PLUNGER LIFT

URT (2002) indicates that agricultural sector recorded a growth rate of 4.0 percent in 2007 compared to 4.5 percent in 2000. Recent statistics by MoFEA (2009) indicates that the sector accounts for about 24 percent of the GDP, 17 percent of exports and employs about 80 percent of the rural population. According to Mlambiti and Isinika (1999) and the World Bank (1994), real growth in agriculture parallel to GDP growth from 1966 through 1992 with agriculture averaging 2.8 percent and GDP growing at 2.7 percent per annum. Agricultural growth was 45 percent lower than the GDP rate in 1966 to 1975 and 65 percent lower in 1976-80. Agriculture began to recover in the early 1980s but GDP growth was still negative. From the 1983/94 period, agricultural growth increased relatively faster enhancing to overall growth of GDP and hence per capital income. With the onset of the agricultural-led reform programme in the mid 1980s the sector’s share in the GDP started to pick up from 42 percent in 1983 to 48 percent in 1998 at 1992 prices. Data from the World Bank (2001a) indicates the indices of agricultural production for selected preferred and drought staples, as well as industrial crops for the period 1965-92 taking the year 1980 as the base.

According to the Ministry of Finance (2002) performance of the agricultural sector has not been impressive in recent years. Agricultural GDP has grown at 3.3 percent per year since 1985, the six main food crops at 3.5 percent and export crops at 5.4 percent per year. Other components of agriculture such as livestock and forestry have recorded lower growth rates. The Ministry wonders specifically when considering that the overall GDP growth target for halving abject poverty by 2015 is in the range of 6-7 percent, this performance falls short of the needed growth. URT (2001) reports that between 1990 and 1993, the annual growth rate of the sector declined drastically from 6.7 percent to mere 0.4 percent before rising to 6.6 percent by 1995. In 1996, the annual growth rate was down to 4.6 percent and it declined further in 1998 to 2.3 percent. The sector’s growth rate made a modest improvement to 4.1 percent in 1999. URT (2002b) indicates that another unsatisfactory performance of the sector is further indicated in 1999, its share of the GDP was Tanzania Shillings 31.7 billion, equivalent to only 44.3 percent of the overall GDP of Tanzania Shillings 71.5 billion. Agricultural GDP declined in real terms between 1985 and 1998 as its dominant components namely crops and livestock grew at 2.2 percent lower that the population growth rate of 2.8 percent.

Overall performance of agricultural sector in post-reform period according to World Bank (2001) estimated that agricultural GDP grew at 3.5 percent per year over1985-90 and at 3.3 percent per year over 1990-98, thus recording an average rate of 3.3 during the entire period. Observation of the Bank in the early period indicates that food crop production grew quickly in response to domestic market liberalization while export crop production remained stagnant. Since 1990, food crop production growth has slowed down to approximately the rate lower than the rate of population growth while export crops posted an impressive 7.7 percent rate of growth.

One of the economic policies affecting agriculture in Tanzania is public expenditure on agriculture (MoFEA, 2009). The way government finances the agricultural sector through its annual budget indicates that the real value of budget allocations to the Ministry of Agriculture and Co-operatives (MAC) currently the Ministry of Agriculture and Food Security (MAFS) since the Fiscal Year 1990/91 has been inadequate. For example, the real allocation in 1997/98 is about 33 percent of the average of annual value in the 1991/92 to 1993/94 periods. There is some recovery of the agricultural budget in the 1998/99 budget and estimated 2001/02 budget. Even so, the 1999/00 budget was almost 33 percent lower, in real terms than the average of the allocations in the first three years of the period. The declining share of research and development is worrisome for future productivity growth in agriculture. This is because of the decline from 25 percent to 30 percent in the early years to an estimated 12 percent in the 1999-2000 budget. The agricultural sector budget trends indicated by MoFEA (2009) indicate that in the 2008/09 and 2009/10 budgets the sector being an engine of the economy, received relatively smaller budget allocation. MoFEA (2009) further indicates that the sector received 3.2 and 5.0 percent also 5.4 and 11.7 percent for recurrent and development budgets for 2008/09 and 2009/10 respectively. This allocation for agricultural sector was 4.0 percent and 7.0 percent of the total public budget for the year 2008/09 and 2009/10 respectively. In this regard, public expenditure on agriculture is one of the crucial areas affecting agriculture in Tanzania.

Furthermore, the findings in Table 2.5 indicate that there is a sharp drop in the development budget as a share of total in the 1990s. The local development budget drastically declined from an average of 17 percent of the sector expenditures in 1990/92 up to only 2 percent in 1996/98. External financing for the agricultural sector is incorporated in the development budget, and has also decreased significantly since 1994/95. The share of external support to budget of MAC declined from 60 to between 10 and 20 percent. This implies an even larger drop in absolute funding since the total budget for MAC declines absolutely. Therefore, the falling share of government spending on agricultural sector activities exacerbates the trend as illustrated in Table 2.5.

Table112.5: Budget Allocations to Agricultural Sector from 1990/91 to 1999/00 in Tanzania in % Budget Item 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 Administration 10 10 10 5 4 9 13 29 32 Crop Development 47 39 44 47 55 49 48 34 36 Research & Development 25 34 22 30 18 10 15 15 12 Co-operative Development 6 5 6 3 4 5 9 4 4 Food Security/grain reserve) 0 0 7 5 6 12 11 3 3 Livestock Development 12 12 12 9 13 16 4 15 13 TOTAL 100 100 100 100 100 100 100 100 100

Total Vote (Mil. Tsh) 64,432 71,001 62,696 63,252 40,161 26,420 21,829 37,047 44,421

Source: Ministry of Agriculture and Food Security (2002) Exchange rate: 1 US Dollar=Tshs 876 Note: (i) Allocation by sector indicates only recurrent expenditure

(ii) Total Vote includes recurrent and development expenditures

Having cited some examples on how the government in Tanzania supports agriculture through its budget, it is also important to compare with other countries. The various types and forms of support to agriculture enable the governments to intervene throughout the agricultural chain, from research activities right down to the consumption stage. Intervention takes in spheres such as development of agricultural techniques, disease control, structural improvements, price and income support, improving the processing system and marketing as well as consumption aid. Table 2.6 indicates budget expenditures of different countries and regions of the world showing how much in financial support to the agricultural sector.

Table122.6: Public Expenditure Related to the Implementation of Agricultural Policy

Country Agric I

Mil ECU % MilECU %Agric II Mil ECU %Agric III Mil ECU %Agric IV Mil ECU %Agric V

USA 814.0 4.2 542.2 8.2 1607.8 8.3 1,0581.1 54.6 3,548.7 22.3 Canada 173.5 10.6 66.6 4.1 151 9.3 243.6 14.9 847.7 16.6 Australia 217.0 46.4 84.5 18.1 28.0 6.0 32.8 7.0 101.4 11.9 New Zealand 49.7 19.9 44.7 18.0 71.5 28.7 0.2 0.1 83.1 26.2 Japan 340.3 3.3 36.3 0.4 3,861.3 37.9 163.2 1.6 4465.8 24.1 Austria 13.9 2.9 _ _ 125.6 25.9 9.0 1.9 335.9 3.4 EEC 1,268.5 6.0 454.8 2.2 5,125.2 24.2 2,163.9 10.2 12,008.9 30.0 Source: OECD (2007) KEY

Agric.I Research, Training and Advisory Services Agric. II Inspection and Disease Control Services Agric III Rationalisation of Production, Improvement of

Structures and Rural Development

Agric IV Processing, Marketing and Consumer Aid Agric V Price and Income Support