Changes to Malawi Fertilizer Subsidy Program Mean Higher Cost for Farmers

Earlier this month, Malawi’s government announced a major change to the country’s Farm Input Subsidy Programme (FISP), an 11-year-old program designed to achieve food self-sufficiency and increased incomes for Malawi’s resource-poor farmers. For the 2015-2016 season, a 50kg bag of fertilizer will cost farmers K3500 (approximately USD 6.31), a 600 percent increase from last year’s cost of K500 (USD 0.90). The price for a 5kg packet of seeds has also jumped; maize seeds will now cost farmers K1000 (USD 1.80), while legume seeds, which were formerly free due to support from development partners, will cost K500. (To put these prices in context, GNI per capita, in terms of purchasing power parity, was USD 750 in 2013 according to the World Bank).

What’s behind these increases? According to Minister of Agriculture, Irrigation, and Water Development Allan Chiyembekeza, the changes follow complaints that too much money has been spent on FISP at the expense of other government programs. A recent IFPRI paper, published in 2014, reached a similar conclusion, arguing that fertilizer subsidies may not be the most effective use of government funds. Rather, programs such as road construction and agricultural R&D may be more cost-effective at reducing poverty.

In addition, says Chiyembekeza, some donors have encouraged higher contributions from farmers in order to make smallholders feel more involved in the program as partners, not just beneficiaries.

The reforms will also look at increasing private sector involvement in FISP. Seven districts have been selected as part of a pilot program in which private sector firms will engage in the supply, distribution, and direct retail of fertilizer. The remaining districts will continue to be supplied through the Smallholder Farmers Fertiliser Revolving Fund of Malawi (SFFRFM) and ADMARK. The pilot program will help determine which system is more efficient and cost-effective in reaching the program’s 1.5 million beneficiaries, says Chiyembekeza.

This last change echoes findings from a 2012 IFPRI study, which examined the policy formation landscape behind FISP. The study found that the private sector historically played only a marginal role in designing and implementing the program, with the majority of policy formation coming from the government and major donors. A similar IFPRI paper published in 2013 argues that strengthening the government’s capacity to conduct and utilize research-based policy analysis is key in improving the policy-making process. If conducted successfully, FISP’s new pilot program could provide important research-based evidence that could be used to strengthen the program’s public-private partnerships and enhance the impact of fertilizer subsidies on the country’s resource-poor farmers.

Read original media coverage of the changes to Malawi’s FISP pricing.

Written by: Sara Gustafson, IFPRI

Photo credit:Flickr: Stephen Morrison