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Government expenditure on agriculture and rural development

Governments have a crucial role in catalyzing investment by farmers and other private investors and channeling such activity towards socially desirable outcomes. The balance of roles between governments and farmers and other businesses will vary depending on the level of development of the sector, but all countries require both public and private investment in agriculture and rural development, including environmental protection. These relationships are highlighted below.

The public sector and its relation to other institutional sectors of the economy

General government sector

Nonfinancial corporations sector

Financial corporations sector

Hosueholds sector

Nonprofit instiutions serving households sector

Public

Public

Public

Private

Private

Private

Private

Source: IMF Government Finance Statistics Manual. In the GFS system the General Government Sector may be further articulated into three levels: central; state, provincial, or regional; and local.

Owing to these intersectoral relationships, public investments in and for agriculture are complementary to private investments. Governments (and more broadly, the combined public sector) need to ensure that scarce public funds are targeted towards ensuring and generating an enabling environment that is conducive for investments with high returns in terms of agricultural growth and poverty alleviation.

FAO statistics is taking a leading role in establishing a comprehensive tracking and monitoring system for compiling indicators of public sector outlays – initially focusing on the national budget - allocated to agriculture and rural development.

Governments have two broad economic responsibilities: to assume responsibility for the provision of selected goods and services to the community on a nonmarket basis and to redistribute income and wealth by means of transfer payments. Government expenditure refers to all non-repayable outlays, whether recurrent (capital (the net acquisition of nonfinancial assets) or recurrent, made by general government units. Expenditures are shown by function or purpose at different levels of government administration-central Government; State, region or province; and local governments.

Percentage expenditure in agriculture

Source: FAOSTAT

The data refer to the share of expenditure on agriculture, forestry, fishery and hunting as a percentage of total outlays (expense plus the net acquisition of nonfinancial assets=expenditure).The data cover 2000 to the most recent year available and have been compiled based on the standard Classification of the Functions of Government (COFOG). COFOG is a system used to identify the socio-economic objectives of current transactions, capital outlays and acquisition of financial assets by the general government and its sub sectors (see below). The collection of relevant COFOG series by FAO is aimed at facilitating the overall objective of monitoring general government – and, over time, public sector - expenditures on agriculture and rural development, including expenditures on environmental protection.

The general government sector and its main subsectors

1 Includes social security funds
2 Alternatively, social security funds can be combined into a separate subsector, as shown by the dotted line

The central government is comprised of the budgetary central government and,  possibly, extrabudgetary units:            

The budgetary central government is a single  unit of the central government that encompasses the fundamental activities of the national executive, legislative, and judiciary powers.
General government entities with individual budgets not fully covered by the general budget are considered extrabudgetary units/funds.

Each of the three main subsectors of the general government may comprise budgetary and extrabudgetary entities.