Subsidies under spotlight
Bertelsmann Transformation Index (BTI) says massive agricultural subsidies to small-scale farmers, who produce for both consumption and the market, have failed to reduce poverty in the country.
In its country update produced last week, BTI says despite the subsidies, majority of Malawians still grapple in poverty
Said the BTI update: “Approximately half of Malawi’s population still lives in poverty. This situation may seem unexpected considering the existence of subsidies and the country’s history of relative social stability since gaining independence.
“Severe poverty limits individuals’ ability to participate in the wider economy and society, leaving poor voters susceptible to manipulation by politicians.”
The Affordable Inputs Programme (AIP), formerly Farm Input Subsidy Programme (Fisp) has faced implementation challenges over the years, with the donor committee on agriculture and food security urging government to rethink the allocations to the AIP, which consume over half of the funding to the agriculture sector.
The development comes amid mounting pressure on government to shift focus from AIP to provision of extension services and commercialisation to achieve aspirations of the Malawi 2063 (MW2063), the country’s long-term development strategy.
Since the 2005/06 fiscal year, government has implemented Fisp, which in 2020 was rebranded and expanded as AIP, for smallholders to raise productivity and achieve national maize harvest to meet the needs of the population.
Meanwhile, in the proposed 2024/25 National Budget, government has allocated K161 billion towards the AIP, an increase from last year’s K109 billion that targeted 1.5 million beneficiaries.
Ministry of Agriculture asked Treasury for K200 billion to implement the 2024/25 AIP, but government has allocated K161 billion.
On Tuesday, Oxfam in Malawi country director Lingalireni Mihowa urged government to reform AIP by redirecting more resources to productive activities such as commercial agriculture.
She said this in Lilongwe at a high-level meeting on Malawi’s Economic Recovery and Growth organised by Oxfam in Malawi, the Economics Association of Malawi, Malawi Economic Justice Network and Youth and Society, among other partners.
Said Mihowa: “We need to stop being more consumptive in our budget and allocate more resources to productive enterprises such as mega farms.
“It is an area that has shown promise and with more resources, it can produce some meaningful results in terms of local economic development.”
BTI is a measure of the development status and governance of political and economic transformation processes in developing and transition countries around the world.
