Presentation prepared by Xinshen Diao, Paul Dorosh, Jan Duchoslav, Karl Pauw, and James Thurlow, all with the International Food Policy Research Institute, Washington, DC. This is part of the Global Crisis Country Series.

1. Version: 20 June 2022
Malawi
Impacts of the Ukraine and Global
Crisis on Food Systems and Poverty
Xinshen Diao, Paul Dorosh, Jan Duchoslav, Karl Pauw, James Thurlow
International Food Policy Research Institute, Washington DC
These country studies are conducted by IFPRI with financial support from
BMGF, FCDO, and USAID. All studies use data and models developed with
ongoing support from BMGF, USAID and the CGIAR’s “Foresight and Metrics”
initiative. The Malawi case study benefitted from working with IFPRI’s Malawi
country program and national partners.
Karl Pauw (k.pauw@cgiar.org) | Paul Dorosh (p.dorosh@cgiar.org) |
Jan Duchoslav (J.Duchoslav@cgiar.org) | James Thurlow (j.thurlow@cgiar.org)

2. Version: 20 June 2022
Overview
• Series of country case studies
• Economywide modeling
• Capture world market shocks
• Estimate impacts on economy, agri-food
system, poverty, food security, etc.
• Simulate policy responses
• Three phases of analysis:
1. Initial data collection and impact assessment
2. Data revisions and analysis of broad policy options
• Cash transfers, food aid, and fertilizer subsidies
• Fiscal implications for national governments
3. In-country engagement and tailored policy analysis
Impact
assessment
Policy
analysis
Country coverage
Countries with IFPRI RIAPA models
May June
July

3. Version: 20 June 2022
Shocks | World Food, Fuel and Fertilizer Prices
World price
Trade share
Direct use
Indirect use
Incomes
How big is the increase in world price?
How important are imports in local market?
Can local producers substitute for imports?
Which sectors use the product as an input?
Which other sectors are affected via supply chains?
What kinds of workers and households earn
incomes within the affected sectors?
Final use Which households consume the affected products?
Impact Channel Considerations World Price Shocks
Source: World Bank Pink Sheets
Global data
11%
-13%
100%
56%
34%
88%
101%
Maize Rice Wheat Palm oil Crude oil Natural gas Fertilizer
Change in real world prices (June 2021 to April 2022)
30 Jun 2021 - 31 Jan 2022 31 Jan 2022 - 30 Apr 2022
30 Jun 2021 - 30 Apr 2022

4. Version: 20 June 2022
Shocks | World Food, Fuel and Fertilizer Prices
World price
Trade share
Direct use
Indirect use
Incomes
How big is the increase in world price?
How important are imports in local market?
Can local producers substitute for imports?
Which sectors use the product as an input?
Which other sectors are affected via supply chains?
What kinds of workers and households earn
incomes within the affected sectors?
Final use Which households consume the affected products?
Impact Channel Considerations Supply and Demand
Supply
(% by source)
Demand
(% by use)
Malawi data
Source: IFPRI Malawi RIAPA Model
97%
75%
100%
25%
100%
Maize Wheat Edible oils Oil products
Imports
Domestic
32%
100%
7%
87%
67%
67%
13%
27%
Maize Wheat Edible oils Oil products
Exports
Final use
Input use
+ Others = 100%
+ + +
4.6% 0.3% 1.5% 3.6%
Products’ share of the
value of total demand
throughout the economy

5. Version: 20 June 2022
Shocks | World Food, Fuel and Fertilizer Prices
World price
Trade share
Direct use
Indirect use
Incomes
How big is the increase in world price?
How important are imports in local market?
Can local producers substitute for imports?
Which sectors use the product as an input?
Which other sectors are affected via supply chains?
What kinds of workers and households earn
incomes within the affected sectors?
Final use Which households consume the affected products?
Impact Channel Considerations Consumption Baskets
Malawi data
Source: IFPRI Malawi RIAPA Model
12.3%
17.6%
7.3%
25.2%
11.4%
27.8%
35.6%
21.9%
32.3%
29.0%
59.9%
52.6%
75.7%
51.4%
64.6%
All households Rural Urban Poor Nonpoor
Composition of household consumption spending
Cereals & edible oils Other foods Non-food goods & services
Notes: Cereals & edible oils and other foods includes self-produced products

