Treasury Criticised for Failing to Give Long-Term Solution to Food Crisis

Business Daily (Nairobi)

Zeddy Sambu

14 June 2011

Treasury’s decision to allocate Sh13.3 billion to cushion consumers in the next financial year has been criticised for failure to address chronic food shortages.

While Finance minister Uhuru Kenyatta announced tax cuts to cushion the poor against the effect of high commodity prices like fuel, maize, and wheat, economists said it did not provide a lasting solution to the chronic problem of food shortages, hunger and subsequent price increases.

“There were no longer term interventions. It did not prepare large scale farmers to produce food and instead reduce over dependence by the urban poor,” said Dr John Omiti, the head of the productive services sector at the public policy think tank, Kippra.

Agricultural economists say interventions succeed only if well targeted. “Who are the beneficiaries? How will farmers be protected against huge and uncontrolled imports?” asked Dr Omiti.

Experts said the Budget addressed short-term problems but failed to address the high cost of production and effects of climate change. “The Budget focused on current problems and not long term large-scale production of food crops through insurance and subsidies,” said Mr David Nyameino, the chief executive of the Cereals Growers Association, an umbrella body for medium and large scale farmers.

Agricultural policy analyst James Nyoro said the budget was not clear on short term incentives to raise production.

“But it has innovative financing methods to mobilise funds from the private sector. The Government also attempted to seal loopholes that have previously discouraged lending to this sector perceived as high risk,” said Dr Nyoro. Sh33.3 billion was allocated to Agriculture, a Sh5 billion reduction from last year’s budget. Sh10.2 billion will go into irrigation in the wake of the current high cost of farm inputs and weather-induced losses. Overall, the rural sector ministries got 11 per cent of the Sh1.115 trillion budget intended to ease the cost of living.

Risk sharing

Through the Kilimo Biashara project, the International Fund for Agricultural Development (IFAD) has extended $10 million as a risk sharing facility to leverage commercial banks to lend about Sh10 billion to agriculture development targeting 700,000 households.

Treasury said it would expand the project by establishing a Sh5 billion impact investment fund under the Kenya Incentive Based Risk Sharing Agricultural Lending (KIRSAL) project to be implemented over a four year period in order to leverage Sh50 billion lending to the agricultural sector and rural development targeting another 1.5 million smallholder farmers and over 10,000 agribusinesses throughout the country.

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