Debate resurfaces on subsidies’ exit strategy
President Lazarus Chakwera’s sentiments on subsidies and handouts have reignited debate on whether they should be scrapped to ensure that Malawians graduate to self-reliance.
The President stated in Chikwawa on Wednesday that there were plans to consolidate all subsidies to ensure that beneficiaries get a one-off big chunk and move towards independence than banking on government and its partners every year.
He said: “I had a discussion with the World Bank two weeks ago and I told them that in Malawi we have a bad habit, there are a lot of subsidies in the name of social cash transfers, food for work and even Affordable Inputs Programme [AIP] benefitting the same people year after year.”
But this is not the first time Chakwera has hinted on the exit strategy for the numerous subsidies, especially the AIP which is the Tonse Alliance’s flagship campaign promise that replaced the Farm Input Subsidy Programme implemented by the erstwhile governing Democratic Progressive Party.
Reacting to the sentiments in an interview yesterday, agricultural policy expert Tamani Nkhono Mvula said it is important to first understand why various subsidies exist and why Malawians seem to fail to graduate to independence.
He said poverty triggers most of the existing subsidies, some of which are provided as a start-up to economic activities.
Nkhono-Mvula said: “Like the AIP, for example, I don’t think the problem is having the subsidy itself, but is the subsidy being transformative? Because most of the food that we eat is produced by smallholder farmers.
“If you look at most of these smallholder farmers, they are not in a position to access inputs such as fertiliser and seed. This is why the government has to come in with support in the form of subsidies.”
He said there is no need to remove subsidies as elsewhere, including in the European Union, farmers are also provided with subsidies.
But in a separate interview, Mwapata Institute executive director William Chadza welcomed Chakwera’s stance on the subsidies as positive and progressive policy direction.
He said this could be an opportunity to revisit the conversation around AIP reforms and take some bold steps.
Chadza said: “Government needs to unbundle AIP beneficiaries and isolate those that would be better supported through social protection.
“Then support the productive group with inputs on the understanding that it is a graduation process since currently, it is very likely that the same beneficiaries that received AIP packages are participating in the food for work and are also receiving social protection support.”
However, he said the challenge would be for technocrats to capitalise on the pronounced policy position and begin to translate it into some technical actions and programming.
When contacted to elaborate on the President’s strategy, presidential secretary Anthony Kasunda yesterday said the best way was to look at various issues to do with the subsidies.
He said government ministries, departments and agencies were better placed to explain.
“So, take these issues to responsible ministries, departments and agencies and not necessarily the President as an implementer,” Kasunda said.
In a joint analysis of the K1.9 trillion 2021/22 National Budget, the Economics Association of Malawi, Oxfam in Malawi and Lilongwe University of Agriculture and Natural Resources, questioned the rationale behind continued allocation of huge resources to input subsidies to achieve food security when government also buys relief maize for vulnerable populations.
Former minister of Finance Felix Mlusu in June 2021 said the AIP exerted pressure on the budget, but government could not stop it because it originated from an election campaign promise.
Our sister newspaper, Weekend Nation reported that a whopping K900 billion has been spent on input subsidies in the past 17 years, but did not lift the poor from food insecurity forcing government to spend another K500 billion to buy relief food to feed them.
On Tuesday this week, London-based think-tank Legatum Institute launched a report of its study titled ‘Pathways to Prosperity’ in Lilongwe which challenged government to enhance agricultural productivity through mindset change by moving away from fixed subsidies to increased private sector participation, among others.
The report recommended a shift in focus from AIP to provision of extension services and commercialisation to achieve aspirations of the Malawi 2063, the country’s long-term development strategy.
