Samuel Benin POLICY SEMINAR Virtual Event - The political economy of COVID-19: Impacts on agriculture and food policies OCT 22, 2020 - 08:30 AM TO 10:00 AM EDT

1. Samuel Benin
Deputy Division Director, Africa Regional Office, IFPRI
Virtual event on:
The political economy of COVID-19:
Impacts on agriculture and food policies
October 22, 2020
Impact of COVID-19 on the fiscal space
for agricultural transformation in Africa

2. Fiscal policies in response to the Covid-19 pandemic in Africa
52
15
20
35
18
6
13
22 18
3
37
15 16
4
0
11
22
33
44
55
Health
Agriculture
Other
Taxes,licenses,etc.
Loans
Tax-deductible
donations
Informalsubsector
Importtax
VAT
Prices
Vulnerable
Laidoff
Incometax/Utilities
Pension
Sector Businesses/Private
sector
Markets Households
Fig 1. Covid-19 response fiscal policies: targets and
instruments (number of African countries)
Not stated; 63%Reprioritize (incl.
defer debt); 23%
Contingency
fund; 8%
Loans; 6%
Fig 2. Sources of financing Covid-19
response policies (% of African countries)
 African countries using different fiscal policies to deal with
the health effects and socioeconomic impacts (Fig 1).
 The cost of the policies is estimated at 1% of GDP ( US$32
billion) for African countries.
 While few of the countries have stated how these will be
financed (Fig 2); the fiscal space seems limited (Fig 3).
0
2
4
6
8
10
12
0
2
4
6
8
10
12
Ethiopia
Egypt
Ghana
Guinea-Bissau
Mauritius
Senegal
SouthAfrica
Tunisia
LIDCs
EMs
G20
AEs
Fig 3. Fiscal space for Covid-19 response
policies, selected African countries and
regional averages (% of GDP)
Additional spending
and forgone revenue
Loans, equities, and
guarantees
Data sources: Based on IMF covid-19 policy tracker and emergency financial assistance by
region (IMF 2000 https://www.imf.org/en/Topics/imf-and-covid19)

3. Concern for CAADP and Africa’s agricultural transformation
 Fiscal space in Africa improved in 2000-2007; but has shrunk since the
global financial crisis (Fig 4).
 Interest payments has been rising rapidly since the global financial
crisis (6%/yr) and squeezing public investment in especially agriculture
and infrastructure (Fig 5).
 Spending on agriculture is already too low (< 1% of GDP/yr).
CAADP = Comprehensive Africa Agriculture Development Programme
Data sources: Based on GFS (IMF 2020), SPEED (IFPRI 2020), WDI (World Bank 2020), Kose et al.
(2020: http://www.worldbank.org/en/research/brief/fiscal-space), and BR reports (AUC 2018, 2020).
57
92 79 92 94 100
43
8 21 8 6
0
1st BR 2nd BR 1st BR 2nd BR 1st BR 2nd BR
Overall Government
agriculture
expenditure
(indicator 2.1i)
Enhancing
agricultural
investment
(theme 2)
Fig 6: CAADP Biennial Review (BR):
progress in achieving goals of the
Malabo Declaration (% of countries)
Not-on-track
On track
 Will further retard progress in CAADP:
 Fewer countries on-track overall
 None on-track for the targets on
enhancing agricultural investment
1
6
11
16
21
0
20
40
60
80
2000 2003 2006 2009 2012 2015 2018
Index
%ofGDP
Fig 4: Fiscal space since 2000
(average for Africa)
General government gross debt, % of GDP
Total external debt stocks, % of GDP
Long-term debt ratings, index from 1-21
2.1 3.0 1.9
5.7
6.4
6.4
3.0
2.0 2.5
11.1 12.0 14.1
2000-2006 2007-2009 2010-2017
Fig 5: Government
expenditure (% of GDP)
Other functions Interest
Social Infrastructure, etc.
Agriculture

4. Increasing fiscal space and building back better
 Increasing efficiency spending. Critical
investments (e.g. infrastructure) to:
 Mitigate or reduce impacts of shocks
 Facilitate more effective and efficient
responses to shocks
 Increasing ODA and refocusing its purpose (Fig 7)
 Broadening the revenue base and increasing
efficiency in revenue collection:
 Including more of informal sector for greater
growth prospects
 More progressive taxes
 Institutionalizing fiscal rules and stabilization
funds for flexibility in managing shocks
 Using medium-term expenditure frameworks for
credibility and transparency in budgeting
Data sources: Based on GFS (IMF 2020), CRS (OECD 2020), and
WDI (World Bank 2020)
0
3
6
9
12
0
2
4
6
8
2002
2004
2006
2008
2010
2012
2014
2016
2018
%oftotalODA
%ofGDP
Fig 7: ODA to Africa
Other ODA,
% of GDP
Emergency
response
ODA, % of
GDP
Emergency
response
ODA, % of
total ODA