This chapter reviews the distributional impact of agricultural sector reforms in Africa. African governments have intervened in the agricultural sector for decades, but generous pricing policies and operational inefficiencies have often necessitated large budgetary transfers to parastatals. Over the past 20 years many African countries attempted to liberalize their agricultural sector, with mixed success. This chapter describes the forms of government intervention in agricultural markets, the liberalizing reforms undertaken in the past 20 years, the channels by which these reforms affected stakeholders, and the outcomes of the reforms on poor households.100
Trade liberalization and devaluation (TLD) policies have always been present in many IMF-supported programs. Tariffs, quotas, and other trade restrictions reduce the level of trade and tend to foster the development of import substitute industries that often fail to attain the degree of efficiency and flexibility shown by firms continuously exposed to international competition.66 Programs tend to promote the removal of trade restrictions in order to improve resource allocation and growth outcomes in the medium term. Devaluation policies in IMF programs tend to play a shorter-term adjustment role instead. The objective is in most cases to restore external viability by switching expenditures from the nontradables sector to the tradables sector.
It is common for governments in developing countries to manipulate prices of goods and services using a range of policy instruments and institutional arrangements. The motivations behind these price manipulations reflect varying objectives, such as the need to raise revenue, the desire to redistribute income toward the poor or toward politically important groups, the desire to provide protection to domestic producers, or the desire to influence the levels of supply or demand in other related markets where prices cannot easily be influenced.17 For example, the major source of revenue in most developing countries is commodity taxation such as domestic sales and excise taxes and taxes on international trade (Burgess and Stern, 1993; and Keen and Simone, 2004); food prices are often kept artificially low for consumers in order to increase the real incomes of poor households (Pinstrup- Andersen, 1988; and Gupta and others, 2000); and public sector prices (e.g., of electricity, gas, petroleum, coal, other fuels, fertilizers) are also often controlled by governments, reflecting either the perceived strategic importance of these inputs for development or the need to provide these sectors with an independent source of revenue and thus greater financial autonomy (Julius and Alicbusan, 1986).