Monday, August 1, 2011

What the World Bank Thinks About Fertilizer Subsidies

Last week at the American Agricultural Economics Association meetings I attended a panel on Malawi's fertilizer subsidy program. The program has been touted as a success by the NY Times a few years ago, but the Economist pointed out that the subsidized fertilizer was putting fertilizer sellers out of business.

The World Bank also has an FAQ on the program saying "In combination with favorable rains, this program has contributed to sharp increases in maize harvests in 2006 and 2007. During the most recent harvest, the country produced an estimated 3.4 million metric tons (a surplus of 1.2 million metric tons above national requirements). This has allowed Malawi to start exporting 400,000 t of grain to Zimbabwe and 80,000 t to Swaziland and Lesotho."

My biggest take away from the session was the program was really expensive, taking up 8-12% of Malawi's total government budget a year. I wonder if this is the best use of the funds. As one person at the session pointed out though, they thought this program was more about getting votes than doing what is best for development. It is important to remember development policy also needs to be approved, so sometimes second best is the only options.

More dispatches from the AAEA on chickens from my Towson colleague James Manley

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1 comment:

Bob Gitter said...

Hmmmmm. Does the government have both a comparative and absolute advantage in fertilizer? ;- )