fao project gcp/syr/006/ita workshop - damascus, 1-2 july 2008 agriculture and economic reform in...

FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008

Agriculture and Economic Reform in Syria: Impacts on Poverty and Inequality

Benedetto Rocchi and Donato Romano

Department of Agricultural and Resource Economics

University of Florence

with the collaboration of the Rural Development Division at NAPC


Objectives A SAM of the Syrian economy:

- households accounts (rural vs. urban, income deciles)

- activities accounts (agriculture, food processing)

Policy simulation assessment:

- policy reform ( social market economy) impacts on poverty and inequality

- changing environment: e.g. soaring food prices impacts on poverty and inequality


Account classification 41 activities (from the NAPC Farming Systems Study + CBS

data) 25 crops 3 livestock 13 non-agricultural activities (8 food processing + 5 other acts.)

51 commodities (from the NAPC Farming Systems Study + CBS data) 23 crops 8 animal products 13 agricultural processed products 7 other products

22 institutions (from the SPC-UNDP Poverty Study + CBS data) 10 rural households (per income deciles) 10 urban households (per income deciles) firms government


Account classification 3 value added (from CBS + IMF data)

hired labour other factors net fiscal revenue (taxes – subsidies)

2 capital formation (from CBS data) inventory change investment

3 rest of the world (from CBS data) goods and services (current account) financial flows (capital account) net lending (lending – borrowing)

TOTAL: 122 accounts


SAM structure 51 41 3 20 1 1 2 3


Definition of policy reform scenarios change in existing (sector) policies towards a

less distorted environment: dropping subsidies to agriculture and food processing

production reducing by 20% the price of strategic crops abolishing the Price Stabilization Fund (food consumption

subsidy)

alternative use of budget saving: fiscal deficit reduction (= investment) public expenditure increase (proportional to the current

composition) increase transfers to households


Policy reform impacts

output incomes povertyelimination of subsidies to agriculturedeficit reduction 3.79 2.45 -0.24publ exp increse 2.03 1.43 -0.15tranf to hhold increase 3.06 7.13 -0.92

price reduction for strategic cropsdeficit reduction 0.55 0.47 -0.05publ exp increse 0.33 0.34 -0.04tranf to hhold increase 0.46 1.07 -0.14

elimination of PSF

deficit reduction 0.43 -2.10 0.51publ exp increse -0.40 -2.58 0.55tranf to hhold increase 0.09 0.10 0.19

% impact on


Policy reform impacts on output % impact on output of

agriculture

food process.

other activities

total

A) elimination of subsidies to agriculture and food processing

1. deficit reduction 1.19 2.16 4.67 3.79

2. public expenditure increase 0.59 0.99 2.52 2.03

3. transfers to households increase 2.79 4.16 3.00 3.06

B) price reduction for strategic crops

1. deficit reduction 0.21 0.37 0.67 0.55

2. public expenditure increase 0.14 0.22 0.39 0.33

3. transfers to households increase 0.42 0.63 0.45 0.46

C) elimination of Price Stabilization Fund

1. deficit reduction -0.80 -1.02 0.92 0.43

2. public expenditure increase -1.57 -0.09 -1.87 -0.40

3. transfers to households increase -0.04 -0.07 0.14 0.09


Policy reform impacts on income % impact on incomes of

urbantotal

urban 1st dec

urban 10th dec

ruraltotal

rural 1st dec

rural 10th

dec

A) elimination of subsidies to agriculture and food processing

1. deficit reduction 2.52 2.29 2.61 2.35 2.28 2.55

2. public expenditure increase 1.55 1.67 1.56 1.26 1.26 1.36

3. transfers to HHs increase 8.35 14.96 6.92 5.32 6.85 3.87

B) price reduction for strategic crops

1. deficit reduction 0.46 0.47 0.45 0.48 0.52 0.45

2. public expenditure increase 0.34 0.39 0.31 0.34 0.38 0.29

3. transfers to HHs increase 1.22 2.11 1.01 0.86 1.11 0.62

C) elimination of PSF

1. deficit reduction -1.41 -5.24 0.10 -3.12 -6.84 -0.39

2. public expenditure increase -1.87 -5.54 -0.40 -3.64 -7.32 -0.95

3. transfers to HHs increase 1.34 0.74 2.13 -1.72 -4.68 0.23


Policy reform impacts on poverty

deficit red.

public xp

incr.

transf to hhs.

incr.

deficit red.

public xp

incr.

transf to hhs.

incr.

deficit red.

public xp

incr.

transf to hhs.

incr.