6. Version: 20 June 2022
Shocks | Fertilizer Response (crop productivity effect)
Adoption
Application
Price
Demand
Response
What share of cultivated land uses fertilizers?
How much fertilizer is being used?
(i.e., fertilizer application rate)
How big is the domestic fertilizer price increase?
How do farmers react to rising fertilizer prices?
(i.e., price elasticity of fertilizer demand)
How do yields change with reduced fertilizer use?
(i.e., fertilizer response ratio)
Impact Channel Considerations Fertilizer Adoption Rate
Source: Estimates from the Integrated Household Survey of LSMS, Malawi
Timing When is the fertilizer needed?
Malawi data
71%
28%
23%
91%
74%
11%
8%
70%
43%
96%
25%
70%
Maize
Sorghum & millet
Rice
Wheat
Pulses
Goundnut
Root crops
Vegetables
Sugarcane
Tobacco
Fruits
Leaf tea
Share of cultivated land using fertilizer

7. Version: 20 June 2022
Shocks | Fertilizer Response (crop productivity effect)
Adoption
Application
Price
Demand
Response
What share of cultivated land uses fertilizers?
How much fertilizer is being used?
(i.e., fertilizer application rate)
How big is the domestic fertilizer price increase?
How do farmers react to rising fertilizer prices?
(i.e., price elasticity of fertilizer demand)
How do yields change with reduced fertilizer use?
(i.e., fertilizer response ratio)
Impact Channel Considerations
Crop Calendar
Source: FEWSNET Malawi
Timing When is the fertilizer needed?
Planting for Malawi’s 2022 main season starts in November
Malawi

8. Version: 20 June 2022
Results | GDP and Employment
• National GDP and employment declines
• Negative terms-of-trade shock
(i.e., negative effect of higher import prices outweighs positive
effect of higher export prices)
• Rising import costs reduces spending on domestically
produced goods
• Falling production leads to job losses
• Impacts occur throughout the economy
• Agri-food system GDP and employment also fall
• GDP declines mainly in primary agriculture
• GDP gains slightly in off-farm agri-food sectors led by
increase in processed tobacco exports that benefit
from a real exchange rate depreciation
• Larger GDP declines in agriculture (equal to 43% of
overall GDP losses in the country)
• Job losses in both on-farm and off-farm sectors, as job
gains in exporting tobacco are not large enough to
offset the losses in labor-intensive food-related
services, incl. trade and transport
Source: IFPRI Malawi RIAPA Model
Contribution to total change
GDP
Jobs
-1.3%
-1.0%
-2.0%
0.5%
-1.6%
-2.8%
-2.3%
-2.4%
-1.1%
-5.7%
-7.0% -6.0% -5.0% -4.0% -3.0% -2.0% -1.0% 0.0% 1.0%
Whole economy
Whole AFS
Agriculture
Off-farm
Outside AFS
Agri-food
system
Change in GDP and employment due to
food, fuel and fertilizer shocks (%)
GDP Employment
43%
64%
Agriculture
Off-farm
Outside AFS
64%
3%
33%
Notes: Model results are for 2022. Employment includes farmers, paid and non-paid workers,
and self-employed persons.

9. Version: 20 June 2022
Results | Drivers of GDP Losses
• Fuel and fertilizer shocks drive most of the decline in
national GDP
• Agri-food GDP losses mostly driven by fertilizer shocks
• Fertilizer directly affects primary agricultural production
• Off-farm adversely affected only by higher food prices,
which raise the cost for food processing and food-related
services
• GDP losses outside the agri-food system driven more
by higher fuel prices
• Higher transaction costs
• Lower consumer demand
Source: IFPRI Malawi RIAPA Model
Contribution
to change
-0.1%
-0.2%
-0.4%
-0.7%
0.4%
-1.4%
-0.5%
-0.9%
-1.8%
0.5%
-0.2%
-1.3%
-1.0%
-2.0%
0.5%
-1.6%
Whole economy
Whole AFS
Agriculture
Off-farm
Outside AFS
Agri-food
system
Percentage change in real GDP due to food, fuel
and fertilizer shocks (%)
Food prices Fuel prices Fertilizer prices & response
8%
54%
38%
Notes: About 13 percent of the effect on agriculture GDP under “fertilizer prices and response” is directly from rising fertilizer,
while the remaining 87 percent is from the productivity shock caused by lowering the use of fertilizer.

10. Version: 20 June 2022
Results | Household Consumption
Source: IFPRI Malawi RIAPA Model
• Household consumption falls significantly
• Losses are much larger than GDP losses as households are
hit twice, by rising prices and falling incomes
• Rising food prices becomes more important for
consumption losses than for GDP losses
• Importance of shocks differs across population groups:
• Fertilizer shocks much more important for rural and poor
households
• Rely more on farm incomes
• Consume more domestically-produced foods
• Fuel shocks important for urban and nonpoor households
• Earn more income outside the agri-food system
• More import-intensive consumer basket
• Consume products with larger transaction cost margins
• Food prices affect all households similarly
Contribution
to change
-0.6%
-0.4%
-0.7%
-0.6%
-0.6%
-2.7%
-1.9%
-3.5%
-1.5%
-2.8%
-2.1%
-3.5%
-4.8%
-1.8%
-5.3%
-5.8%
-4.7%
-6.9%
-5.1%
National
Rural
Urban
Poor
Nonpoor
Percentage change in real consumption
Food prices Fuel prices Fertilizer prices & response
11%
50%
39%

