World Bank calls for caution in agric financing


THE World Bank says government’s support to agriculture through quasi-fiscal activities (QFAs) are exerting significant pressures to the fiscus.

The bank said last week that despite the interventions, including to financial institutions, food insecurity in Zimbabwe remained.

“Significant and extensive support to the agriculture sector imposed considerable pressures on macroeconomic policy,” the World Bank said in a report titled Zimbabwe Country Economic Memorandum released last week.

“A large proportion of support to the agriculture sector was financed by QFAs and an increase in contingent liabilities,” the World Bank added.

“This support took many forms—subsidies to farmers for purchases by the Grain Marketing Board (GMB), the provision of inputs (fertilisers and seeds) to maize contract farmers and for free to vulnerable households, the provision of equipment, cross-subsidised electricity, the capitalisation of Agribank, the bailout of banks with high exposure to agriculture (in 2015), guarantees to banks (since 2020), and farmers’ compensation,—all of which added US$3,5 billion to public debt,” the World Bank added.

The bank said agricultural spending in the budget was subject to significant spending overruns and limited transparency on allocative efficiency, especially of command agriculture.

“However, despite significant public spending on agriculture, food insecurity remains high, while agricultural productivity is one of the lowest in the region,” the World Bank said.

Over the years, government has issued several debt securities, mainly through Treasury Bills and central bank bonds.

Government has also made several subsidies to make farming inputs cheaper for farmers.

Among several schemes used to fund agriculture was the command agriculture programme.

But there have been fears that some top government officials have benefitted from the scheme at the expense of needy farmers.

Pact, a global civic society organisation (CSO), last week said looters exercised their power to circumvent procurement protocols, oversight mechanisms and due diligence laws under the programme.

Parliament last year also expressed serious concerns in the way the command agriculture programme had been handled.

“Corrupt public procurement and abuse of State subsidies have undermined Command Agriculture programme’s ostensible efforts to make Zimbabwe’s agriculture system more productive, equitable, and competitive,” the report said, noting that Pact’s analysis focused on the programme’s operations before 2019.

“While important reforms have occurred since, Pact identified weaknesses within the governance of the Command Agriculture programme in which public and private actors colluded to move as much money as possible into their own pockets and distributed funds in a way that flouted parliamentary oversight and utilised opaque financing arrangements,” the report added.

“Command agriculture programme’s poorly managed and targeted subsidies demonstrate how Zimbabwe’s agriculture sector has been vulnerable to powerful actors’ abilities to circumvent procurement protocols, oversight mechanisms and due diligence laws,” Pact said.

The CSO added that said public procurement systems and safeguards were routinely ignored at all stages of the programme, providing ample opportunities for abuse.


Related Topics