Government.expenditure, structural adjustment and the performance of agricultural sector in Kenya

Abstract

Only less than a fifth of Kenya's total land is suitable for agricultural production. This implies that output in the agricultural sector can only be increased through among others land use intensification. Intensification implies use of improved farm inputs such as high yielding crop variety seeds, fertilizer, farm machinery, better husbandry practices etc. These inputs are not available on the farm and a good number of farmers are not able to purchase J;them due to financial limitations or constraints. Any significant agricultural output is not possible without smallholder since they produce 7S % of the agricultural output. These farms as mentioned above lack complementary farm inputs due to limited financial resources. In addition the necessary infrastructure for raising agricultural productivity are in nature public goods. Adequate and reI iab Ie provisi on of these in pu rs rcq II ire increased govern men t expenditure. This is one of the major strategy being emphasized to speed up agricultural development in Kenya's agricultural sector. Under Structural Adjustment policies there are a number of strategies intended for improving the performance of the sector such as rationalizing budget allocations and expenditures, enhancing price incentives, increase access to credit by smallholder etc ..•• 9ne of the setbacks is inadequate and inefficiency use of government expenditure and in the application of SAPs to the sector. The objective of this study is explore and estimate the impact of government expenditure and SAPs adjustment on the performance of agricultural sector with a view to proposing measures that can help improve the agricultural sector performance. Time Series data covering the period 1970 to 1990 was analyzed by ordinary least squares regression method.

The findings of the study shows that development expenditure, recurrent expenditure, infrastructure, active population in agriculture and structural adjustment policies are important determinants of the agricultural sector performance. The study also found out that instability in government expenditure have adverse effect on agricultural performance. 'lfAgricultural performance can be improved through use of government expenditure in the provision of farm inputs eg improved seeds, support services, establishing budgets and expenditure control systems with a view to raising efficiency in spending, directing budgetary savings from cutbacks in public and resources obtained through sectoral reforms in the rural infrastructure, extension services and agricultural research, improving the structure and quality of investment programmes, a review of existing portfolio emphasising priority projects that can be implemented within the limits of the available resources and limiting . instability in government expenditure so that financial analysts take both recurrent and development priority by category, plan and manage allocation by them. In addition to the above stated measures, raising the ratio of non-salary operating . costs to salary operating expenditures, and support of investment by the adjustment policies can help raise the elasticity of the agricultural output supply particularly in the smallholder sector.