Social Inclusion Programmes: Experiences and Lessons from the Malawi Farm Input Subsidies Programme

Transcription

1 Social Inclusion Programmes: Experiences and Lessons from the Malawi Farm Input Subsidies Programme Ephraim W. Chirwa Wadonda Consult Limited and University of Malawi

2 Social Inclusion Programmes: Experiences and Lessons from the Malawi Farm Input Subsidies Programme Ephraim W. Chirwa Expert Meeting on Social Inclusion Programmes and their Impact on Sustainable and Inclusive Development and Growth, Geneva, Palais des Nations, November 2014

3 Outline Roles of Input Subsidies Impacts of Input Subsidies on Growth and Development Reflecting on FISP Strategic Issues from the Malawi Experience Objective growth and development oriented Targeting Sustainable Graduation 3

4 Roles of Farm Input Subsidies Social Protection Transfer to vulnerable groups Lower food prices and/or higher wages for recipients & non-recipients Input Profitability Improving profitability of input use Addressing affordability constraints lack of financial services Household and national food security Health, nutrition and education outcomes 4

5 Impacts of Subsidies: LMAP Trap in Malawi PRIVATE SECTOR, NON-FARM ROADS UNSTABLE POLICIES UNSTABLE WEATHER SLOW PRIVATE SECTOR DEVELOPMENT POOR ROADS MAIZE PRICE & TRADE POLICY Low credit Unstable maize prices CREDIT, RESEARCH, EXTENSION, CASH & OIL CROPS Low producer investment Low maize & agric productivity Consumer lock in to low productivity maize INPUT SUBSIDY SOCIAL PROTECTION Low & vulnerable real incomes Low demand for nonagric goods & services 5

6 The Malawi Farm Input Subsidies Programme started in 2005/06 season Targeted programme using input vouchers Targets resource poor smallholder farmers and reaches more than 50% of rural farm households Subsidizes improved maize and legume seeds, and fertilizers for maize production Subsidy on fertilizers started at 70% of market price in 2005/06 to 97% in 2013/14 The volume of subsidized fertilizers has on average been 140,000MT of basal and urea fertilizers 6

7 Impacts of Subsidies: Case of FISP Maybe, it depends on objective outcomes Contested impacts from empirical studies? Productivity? Food security, maybe yes given changes in population Economy-wide (indirect) effects? Population Growth But the issue of population has not been put in context Malawi has more people to feed today than in 2005/06 Yet the level of subsidized inputs have remained the same at about 160,000 MT Between 2001/2 and 2013/14 seasons, consumption requirements have increased by 45% (24% since FISP) But there has been some maintenance of food security in most of the years with FISP (without requiring major imports) 7

8 Percent Percent Agricultural & Economic Growth Impacts? a) Agriculture GDP Growth Rates b) GDP Growth Rates Year of Decade Year of Decade Poverty fell marginally from 52.4% (2005) to 50.7% (2011) Rural poverty increased from 55.6% to 56.6% Ultra-poverty increased from 22.3% to 24.5% 8

9 2001/2 2002/3 2003/4 2004/5 2005/6 2006/7 2007/8 2008/9 2009/ / / / /14 Maize Production Impacts? 4000 '000MT Domestic surplus (deficit) before subsidy (MT) Domestic surplus (deficit) with subsidy (MT) Domestic surplus (deficit) without subsidy (MT) Total consumption (MT) Production with subsidy (MT) Production without subsidy

10 Impacts on Maize Prices Aug 2001Apr 2001Dec 2002Aug 2003Apr 2003Dec 2004Aug 2005Apr 2005Dec 2006Aug 2007Apr 2007Dec 2008Aug 2009Apr 2009Dec 2010Aug 2011Apr 2011Dec 2012Aug 2013Apr Current MK/kg Aug 2001Apr 2001Dec 2002Aug 2003Apr 2003Dec 2004Aug 2005Apr 2005Dec 2006Aug 2007Apr 2007Dec 2008Aug 2009Apr 2009Dec 2010Aug 2011Apr 2011Dec 2012Aug 2013Apr Current US$/kg

11 Programme costs too much? % 60% 50% 40% 30% 20% 10% 0% 2005/6 2007/8 2009/ / /14 Other costs (US$ million) Seed costs (US$ million) Fertiliser costs (net) (US$ million) Programme budget (US$ million) Cost, % MoAFS adjusted budget Budget, % national budget Cost, % GDP 11