Urb dec 1 -0.01 0.00 -0.04 0.00 0.00 -0.01 0.02 0.02 0.00Urb dec 2 -0.12 -0.08 -0.52 -0.02 -0.02 -0.07 0.21 0.23 0.02Urb dec 3 -0.28 -0.18 -1.20 -0.06 -0.04 -0.17 0.37 0.42 -0.06Urb dec 4 -3.41 -2.20 -14.62 -0.66 -0.50 -2.11 4.14 4.71 -1.15Rur dec 1 0.00 0.00 -0.01 0.00 0.00 0.00 0.01 0.01 0.01Rur dec 2 -0.14 -0.08 -0.43 -0.03 -0.02 -0.07 0.34 0.37 0.20Rur dec 3 -0.46 -0.26 -1.46 -0.10 -0.07 -0.23 1.11 1.21 0.64Rur dec 4 -3.19 -1.78 -9.32 -0.68 -0.50 -1.48 6.90 7.56 4.01Total -0.24 -0.15 -0.92 -0.05 -0.04 -0.14 0.51 0.55 0.19

elimination of subsidies to agri-food

price reduction for strategic crops

elimination of PSF


Soaring cereal prices: redistributive effects

deficit red.

public xp incr.

transf to hhs. incr.

deficit red.

public xp incr.


deficit red.

public xp incr.


Urb dec 1 0.08 5.59 17.08 4.24 5.42 14.29 -6.01 -5.69 1.65Urb dec 2 -2.93 0.45 11.41 -4.28 -3.54 6.38 -7.40 -7.26 -2.17Urb dec 3 -4.79 -1.24 13.13 -10.12 -9.32 4.95 -5.37 -5.22 0.80Urb dec 4 -3.75 1.12 14.92 -5.54 -4.47 8.36 -4.26 -3.99 2.70Urb dec 5 -2.96 3.64 22.74 -5.44 -3.96 13.94 -3.26 -2.85 7.25Urb dec 6 -1.05 1.57 6.13 -0.75 -0.18 4.13 1.08 1.26 3.97Urb dec 7 2.79 3.40 1.69 1.77 1.95 1.80 1.79 1.87 2.43Urb dec 8 6.26 5.89 1.44 3.16 3.19 1.95 6.92 7.01 7.34Urb dec 9 16.63 16.68 9.61 12.80 13.05 11.47 18.45 18.76 22.22Urb dec 10 74.24 61.66 1.76 70.05 68.14 28.01 54.27 54.48 51.65Rur dec 1 -0.79 -0.67 -0.36 4.67 4.61 2.09 -10.37 -10.47 -10.72Rur dec 2 -4.51 -3.55 0.02 0.90 1.00 0.90 -11.44 -11.52 -11.41Rur dec 3 -5.09 -3.43 0.08 2.41 2.63 1.73 -12.03 -12.07 -11.94Rur dec 4 -6.57 -6.27 -1.59 -3.54 -3.59 -2.21 -12.29 -12.44 -12.88Rur dec 5 -7.37 -7.64 -5.72 -2.27 -2.48 -4.47 -10.02 -10.20 -12.40Rur dec 6 -13.27 -14.09 -10.79 -6.95 -7.37 -9.80 -8.68 -8.92 -12.97Rur dec 7 -11.83 -12.44 -10.30 -7.34 -7.67 -9.78 -5.22 -5.41 -9.31Rur dec 8 -15.70 -18.19 -18.05 -16.02 -16.76 -19.17 -3.64 -3.97 -10.99Rur dec 9 -10.65 -13.82 -19.02 -10.88 -11.71 -17.87 3.59 3.32 -4.35Rur dec 10 -8.76 -18.66 -34.19 -26.87 -28.96 -36.69 13.91 13.30 -0.84

Tot abs value 985 1 103 7 172 629 637 1 293 7 575 7 501 7 406

elimination of subsidies to agri-food

price reduction for strategic crops

elimination of PSF


The impact on poverty of soaring cereal prices

no yeselimination of subsidies to agriculturedeficit reduction -0.24 0.25publ exp increse -0.15 0.35tranf to hhold increase -0.92 -0.42

price reduction for strategic cropsdeficit reduction -0.05 0.45

publ exp increse -0.04 0.46tranf to hhold increase -0.14 0.36

elimination of PSFdeficit reduction 0.51 1.00publ exp increse 0.55 1.05tranf to hhold increase 0.19 0.68

cereal price increase


Conclusions

The estimated SAM for Syria is a suitable tool for policy impact simulations

Policy lessons: crucial role of Government budget strategies on the

outcomes of a given sector policy (reform) importance of output growth for poverty reduction existence of structural asymmetries in income

distribution (e.g. rural vs. urban)

Limitations: static model: only short-run impacts the classification of household groups by deciles may

change as a consequence of simulated policies


Conclusions Future developments:

analyze alternative policy mixes

- less ‘extreme’ policy mixes

- impact of debt service of production loans on HHs

- decrease in oil production foreign exchange access to international food market

alternative classification criteria for households sector (sector of occupation of the reference person, education level, composition of the household’s total income)

regional disaggregation of the Syrian SAM CGE


The impact of an exogenous shock

industries factors householdsexog. acc.

industriesinterindustry

flowshousehold

consumptions

factorsincome

distribution to factors

householdsincome

distribution to household

exog. accounts

fao project gcp/syr/006/ita workshop - damascus, 1-2 july 2008 agriculture and economic reform in...

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