Experts back World Bank recommendation on AIP
Economic and agriculture experts have backed a recommendation from the World Bank to redirect funds allocated to agriculture subsidies to clean energy sources following its perceived failure to achieve intended outcomes.
The experts were responding to a recommendation the Bretton Woods institution made in its report titled: ‘Detox development: Repurposing environmentally harmful subsidies,’ urging member countries to redirect funds allocated to agriculture subsidies and re-invest them in clean energy to spur economic transformation.
Reads part of the report: “Subsidies are often substantial relative to GDP [gross domestic product], so policymakers must be transparent in their plans for reallocating the revenues from a subsidy reform in a way that is consistent with long-term development strategies.
“Depending on a country’s specific needs, revenues from reform could be used to invest in infrastructure—such as low-carbon electrification, public transit, digitisation, or irrigation—or improved health care coverage, public education services, or institutional and tax reform.”
Reacting to the development, Mwapata Institute executive director William Chadza said in an interview on Tuesday that the World Bank’s recommendation has merit, considering that the AIP, the current iteration of the subsidy programme is experiencing challenges of ineffective targeting.
He said: “The dominance of the subsidy in the Ministry of Agriculture budget has crowded out other programmes such as research, extension, irrigation and livestock that if they were financially supported could bring more returns.
“I think it is possible to repurpose our agricultural policies and support and get more returns via agricultural diversification and commercialisation.”
In a separate interview, Malawi University of Business and Applied Sciences associate professor of economics Betchani Tchereni said the bank is right to call for a transition from subsidies, but stressed that the World Bank’s proposal would promote energy and economic inequalities.
“It is true that the subsidies have gone up in cost, but have not produced the intended results. However, the problem I have with the proposal is that it ignores that most of the economic powers developed on [so-called] dirty energy,” he said.
University of Malawi associate economics professor Winford Masanjala during a Ben Kaluwa Seminar Series titled ‘Can Malawi sunset the fertiliser subsidy programme? An analysis of policy options’ early this month, backed the continuation of fertiliser subsidies, but has proposed reforms that include grouping smallholder farmers into various categories based on needs and economic status.
In the 2023/24 budget, government allocated K117 billion for the AIP.
