Can budget support to the cotton sector be used more efficiently? An assessment of the policy support measures in Mali and Burkina Faso

In Burkina Faso and Mali, cotton is the most important cash crop, given its high contribution to the GDP and to the export sector revenue. Export of cotton lint accounted for 60 and 15 percent of the value of national exports, respectively, in 2014. To maintain the level of cotton production, the two Governments support the sector. Indeed, the analysis based on the Monitoring and Analysing Food and Agricultural Policies (MAFAP) methodology show that producers received incentives of 21 and 12 percent in Burkina Faso and Mali, respectively, between 2005 and 2012 (nominal rate of protection [NRP]). The analysis provides insights on the level of domestic price protection that compensates price distortions resulting from on one hand, exogenous causes namely the international price distortions and the exchange rate misalignment and on the other hand, endogenous inefficiencies such as the high transport or processing costs. Two adjusted NRP are computed, one using an adjusted benchmark price for cotton that is netted out of policy interventions at the international level (Anderson and Valenzuela, 2006) and one using an alternate, non-misaligned exchange rate (BCEAO, 2013). The value chain inefficiencies are then discussed, using the market development gap indicator which reveals that higher producer price could be obtained if inefficiencies were corrected through sound investment policies. Finally, a budgetary allocation analysis is proposed, along with the computation of nominal rates of assistance that reveal the full extent of policy support to the cotton value chain. Price intervention, with other cotton-related budgetary transfers, represented 9 percent of food and agricultural expenditure in Burkina Faso between 2006 and 2012 and 31 percent in Mali.