Policy Options For Fertilizer Subsidy Reforms In Rwanda A Simulation Based Analysis And Synthesis Of Prior Studies
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Policy options for fertilizer subsidy reforms in Rwanda: A simulation-based analysis and synthesis of prior studies
Author: Spielman, David J.
language: en
Publisher: Intl Food Policy Res Inst
Release Date: 2022-10-28
Agricultural input subsidies are a prominent feature in the 2018-2024 Strategic Plan for Agricultural Transformation (PSTA 4), which is designed and implemented by the Ministry of Agriculture and Animal Resources (MINAGRI). By reducing the cost of improved seed and inorganic fertilizers, subsidies are designed to accelerate the use of these productivity-enhancing inputs, thereby increasing agricultural yields and output, increasing rural incomes while reducing food prices, and improving food security in line with PSTA 4’s targets. However, questions arise about whether the current input subsidy rates and levels are sufficient to increase crop production and meet the PSTA 4 targets, and whether the subsidy system can be expanded in the current economic climate and fiscal situation caused by the COVID-19 pandemic and spike in global fertilizer prices. This paper examines the impact of an increase in the price of fertilizer in Rwanda using seasonal production data from National Institute of Statistics of Rwanda (NISR) in a microsimulation model aimed at three priority crops—maize, rice, and Irish potato—and the three main fertilizers in use—diammonium phosphate (DAP), urea, and NPK.
Agricultural Producer Subsidies
Author: David Amaglobeli
language: en
Publisher: International Monetary Fund
Release Date: 2024-08-26
The objectives underlying agricultural output subsidies can have conflicting implications for the design of subsidy programs. As they tend to affect meaningful swaths of the electorate, subsidies can also be an attractive political instrument. By artificially lowering production costs or assuring higher output prices, direct support measures can result in resource misallocation in instances where they fail to address market failures, such as imperfect information about the returns to fertilizers. Subsidies can also contribute to fertilizer overuse, harming the environment and the agricultural sector in the long term. Furthermore, agricultural production subsidies are often fiscally costly and unfavorable compared to alternative uses of public funds—both within the agricultural sector and outside it—to achieve the same ends. Various design and implementation challenges amplify the shortcomings of producer subsidy programs.
Fertilizer subsidies in Malawi: From past to present
Author: Benson, Todd
language: en
Publisher: Intl Food Policy Res Inst
Release Date: 2024-02-12
Malawi has been at the center of the debate on agricultural input subsidies in Africa ever since it significantly expanded its fertilizer subsidy program about two decades ago. When it did so, Malawi was a trailblazer, receiving international attention for seemingly leveraging the subsidy program to move the country from a situation characterized by food deficits and widespread hunger to crop production surpluses. In this paper we trace the history of Malawi’s subsidy program over the past 70 years, describing how the country arrived at that watershed moment earlier this century and how the subsidy program has developed since. We show how donor support for the program has wavered and how external pressure to remove the subsidy has repeatedly been unsuccessful. We also demonstrate how over the years the program’s total fiscal burden has fluctuated significantly. However, we find that since the expansion of the subsidy program in 2004, the fiscal costs of the program have shown little correlation with the maize harvest that same agricultural season. We show that the subsidy program has succeeded in raising awareness about the value of the fertilizer for increased crop productivity. However, despite its continued prominence in the country’s agricultural policy, most Malawian smallholder do not manage to grow sufficient maize to feed their households throughout the year, and every year millions depend on food assistance during the worst months of the lean season.