11. Version: 20 June 2022
Results | Changes in Inequality
• Differential effects on poor/nonpoor households drive
changes in inequality:
• Fuel shocks causes larger consumption losses for
households in the top quintile
• Fertilizer shocks affect lowest quintile much more than
top quintile, causing inequality to increase significantly
• Food prices have similar impact across the income
distribution
• Combined shocks are dominated by fertilizer shocks for
most households
• Overall, inequality rises
• Larger consumption losses in Quintile 1-3, which spans
Malawi’s poverty line
Source: IFPRI Malawi RIAPA Model
-8.0%
-7.5%
-7.0%
-6.5%
-6.0%
-5.5%
-5.0%
-4.5%
-4.0%
-3.5%
-3.0%
-2.5%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
Q1 Q2 Q3 Q4 Q5
Percentage change in quintile consumption
Food prices
Fuel prices
Fertilizer prices & response
Combined food, fuel and fertilizer shocks

12. Version: 20 June 2022
Share of population
falling into poverty
Results | Poverty
• Poverty rises significantly
• Headcount rate up 1.9% points
• 350 thousand more people pushed into poverty
• A large number of poor people prior to the crisis
further impoverished
• Larger increase in poverty in rural areas
• Near 90 percent of expanded poor population
• Larger increase in rural poverty headcount rate
• Rural population much larger than urban population
• Mainly driven by fertilizer shock
Source: IFPRI Malawi RIAPA Model
Contribution
to change
0.3%
0.5%
0.2%
0.5%
0.7%
0.5%
1.1%
0.2%
1.2%
1.9%
1.5%
2.0%
National
Urban
Rural
Change in poverty headcount rate (%-point)
Food prices Fuel prices Fertilizer prices & response
52
17
36
102
23
80
200
7
191
354
47
307
National
Urban
Rural
Change in poor population (1000s)
Food prices Fuel prices Fertilizer prices & response
15%
29%
57%
13%
87%
Urban
Rural
Notes: About 70% of the country’s population have adult equivalent consumption levels that fall below the US$1.90 poverty
line. The poverty rate is higher in rural, about 76%, than in urban, about 37%.

13. Version: 20 June 2022
• Food, fuel and fertilizer shocks modestly increase the
cost of a healthy reference diet
• Reference diet is the EAT-Lancet’s “healthy” diet
thresholds for the six major food groups
• Rising prices for edible oils (in added fats) increase the
cost of the recommended healthy diet, while falling
incomes reduce demand for vegetables, fruits and
protein food (meats & fish) and thus, lower their costs
slightly
Results | Diet Quality
Source: IFPRI Malawi RIAPA Model
• Rising food prices and falling incomes cause diet quality
to worsen for many households
• Prior to the crisis, few households had consumption levels
and diversity needed for a healthy diet
• Rising food and fertilizer prices cause 240 thousand people
to become deprived in at least one additional food group
• Rural population accounts for more of the deterioration in
diet quality
0.5%
0.1%
-0.4%
-0.4%
-0.8%
2.0%
Net change in
cost of healthy
diet
Contributions of
food groups to
change
Change in the real cost of a healthy
reference diet caused by rising world
prices (%)
Added fats
Proteins
Dairy
Fruits
Vegetables
Staples
5.4%
11.7%
12.1%
24.6%
34.7%
11.5%
Shares of six food groups in
total cost of a healthy diet
prior to the crisis
Added fats
Proteins
Dairy
Fruits
Vegetables
Staples
158
73
85
72
71
241
81
160
National
Urban
Rural
Number of people to become deprived in at least one
additional food group (1000s)
Food prices Fuel prices Fertilizer prices & response

14. Version: 20 June 2022
Headlines
• Food, fuel and fertilizer shocks lead to large reductions in
GDP and employment in Malawi
• Agri-food system adversely affected, alongside the broader
economy
• Agriculture is particularly at risk to fertilizer shocks, esp. if it
leads to lower fertilizer use in the current season
• Poor and rural households are especially vulnerable
• Larger income losses
• Greater increase in poverty (esp. number of poor people)
• Larger contribution to the deterioration in diet quality
• Next steps
• Evaluate policy options available to governments and
development partners to mitigate impacts on food systems,
poverty, and food insecurity (e.g., cash transfers, food aid,
fertilizer subsidies, fiscal support, etc.)
Impact
assessment
Policy
analysis
Country coverage
May June
July