Overview of government spending on food and agriculture

Actual agriculture-specific expenditures* in Ethiopia from 2009-2021 stood at an average of USD 1.1 billion, with the lowest of the period being USD 783 million in 2009, the highest being around USD 1.7 billion in 2019. 

In the last 5 years (2017-2021), budgeted amounts stood at an average of around USD 1.3 billion, while actual spending stood at around USD 1.5 billion, implying a budget execution rate of 112%.

Ethiopia’s agriculture expenditure progress declined over from 2009 to 2021 and was below the CAADP 10% target in the last five years. Between 2009 and 2021, the share of agriculture spending over total public expenditure ranged from the lowest 8.3% in 2018 and the highest 13.3% in 2010, with an annual average over the period of 10.3%. 

Recently, over two-thirds (78%) of all expenditures on food agriculture came from the government, while the rest (22%) was financed by donors.  

On average, in the same timeframe, 87% of actual agriculture-specific expenditures were directed towards the general support to the sector (i.e. public goods such as research, extension or infrastructure), and the reminder is spent in support of producers mainly in form of input subsidies.

Public expenditure on nutrition

The team is also carrying out a budget analysis with Policy Studies Institute to develop, test, and deploy a scalable approach to monitor public expenditure on nutrition as part of a policy reform negotiation process with national stakeholders. The focus is for policy change to make nutritious food more affordable in Ethiopia, while safeguarding livelihoods and ensuring agrifood systems deliver on other inclusive agricultural transformation outcomes such as increasing agrifood GDP, reducing poverty, and creating off-farm job in rural areas.

*in USD nominal terms

The commodities considered for the price incentive analysis cover a diverse range of crops, including the staple cereal teff, wheat, as well as globally recognized export commodities like cattle, coffee, pulses such as haricot beans, and sesame.

We find that commodities were protected from external competition, like teff (due to limited production in other countries) or wheat (regulated by government policies restricting imports), may demonstrate a deviation from a zero rate of nominal protection, either negatively or positively, over an extended period. Conversely, highly traded commodities generally maintain a stable nominal rate of protection (NRP) without significant deviation from zero. The exception is cattle, which faces complex challenges in the value chain necessitating government intervention to ensure optimal benefits for producers to effectively benefit from cattle’s current potential.

• Cattle producers encountered negative price incentives averaging -22% throughout the period under review, but with a gradual NRP improvement, and have been positive since 2019. These disincentives can be attributed to market power and concentration at the intermediate and export markets. A handful of large-scale traders operate in each area and have permanent buyers, usually abattoirs and/or live animal exporters.
• Teff producers experienced a notable transition from strongly negative to strongly positive price incentives around 2012 and has remained positive since then. Specifically, the NRP at farm gate averaged -25% before 2011, skyrocketing to an average of 100% from 2012 to 2021.
• Wheat producers faced negative incentives with the NRP averaging -15% between 2005 and 2011, but shifting to positive incentives at 28% from 2012 to 2021.
• Coffee producers saw price incentives fluctuating, reflecting the volatile coffee price and policy environment. Overall, incentives ranged from -30% to 28% for farmers, and from -15% to 28% for traders between 2005 and 2021. 
  
• Sesame producers and traders benefitted from positive price incentives averaging 18% and 28%, respectively. The NRP using the official exchange rate for haricot beans remained consistently positive for both producers and traders, averaging 21% at the farm gate during the observed period.

MAFAP has been working with the  Ministry of Agriculture and the  Ministry of Planning and Development to present several spending and investment scenarios that would raise agrifood GDP, reduce poverty reduction, and create more off-farm jobs.

MAFAP is working alongside the FAO’s Food and Nutrition Division and the Ethiopian Public Health Institute on the Value-Added Impact Area (VAIA) initiative to calculate the least-cost healthy diets for Ethiopian subnational groups. The MAFAP team will use the calculations and data to carry out a policy analysis to better understand how to optimize public expenditure on food and agriculture in order to increase access to healthy diets for millions for Ethiopians. Read more here. 

The MAFAP programme has supported Ethiopia to bring about a policy reform on Agro-Commmodity Procurement Zones (ACPZ).

We carried out an investment gap analysis for Ethiopia’s Agro-Commmodity Procurement Zones (ACPZ), outlining investments and value chains with the highest rates of return, such as irrigation for wheat, and rural and feeder roads to improve productivity of milk and red meat.