Malawi's FIRP Program and Maize Prices
In April 2016, the President of Malawi declared a state of emergency in response to the second consecutive year of failed maize harvests. Domestic maize production in early 2016 only reached 2.4 million metric tons, compared to the 3.2 metric tons harvested in an average year. The international aid community and the private sector responded with the Food Insecurity Response Program (FIRP), which provided aid to almost 40 percent of the Malawian population. The program consisted of a variety of aid, including in-kind delivery of cereals and oil, maize vouchers, cash transfers, and mobile money transfers.
A recent policy note from IFPRI’s Malawi Strategy Support Program examines the impact that this program had on maize prices within Malawi.
The authors compared retail maize prices during the 2016-2017 humanitarian response to prices in 2015-2016 and to a seasonal price index based on prices over the preceding five years. The report finds that prices moved somewhat counterintuitively throughout the food crisis. While the seasonal maize price pattern in Malawi typically sees a peak between January and March (the lean season prior to the main maize harvest), during the food crisis, prices reached their highest level in July and August 2016 and then declined.
The report finds that the volumes of cash and vouchers distributed through the FIRP program had little impact on daily maize prices and analyzes why in-kind food distributions did not depress maize prices and why cash transfers did not increase prices. The authors emphasize that typically a larger quantity of maize in a market would decrease prices, while large influxes of cash would increase demand for maize and subsequently maize prices. However, in late 2016, the program switched from cash transfers to maize vouchers, which reduced the inflationary impact of cash transfers during the lean season. In addition, beneficiaries may have shared their food transfers, which would have hampered the deflationary impact of the maize vouchers.
Although in-kind food transfers accounted for around 10 percent of the country’s maize consumption requirements, these transfers also had little impact on daily maize prices in most of the markets studied. This is because very little of the maize received through in-kind transfers was then resold. Most people who received in-kind transfers used those transfers to fulfill approximately 67 percent of their maize consumption needs; these households’ own production accounted for another 19 percent. Thus, in-kind beneficiaries also had little need to purchase maize from the market. Finally, the FIRP program also distributed other commodities (such as cooking oil and pulses, as well as biofortified cereals for children under two years old and pregnant and lactating women); these transfers reduced the need for beneficiaries to sell the maize they received to meet other non-maize food needs.
The report also examined the linkages between various domestic markets within Malawi and found that in general, the country’s maize markets are poorly linked. When links do exist, they appear to run from the Central to the Southern region of the country, with market prices in Central Malawi being transmitted (minus transportation and other marketing costs) to other markets within two to three days.
Understanding how prices move within the country, as well as how different types of food aid impacted domestic maize prices, will be key in the design of future humanitarian responses in Malawi and other countries in Africa south of the Sahara.
By: Sara Gustafson, IFPRI