Importance of Irrigated Agriculture to the Ethiopian Economy: Capturing the direct net benefits of irrigation

Report
1 January 2008

Irrigation development has been identified as an important tool to stimulate economic growth and rural development, and is considered as a cornerstone of food security and poverty reduction in Ethiopia. While a lot of effort is being exerted towards irrigation development, little attempt is being made to quantify the contribution of irrigation to national income. This study is an attempt in that direction by quantifying the actual and expected contribution of irrigation to the Ethiopian national economy for the 2005/2006 and 2009/2010 cropping seasons using the adjusted net gross margin analysis.

Our results show that irrigation generates an average income of approximately US$323/hectare (ha) under smallholder-managed irrigation systems compared to an average income of US$147/ha for rainfed systems. This indicates that, after accounting for annual investment replacement cost, the adjusted gross margin from irrigation is 219.7% higher than the gross margin from rainfed agriculture. The gross margin from medium- and large-scale systems was calculated to be US$400/ha and US$1,308/ha, respectively. Based on our calculations, irrigation contributed approximately 5.7 and 2.5% to agricultural Gross Domestic Product (GDP) and the overall GDP, respectively, during the 2005/2006 cropping season. By the year 2009/2010, the contribution of irrigation to agricultural GDP and overall GDP is estimated to be approximately 9 and 3.7%, respectively.

After relaxing some of the underlying assumptions, the future contribution of irrigation to agricultural GDP rises to approximately 12% while the contribution to overall GDP will be approximately 4%. To realize these outcomes, besides the obvious task of developing the planned irrigation infrastructure, there is a need to: i) improve the provision of agricultural inputs including high-value crops, ii) improve the performance of the agricultural extension system to support irrigation to enhance efficiency and productivity, iii) improve market access conditions and marketing infrastructure, and iv) improve the management of schemes to increase efficiency at all levels. Additional policy implications for cost recovery and sustainability of irrigation investment are drawn.

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Publication reference
Hagos, Fitsum, Godswill Makombe, Regassa Namara, and Seleshi Awulachew, 2008, "Importance of Irrigated Agriculture to the Ethiopian Economy: Capturing the direct net benefits of irrigation", Research Report, 128, International Water Managem

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Publication | 27 October 2011