Genesis 1:6 || Meditate the Scripture daily verse by verse
Fertiliser Subsidy Reforms and Maize in Malawi
1. FERTILIZER SUBSIDY
REFORMS AND MAIZE
IN MALAWI
MARIAM A.T.J. MAPILA
MASSP RESEARCH DISSEMINATION SEMINAR
GROWTH, POVERTY, NUTRITION LINKAGES AND THE ROLE OF
FISP
APRIL 9, 2014
CROSSROADS HOTEL, LILONGWE
1
3. WHY REFORM
STRATEGIES
Input subsidies
intended to be short
term strategy
Resistance to scaling
down or removal from:
◦Beneficiaries
◦Non-beneficiaries
◦Politicians
OBJECTIVES OF THE
STUDY
Analyze the impact of
reforms of the Farm
Input Subsidy Program
on Malawi’s maize
commodity market
3
4. Malawi maize model
Key Endogenous
variable
Exogenous
variable
L Lag
Local
maize
price
Local economy
Parity prices Malawi policy
instruments
Domestic
production/consumption
ADMARC maize
price
Trend
Local
maize
production
Household income (with maize income)
Local
maize
consumptio
n
Local
rainfall
L
Net
exports
Domestic
maize
consumption
Trend Per
capita
GDP
Aggregate
demand
Yield
Area
Domestic
production
Aggregate
supply
RainfallPrice of
fertilizer
Per capita
maize
consumptio
n
L
L
Populatio
n
Source: Mapila, 2011
4
5. Model simulations
A) Baseline scenario – fertilizer subsidy continues
B) Reforms of subsidy program:
1) Complete removal of subsidy program
2) Scale down amount of subsidized fertilizer
3) Reduce number of targeted beneficiaries
4) Complement exit strategies with improved
Agricultural Extension Services
5
7. -40
-20
0
20
Acreage Yield Domestic
production
Domestic
consumption
ADMARC maize
price
%change
Impact multiplier
(2012/13)
Total long run
dynamic multiplier
7
-40
-20
0
20
40
Area planted Yield Domestic
production
Domestic
consumption
ADMARC maize
price
%change
Impact multiplier
(2012/13)
Total long run
dynamic multiplier
Complete removal combined with extension services
Complete removal of subsidy
8. -60
-40
-20
0
20
Area Yield Domestic
production
Domestic
consumption
ADMARC maize
price
%change
Impact multiplier
(2012/13)
Total long run
dynamic multiplier
8
-30
-20
-10
0
10
Area planted Yield Domestic
production
Domestic
consumption
ADMARC maize
price
%change
Impact multiplier
(2012/13)
Total long run
dynamic multiplier
Reduced amount of fertilizer
Reduced amount of fertilizer combined with extension services
9. Conclusions
Complete removal of farm input subsidies is feasible only
at a cost
◦ Negative impacts on maize commodity market
◦ Cost of new investments i.e. in extension services
Scaling down more likely to occur using more ‘practical’
options:
◦ Scaling down number of targeted beneficiaries
◦ Scaling down amounts of subsidized fertilizer
9
10. Conclusions
Considerations in designing reforms:
◦ Gradual implementation
◦ Need for complementary strategies to minimize losses
◦ Duality of smallholder farmers – producer and
consumer to be taken into account
◦ Entrenchment of fertilizer subsidies in the African
political agenda
Other areas of research – impact of exit on
households, private sector input markets and networks
10