Role of Agriculture in Economic Development and Poverty ...

Role of Agriculture in Economic Development and Poverty ...

BY Ian Kumwenda Agricultural and Natural Resources Management Consortium Background Agriculture has a multifunctional role to play in economies Apart from providing food and fibre, agriculture is the main source of economic growth Malawi and most of sub Saharan Africa in Growth originating from agriculture is known to be twice as effective in reducing poverty as GDP growth originating from outside agriculture (World Bank, 2008)

Background continued These attributes make agricultural development a vital means of achieving growth & poverty reduction This presentation will highlight the following: Trends in economic dev in Malawi and agric investment

Awareness and commitment to using agriculture for economic development Key lessons in using agriculture for growth and poverty reduction Trends in economic growth and poverty reduction years registering ve growth rates such as 1980, 1992, & 1994 & in the early 2000s are characterized by low & erratic rainfall

Confirms growth affected by climatic Trends contd Recent statistics show improved performance Growth rates of 8.6% (2007), 9.7% (2008) and projected 7.9% in 2009 Attributed to good weather conditions & the improved access to farm inputs Overall poverty rate unchanged between 1998 (52.4%)

has remained the (54.1%) and 2005 Investment in Agriculture Several agriculture development programmes have been implemented Starter pack programme 1997-1999 Target Input Programme between 2000 & 2004, Input Subsidy from 2005 to date The main aim of these programmes has been to improve productivity of smallholder agriculture to achieve food security and reduce poverty Investment in Agriculture

Figure 3: Annual growth in GDP from 2000 - 2007 Evidence of contribution The annual economic growth in national income appears to respond to increase in agriculture investment Investment in agriculture has contributed to this good economic performance in two ways the direct effect on access to seed & fertilizer has increased production & resulted in growth of agriculture GDP. Inflation & public investment in agriculture Since

2006 overall rate inflation has been going down due to continued fall in food prices Interest rates & public investment in agriculture Impact of investment on poverty reduction The recent poverty assessment was in 2005 that put the proportion of poor at 52.4%.

However, several direct & indirect benefits accrue to beneficiaries of the program & are more likely to contribute income/reduction in poverty to increased Awareness and commitment to using agriculture Policy framework Economic growth & poverty reduction in Malawi is guided by the Malawi Growth &Development Strategy (MGDS) for

the next five years, from 2006/07 to 2010/2011 fiscal years. The growth will emanate from growth in agriculture, manufacturing, mining as well as service sectors. Agriculture is recognized as a priority sector but only as far as provision of food and not as a lead sector for eonomic growth. Civil society Civil society advocacy & contribution to

economic management in Malawi is spearheaded by the Malawi Economic Justice Network (MEJN). Agriculture shall be a priority for government budgeting in order to achieve food security In terms of economic growth & poverty reduction MEJN emphasizes on prudent management of macro-economic variables ( 2004, 2009) This aims at facilitating the development

manufacturing sector as a lead sector for growth. of the National Resource Allocation (Budget) Agricultural sector was treated as a number 3 priority in late 1990s & early 2000s & entails research & extension. The recent years show increasing allocation to the agriculture sector. The major beneficiary of

the increased agriculture expenditure in the latter years is the input price subsidy programme. Table 3: Government Priorities based on Budget Statements Year 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 Priority 1 Education

Education Education Education Education Health Education Education Education Priority 2 Health Health Health Health Health Education Health Health Health 2005/06

Information & Agriculture Tourism 2006/07 Transport Agriculture Infrastructure Priority 3 Agriculture Agriculture Agriculture Agriculture Agriculture Water & Sanitation Priority 4 Priority 5 Roads

Roads Roads Roads Water and Sanitation Community Services Agriculture Agriculture Water and Sanitation Roads Agriculture Agriculture Water and Sanitation

Transport Trade & Private Sector Water and Development Sanitation Energy Rural Development Roads Industry Science & Technology Awareness contd Individual nations pledged under the CAADP to allocate a minimum of 10% of total national budget to the agriculture sector. This is recognition of the fact that increasing

investments necessary in for the agricultural sector the sector contribute to is

substantially to economic growth & meeting the first millennium development goal. However, increase in expenditure is due to the subsidy but other crucial areas such as research and extension receive little funding This lack of a sustainable approach to agriculture development seems to suggest that agriculture is still being used to meet the short term food requirements of the country and not long term development needs . Conclusion There are agriculture

direct & indirect growth/investment effects on of national income, inflation, interest rates, exchange rates & other macro economic variables However, not all investment in agriculture sector will lead to these positive trends; caution must exercised in selecting the strategy for

channeling investment in agriculture Conclusion contd Little emphasis has been put on agriculture as a lead sector for growth & poverty reduction by both the public policy framework However, in terms national budgets, agriculture now a priority receiving the largest share but it is mostly expenditure recurrent & not

development RECOMMENDATIONS Need to investment in less vulnerable means of production such as irrigation. Dialogue is still necessary to achieve the full recognition of agriculture not only as a vital sector in economic development but potential to be the lead sector for growth


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