12 Benefit Cost Ratios with Growth Multiplier BASE /6 2006/7 2007/8 2008/9 2009/ / / /13 12

13 Framework for Subsidies? Key Principles If well-designed and implemented, production subsidies can promote inclusive growth and development Clear anchor objective one key objective that can achieve multiple outcomes Proxy means tests targeting multiple indicators, not easily manipulated Strong coordination with social protection data gathering and unified targeting criteria Graduation and sustainable subsidization incentives and penalties! Time bound, cohort targeting and pre-announced subsidy levels Strong monitoring and evaluation evidence into practice 13

14 Strategic Changes Growth-Oriented Programme objective Anchor objective to focus on achievement of productivity! To increase land and labour productivity in smallholder food production Other objectives maybe achieved consequentially without explicitly expressing them Food security is implicit in increased maize productivity Increases productivity also deals with improved incomes and hence poverty reduction Improved productivity ensure sustainable outcomes Productivity can lead to farm and non-farm diversification 14

15 Strategic Changes Targeting Targeted households should be resource poor productive smallholder farmers (poor but not ultra-poor) Resource poor unproductive farmers (ultra-poor) should be targeted for social cash transfers If transfers under SCT are lower than under FISP cost savings Other considerations Ensure minimal displacement effects Objective and multidimensional criteria (proxy means tests) Ensure providing platform for stepping-up or stepping-out Strong coordination with social protection programmes to avoid multiple dipping Targeting challenges & costs National identification system, not biometrics only for FISP 15

16 Differentiating Types of Support? Rural Population Category Percept of Rural Population Type of Support Ultra-poor & labour constrained Ultra-poor & non-labour constrained Moderate-poor & labour constrained Moderate-poor & nonlabour constrained Non-poor & labour constrained Non-poor & non-labour constrained 4.2 Social Cash Transfer 17.3 Farm Subsidy + Public Works to support coupon redemption 19.5 Social Cash Transfer 40.0 Farm Subsidy 6.0 None 13.0 None 16

17 Percent Targeting Problems? MDP1+Labour Constraint (LC)/Non-labour constraint (NLC) Ultra-poor & LC Ultra-poor & NLC Moderate poor & LC Moderate poor & NLC Non-poor & LC Non-poor & NLC % Welfare Group % FISP 17

18 MK Billion Metric Tons Targeting SCTP & FISP with price variation 70.0 Supporting 76.7% of Rural Households (20.3% SCTP & 56.3% FISP) 250, , , , , ,520 3,040 4,560 6,080 7,600 9,120 FISP Farmer Contribution MK/bag - SCT FISP Total Quantity Subsidized (MT) 18

19 Strategic Changes Sustainable Graduation Design must embrace the concept of sustainable graduation Fixed subsidy and flexible farmer voucher redemption price or increasing farmer contributions Repeated cohort target and progressive reduction in subsidy Pre-announced future subsidy levels 5-year targeting cycle Subsequent cohorts may entail less people needing subsidies Other considerations Requires complementary interventions soil conservation & fertility, diversification, credit access, extension services, maize markets, farmer organisations Strong internal monitoring and evaluation to determine achievement of objective and graduation conditions 19

20 Farmer Contribution (%) FISP Graduation Model? Productivity (% of target) Monitoring and Evaluation Commercialisation & off farm diversification - farm credit, high value markets, business training Farmer organisations, farm credit, farm diversification, commercialisation Extension services, soil fertility management, National level advocacy on the strategic intent of the programme Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 0 Farmer Contribution Productivity Achievement 20

21 Other Strategic Issues Political commitment to sustainable approaches to subsidization Private sector involvement Fertiliser formulations Budget & tender timing & processes 21

22 Conclusions Agricultural input subsidies can be successful Address critical farm, livelihood & wider economy constraints to input use on staple crops Good physical yield responses to subsidised inputs (soils, seeds, rainfall) Efficient implementation Coherent vision Political commitment (a paradox?) Agricultural input subsidies can also be costly failures Political attractiveness requires strong attention to their effectiveness & efficiency Attention should be paid to efficient targeting, complementary investments and sustainable graduation 22

23 Social Inclusion Programmes: Experiences and Lessons from the Malawi Farm Input Subsidies Programme Ephraim W. Chirwa Expert Meeting on Social Inclusion Programmes and their Impact on Sustainable and Inclusive Development and Growth, Geneva, Palais des Nations, November 2014