Context
As governments face growing economic, social, and environmental demands, finance ministries are increasingly in need of more robust information tools to design public policies aligned with two fundamental financial principles of state management: efficiency and effectiveness in the use of public resources.
Just as there has been a trend toward improving the quality and granularity of information on climate change, there has been a need to quantify other categories of public spending, such as spending on gender, science and technology, and, more recently, forestry, among others.
However, exercises to quantify public spending in specific environmental sectors or objectives lose relevance if they are not accompanied by indicators and evaluations that allow their impact to be measured effectively. In Latin America, the forestry sector is of great importance in terms of its contribution to gross domestic product (GDP), job creation, and revenue for the country through exports, and it is an important source of raw materials. Added to this is its contribution to ecosystem conservation and the fight against climate change and deforestation. The AFOLU sector accounts for between 5 and 18% of GDP in Latin American and Caribbean countries (World Bank, 2020).
Between 2015 and 2025, Latin America lost 4.5 million hectares of forest (FAO, 2025). However, eighteen countries in the region have committed to protecting and restoring more than fifty million hectares of degraded and deforested land by 2030.
Enhanced reporting
To address this gap, the Food and Agriculture Organization of the United Nations (FAO) has launched a pilot initiative to improve the measurement and reporting of public spending on forestry in Latin America, highlighting the challenges and opportunities involved in capturing the full scope of government investment in the sector across the region.
This initiative was prompted by the limited availability of forestry-related public expenditure; only 16 out of 33 countries in Latin America and the Caribbean reported some level of forest public expenditure through the historical series from 2001 to 2024, by submitting data on government expenditures in agriculture to FAOSTAT. This gap reflects the capacity limitations of existing methodologies, such as the widely used Classification of the Functions of Government (COFOG), to fully capture and track the expenditure flows within the forestry sector. This is also because many forest-related activities, especially those linked to conservation and environmental protection, are often grouped under broader environmental categories, reducing their visibility and contributing to underreporting – which also differed by each country.
The implementation of the pilot initiative by FAO has revealed a significant increase in reported forest public expenditure in Latin America. Spending rose from USD 298 million in 2020 to USD 540 million in 2024, with cumulative expenditure reaching USD 2.08 billion over the period.
These updated estimates suggest that earlier figures may have underreported forestry spending by as much as 35 percent, demonstrating how a more systematic classification approach, combined with a detailed review of the projects, better aligns with forestry-related objectives.
Why it matters
Taking a moment, why do we need to enhance reporting of public expenditure? Enhancing public expenditure reporting can improve transparency, accountability, and evidence-based policy and decision making. It could help governments identify financing gaps, mobilize resources—including donor funding— and promote more coordinated, cross-sectoral planning.
Beyond overall spending levels, understanding how funds are allocated, the composition analysis allows countries to assess sector performance and align investments with long-term priorities, such as national development plans. Improved tracking also supports reporting obligations, including climate and biodiversity frameworks.
How the new methodology works, some key findings, and the way forward
The methodology proposed by FAO builds on the existing Global Expenditure Analysis Questionnaire framework and encourages countries to identify forestry-related expenditures across the economic and environmental accounts. It continues to rely on specific COFOG categories, while promoting further disaggregation of data to enhance consistency and analytical value.
Participating countries include Brazil, Bolivia, Chile, Colombia, Guatemala, Mexico, and Peru, with reporting focused on expenditures related to conservation, restoration, and sustainable forest use.
As noted earlier, key findings from the initiative confirm that current budget classification systems have limitations in capturing the full range of forest-related activities. In addition, the lack of a coherent and systematized statistical framework has made it difficult to align national accounting systems with environmental-economic frameworks.
In response, some countries have taken steps to improve their methodologies, introducing more detailed subcategories for forest expenditure, while others have begun exploring the use of artificial intelligence to support data classification. Complementary efforts—such as joint work through UN-REDD and in collaboration with MAFAP—are advancing a new methodology for classifying public expenditure on forests and natural capital (expected in 2026), with technical inputs and pilot applications in Uganda and Ghana. This approach aims to further disaggregate spending and enable tagging by policy objectives, with strong input from governments to ensure practical usability. Nonetheless, challenges remain, including the need to update and harmonize historical data and to expand institutional coverage.
Looking ahead, maintaining a standardized reporting approach remains a priority for countries. Improved reporting systems, better coordination among institutions, and the adoption of new technologies are expected to enhance data collection and monitoring, increase the visibility of forestry investments, and support progress towards achieving the Sustainable Development Goals.
In a few words, optimising existing resources to align the level of national public expenditure with policy objectives is essential to unlock additional national and international financing, especially for actions that provide public goods and long-term social benefits, reducing deforestation while prompting and boosting economy and enhanced livelihood.
References
- FAO. FAOSTAT: Statistical Database. Rome. https://www.fao.org/faostat/en/#home
- FAO. 2025. Global Forest Resources Assessment 2025. Rome. https://doi.org/10.4060/cd6709en
