Nepal Agriculture Public Expenditure Review: Successes and Challenges in Aligning Impact and Spending Krishna Prasad Pant, Nepal Government Mona Sur, The.

Nepal Agriculture Public Expenditure Review: Successes and Challenges in

Aligning Impact and Spending

Krishna Prasad Pant, Nepal GovernmentMona Sur, The World Bank

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Dad eld hura

KalikotAchham

Mu st angKanch anpur Dailekh

Kailali

Jajarkot

Surkhet

Rukum

Manang

Myangd iBardiya

Gorkha

Salyan

Bag lung KaskiRolpaLamjung

Banke

Parbat

Pyuth anRasuwa

Dhading

Dang

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Sindhupalchowk

Dolkha

TanahunArghakhanch i

Solu khumbu

NuwakotPalpa

Tapleju ng

Sankhu wasabha

Nawalparasi ChitwanKapilb astu

Rupendehi

Kathmandu

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Bhaktapur

Makawanpur

Lalitpur

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SaptariMo rangSun sari

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NEPAL

China

India

Kathmandu

Agriculture in Nepal• Employ 2/3 of labor force• Involves 3.36 million households• Average land holding 0.79 ha• Contributes 32% of GDP

% Contribution to the AGDP

1. Crops 66.16

2. Livestock 25.68

3. Forestry 8.07

4. Fisheries (inland) 0.09

GDP growth and agriculture

-6

-4

-2

0

2

4

6

8

2002 2003 2004 2005 2006 2007 2008

Fiscal year ending

%

Agriculture IndustryGDP (at producer's price)

Budget Process

Ministry of Agriculture and Cooperatives

National Planning Commission

Ministry of Finance

Dept. Agri

Dept. Livestock

Dept. Food Tech

Dept. Coop

Program Directors

Program Directors

Program Directors

Program Directors

Regional level Offices (Agri., Livestock, Food Tech, Coop)

District Agencies

Allocation of the budget higher than ceiling depends on

• Strength of the proposed program• Political favor of the Ministers• Favor given by the Ministry of Agriculture

while negotiation• Strength and lobby of the Departments• Strength, lobby and personal influence of

the Program Director• Intention and ability of the program director

to consume the fund

Recurrent expenditure in agriculture (nominal)

0

500

1,000

1,500

2,000

2,500

3,000

2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07

Rs

mill

ion

AgricultureIrrigationForest

Capital expenditure in agriculture (nominal)

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07

Rs

mill

ion

AgricultureIrrigationForest

Government expenditures (nominal)

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

Rs

bill

ion

Total

Agriculture

Expenditure in agriculture as percent of total expenditure

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

1990

/91

1991

/92

1992

/93

1993

/94

1994

/95

1995

/96

1996

/97

1997

/98

1998

/99

1999

/00

2000

/01

2001

/02

2002

/03

2003

/04

2004

/05

2005

/06

2006

/07

Per

cen

t

Government expenditure

ODA

Synthesis• Nobody denies the role of agriculture in Nepalese

economy• Public expenditure in agriculture is insufficient• Allocation of expenditure to different sub-sectors not

based on analysis, but on hunch and power play• Recurrent public expenditure in agriculture is increasing

faster than the capital expenditure• Expenditure in agriculture is not increasing as it increased

in other sectors• ODA is not in favor of agriculture• DFID-ARD Analysis of Public Expenditures in

Agriculture derives some hard facts.

Nepal - Public Expenditures by Sector, 1999-2003

Public expenditures on Ag/Ag GDP= 4%

0.7%1.9%

2.9%3.8%

0%

2%

4%

6%

8%

10%

12%

14%

16%

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Ext

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Pay

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Inte

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Mis

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Def

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Po

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Ele

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Ro

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Lo

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Dev

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Hea

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Wat

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Lan

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Su

rvey

Impact of Agricultural Public Expenditures on Household Welfare & Agricultural Production

NE: No Effect; NA: Not Applicable; IV: Instrumental variable; SE: Simultaneous equations

Outcome Variable Data Methodology Irrigation Agriculture Roads

Maize value District level IV NE 14.85% 4.39%

Rice value District level IV NE 13.84% 6.34%

Wheat value District level IV NE NE 5.17%

Vegetables value District level IV NE NE NE

Plot values Cross-sectional household data Jacoby 16.62% - 36.86% NA 26.41% - 60.78%

Consumption per capita Panel data IV 3.92% 0.92% 6.43%Agricultural Income per capita Panel data IV NE NE NEConsumption per capita

Cross-sectional household data SE 9.61% 1.36 - 2.98% 30.25%