The Malawi Agricultural Inputs Subsidy Programme, 2005/6 to 2008/9

The implementation in Malawi of a large scale agricultural input subsidy programme in 2005/6 and subsequent years has attracted significant international interest. This paper reviews the background, implementation and impacts of the programme from 2005/6 to 2008/9. The programme is estimated to have raised national maize production by 26 to 60 percent. In so doing, the programme has contributed to wider economic growth and poverty reduction through increased food availability and higher real wages. The benefits of the programme relative to its costs have varied widely between years, depending on fertilizer and maize price levels, estimated yield responses to subsidised inputs, and the extent to which expenditure on input subsidies leads to greater use of inputs rather than displacement of commercial input purchases. On average, estimated benefit-cost ratios over the four years of the input subsidy programme have been modest but standard benefit-cost analysis does not capture all the benefits of the programme. There is considerable scope for changes in programme implementation to raise effectiveness, efficiency and benefits in delivering growth, poverty reduction and food security, but there are also practical and political difficulties regarding the implementation of some of these changes and questions about their effects. Consideration of applying Malawi’s subsidy experience to other countries should take account of special characteristics of the Malawian maize economy, of ways of improving programme effectiveness and efficiency, and of possible returns that can be achieved from alternative public investments.