projects required more expert time for project preparation, supervision, and follow-up, and constraints on staff resources led to slow loan disbursements. Poor performance records for some agricultural projects, in the absence of strong institutions to implement them, diminished incentives to pursue agricultural projects, particularly in Africa. Concerns over macroeconomic policy and disagreements with local governments over policy and institutional reform delayed project formulation in many countries.
13. M. Lipton and R. Paarlberg, The Role of the World Bank in Agricultural Development in the 1990s (Washington, D.C.: IFPRI, 1990).
Combined, the Asian Development Bank (AsDB), the African Development Bank (AfDB), and the Inter-American Development Bank (IADB) provided about 15 percent of total agricultural assistance to developing countries during the 1980s.
During most of the 1980s, the AsDB generally kept its agricultural lending at or slightly above the 1980 level of US$ 620 million (in constant 1985 U.S. dollars).14 As total AsDB lending increased by more than 60 percent during the decade, the share of agriculture fell from around 34 percent during the early and mid-1980s to 25 percent in 1989, and up again to 31 percent in 1990.
14. Asian Development Bank, Annual Report (Manila, various years).
The AfDB significantly increased its lending to agriculture from around US$ 240 million in the early 1980s to almost $600 million in 1990.15 This increase coincided with an expansion of overall lending by AfDB during the decade. Consequently, the share of agriculture in total lending, which had reached about 39 percent in the mid-1980s, stabilized at only 20 percent during 1988-90.
15. African Development Bank, Annual Report (Abidjan, various years).
The IADB lent as much as US$ 809 million in 1980 and US$ 892 million in 1984 to agriculture, but since then its commitments have decreased substantially to $263 million in 1990.16 Relative to total lending, which varied widely and plunged deeply from 1987 to 1989, the absolute decrease in agricultural lending appears less striking, and agriculture's share in total lending remains between 17 and 23 percent.
16. Inter-American Development Bank, Annual Report (Washington, D.C., various years).
United Nations Agencies and the CGIAR
The International Fund for Agricultural Development (IFAD), which deals only with agriculture, reduced its assistance from about US$ 600 million in 1980 to about $130 million in 1986, and only recently has there been an upswing to about $300 million in 1990. The United Nations Development Programme (UNDP) substantially reduced its agricultural activities between 1980 and 1984, stabilizing at around 60 percent of its 1980 level of about $260 million for the rest of the decade. FAO increased its expenditures during the decade, from about $150 million to about $200 million. Funding for the Consultative Group on International Agricultural Research (CGIAR), a worldwide network of research institutions that seek to improve the productivity of agriculture, forestry, and fisheries, expanded slightly during the 1980s as the CGIAR obtained responsibilities in new areas, but it decreased in real terms in the early 1990s.
Even taken together, the UN agencies that specialize in agriculture (FAO, IFAD, and World Food Programme [WFP]) do not command a substantial share of aid to agriculture. Because of their expertise, however, they should be in a position to play an appropriate strategic role in support of agricultural development assistance. Yet, this role, urgently needed in the 1980s, was impaired by competition between some of the institutions and by lack of coordination.
With its decade-long interest in development assistance, Japan is one of the few donors to have increased funds earmarked for agricultural projects. Unlike several bilateral donors, Japan kept its commitments (in real terms) to agriculture above its 1980 level for most of the decade and has maintained a share of agriculture in total aid of 10-12 percent. In the early 1990s, Japan emerged as the leading bilateral donor to the agricultural sector in low-income countries and is expected to continue its agricultural assistance at an unchanged or even increased level.
Assistance by the United States to agriculture in low-income countries has been declining since 1980, when U.S. commitments were at their highest.17 The decline accelerated in 1988, and by 1990, agricultural commitments were one-half those of 1988 and about one-quarter those of 1980. From 20 percent of total U.S. aid in 1980, agriculture accounted for only 11.3 percent in 1985 and 5.2 percent in 1990. USAID's agricultural assistance fell from US$ 1,251 million in 1985 to $815 million in 1990 (in nominal dollars). Moreover, agriculture represented over 50 percent of total USAID development assistance in 1982 but only 30 percent in 1991.18
17. Data for USAID are not comparable over time. In 1988, USAID undertook changes in attributing specific projects to sectors. This had somewhat of a downward effect on total figures for agriculture. Even if the agricultural assistance in 1990 may be somewhat underestimated, there certainly was a decrease in real terms.
18. Board for International Food and Agricultural Development, "FY-93 Report of the BIFAD Budget Panel" (BIFAD, Washington, D.C., 1991, mimeographed).
There are several factors underlying this trend. There is a perceived lack of leadership and interest in agricultural issues within USAID. No agency-wide strategy paper or policy guideline exists to address priorities and critical issues in agriculture. Agricultural funding from the more long-term-oriented Development Assistance Fund (including the Development for Africa Fund) has rapidly decreased, from 54 percent in 1980 to 33 percent in 1990. In 1991/92 about 40 percent of the agriculture budget came from the Economic Support Fund and the Special Activities Initiative, which are short-term budget-support facilities for politically important troubled countries.19 This shift in funding sources has made agricultural aid more volatile and less efficient.
19. BIFAD, "Report of Budget Panel."
German aid to agriculture has fallen since 1987, and was lower in 1990 than in 1980. Funds for agricultural technical assistance (crop production, livestock, agricultural services) further decreased between 1990 and 1992 by 17 percent.
The reduced aid allocations to agriculture are partly the result of decreased emphasis on integrated rural development projects with strong agriculture components, which are being replaced by administrative support projects to promote regional planning. Similarly, capacity-building projects, such as increased support for university education, are supplanting some direct investments in rural areas and agriculture.20
20. H-W. von Haugwitz, "Haben die Frung der Landwirtschaft und der Llichen Regionalentwicklung die Prioritverloren?" Entwicklung + Llicher Raum 2, 1990.
Unlike assistance from some other donors, bilateral assistance channeled through the European Community continues to emphasize agriculture and rural development. The share of projects supporting rural production in the ACP countries21 increased from 30 percent in 1980-85 to 40 percent in 1985-89. At the same time, there was a significant increase in funding of integrated rural development at the expense of more specific support to crop and livestock production. It appears that the strong focus on assistance for rural areas and the food sector will continue during 1990-95.
21. African, Caribbean, and Pacific countries that are supported under the Lomonvention.