The 2012/13 budget for the Farm Input Subsidy Programme (Fisp) has swelled 40.3 percent to K57 billion from the initial allocation of K40.6 billion largely propelled by the increase fertilisers procured.
The Malawi Government statement on Monday indicated that it has allocated K57 billion for the purchase of 155 000 metric tonnes of fertilisers comprising 77 500 metric tonnes of Urea and 77 500 metric tonnes of NPK fertilisers which is being distributed to 1.54 million from an initial 1.4 million farm families in 2011 at a price of K500 per 50 kilogramme bag.
Initially, government had allocated K40.6 billion for the purchase of 150 000 metric tonnes of fertilisers comprising 75 000 metric tonnes of Urea and 75 000 metric tonnes of NPK fertilisers to benefit.
“At current exchange rates, the K500 means that the farmer is paying less than half last year’s price and thus a substantial cash transfer to the rural populations,” it says.
Within the Fisp, K7.6 billion was allocated for the procurement of maize and legume seeds for distribution to smallholder farmers across the country.
Government said this is expected to improve not only food security, but also nutritional security through the legumes.
In the same plan, government also allocated K1.3 billion for the purchase of maize from farmers for the Strategic Grain Reserves (SGR) to help government provide food to the poor during the lean months.
In the same year, government has also scaled up the implementation of social safety net programmes in the 2012/13 fiscal year to cushion the vulnerable from the dire effects of devaluation.
The Reserve Bank of Malawi (RBM) devalued the kwacha by 49 percent and subsequently adopted a market determined exchange rate on May 7 2012 with the aim of jacking up the economy.
Economic commentators have given differing opinions on the impact of the monetary policy reform with others saying they were a necessary evil while others contend they have brought misery onto Malawians’ lives.
“Government in partnership with its development partners has scaled up implementation of social safety net programmes during 2012/13 financial year. These programmes are aimed at assisting the poorest in our communities to cope with the unintended effects of the reforms,” says the statement.
It says K27.5 billion was allocated for social support programmes, particularly labour intensive public works programme, school feeding programme, schools bursaries programme targeting 16 480 needy students and social cash transfer programme.
“The devaluation and the subsequent floatation of the kwacha have directly benefited exporters beginning with tobacco farmers during the 2012 marketing season. As a result farmers have expanded the production of various export crops for the forthcoming season in order to take advantage of the opportunities that have been accorded by the liberalised environment.”
But the Consumers Association of Malawi (Cama) and its membership countrywide have said the flotation of the kwacha has brought misery on Malawians, and have called for public demonstrations on January 17 2013.
In their six-point petition issued last Thursday in Blantyre to be presented to President Joyce Banda, the organisers have asked government to immediately stop the flotation of the kwacha.
They argued that the flotation of the currency should have been done only after certain conditions were achieved such a flexible exchange rate regime to defend the kwacha against speculative attacks and prevent its free fall.
Some analysts have argued that a flexible exchange rate regime poses a challenge to businesses in planning for expenditures due to the volatile operating environment.
They argue that a weakening currency increases external liabilities for companies that have foreign currency liabilities on their balance sheet and also results in soaring inflation; hence, reducing disposable income and increasing the cost of capital as authorities increase interest rates to contain the rising inflation.