Prioritizing public investment in Armenia’s changing climate

Armenia's agriculture and food systems face multiple challenges related to climate, environment, and competitiveness, with additional difficulties stemming from being a landlocked nation. In the coming decade, a reduction in the seasonal distribution of rainfall is predicted, which will cause a significant drop in the productivity of rainfed crops. Yields from irrigated agriculture are also projected to fall.

While the agriculture sector in Armenia is vulnerable to the effects of climate change, it is also a cause of climate and environmental issues, contributing 22.3% of national greenhouse gas (GHG) emissions - of which 60% are generated by livestock. To tackle these impacts the agriculture sector needs to incorporate appropriate climate adaptation and mitigation measures, coupled with sound environmental management.

While the agriculture sector in Armenia is vulnerable to the effects of climate change, it is also a cause of climate and environmental issues, contributing 22.3% of national greenhouse gas (GHG) emissions - of which 60% are generated by livestock.

Given that these challenges affect a wide range of stakeholders - including the public and private sectors across regions and value chains - the World Bank Group has been helping the government to advance a forward-looking strategy and a coordinated and collaborative approach to incorporate climate considerations into its economy.

In the Spring of 2024, the World Bank partnered with Armenia’s Ministry of Economy (responsible for the agriculture sector) to bring together stakeholders from different ministries and agencies to share knowledge, lessons learned, and discuss an integrated approach for planning and identifying public investment priorities.

The agenda was wide-ranging, covering the following core areas:

1. Promote the development and adoption of climate-smart technology.

There is a wide gap between the finance needs of farming communities and agribusinesses and the support available. While public spending on agriculture has more than doubled since 2019, with programs reaching some 2,000 agribusinesses and larger farmers, key vulnerabilities and challenges faced by some 300,000 farmers and value chain operators are not being addressed.

Management of natural resources and investment in climate smart and green technologies by farmers and agribusinesses are crucial for the sustainable growth of the agricultural sector. Various Climate Smart Agriculture (CSA) technologies for crop production and livestock management were discussed, along with Armenia’s different agroecological zones and diverse cropping patterns, which require a region-specific approach to the promotion of these technologies. Participants also discussed reasons for the relatively low levels of CSA adoption amongst smaller scale farmers – which is often due to  a lack of information, capacity and knowledge dissemination.

2. Expand measures to classify and manage sustainable development projects and activities.

Armenia’s Ministry of Environment, with World Bank support, has developed a Green Taxonomy classification system for the assessment and verification of environmentally sustainable economic activities and projects, providing clear criteria for green and climate-oriented projects that would be eligible for concessional green finance. These include investments in the agriculture and food sector, such as carbon capture, climate adaptation technologies, irrigation, circular economy investments, pollution reduction investment, and restoration of biodiversity and ecosystems.  

3. Identify and support logistical and other needs.

During the meeting, participants discussed how the linkages between agribusinesses and farmers could be enhanced through an existing loan interest rate subsidy program targeted at agri-processors. This could increase available capital for raw materials. The program could also include farm-level technical advisory and financial incentives to increase volumes and quality of production, which would enable farmers to respond to the increased demand.

The rehabilitation of irrigation schemes and improvement of service delivery combined with incentives to farmers for using water saving irrigation technologies will be crucial to ensure that water use efficiency enhancements are achieved.

4. Take relevant learnings from other countries and apply them.

A newly developed World Bank toolkit on land degradation risk provides an analysis of trends in vegetation health, productivity, flood risk, and water scarcity, and identifies “hotspots” where land degradation and climate risks are high, and where adaptation and restoration are feasible. The restoration of croplands, pastures, forests, shrublands, and wetlands are estimated to result in a decrease of crop production costs, an increase in the production of crops and livestock products (i.e., milk, meat, and wool), a reduction in infrastructure damage, a reduction in GHG emissions as well as an enhanced supply of other ecosystem services. In short, land restoration in Armenia has been found to be economically viable.

In short, land restoration in Armenia has been found to be economically viable.

What’s next?

To achieve these goals, the Ministry of Economy will need increased capacity to lead and execute policies and programs. In addition, future agriculture support programs should broaden the beneficiary target group and aim to provide knowledge and incentives for the adoption of green technologies. Efficient implementation requires an integrated approach based on a clear set of objectives. Research, farm extension/advisory, food safety, and animal health will provide the necessary enabling environment.

The World Bank will continue to provide support and assistance to the Armenian Government in designing measures to increase the resilience and competitiveness of the sector. This includes a review of public spending in the agriculture sector that will inform discussions on resource allocation and institutional development.

Overall, by broadening support programs to include a wider range of beneficiaries and promoting green technologies, Armenia can ensure a more sustainable and resilient agricultural sector. The World Bank's ongoing support will be crucial in reviewing public spending and informing resource allocation, ultimately helping to create a more livable country for all its citizens.