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Submitted by Anonymous on
I strongly agree with the Zambian example contribution. Fertilizer subsidy has had significant positive contribution to yield in Malawi too and most poor households have have very good 5 years with enough food. Yes other public investments are important but this has had significant impact in short term to large number of poor people. Most of the contributions above seems to make simple assumptions that cost of input (fertilizer) should be paid back by the revenue from output (maize) hence providing credit could have a similar impact. I have met several people making the same connections but one thing that is most times forgotten is that the increased output is not easily liquidized to purchase fertilizer in subsequent years. This is a fundamental problem in subsidizing a food crop with low prices in developing countries where markets are imperfect or unavailable. Yes, increase in output reduces the food prices, but this is a benefit to very few people, less that 10% of the population. Almost all rural households grow their own maize and a large number of potential urban buyers are growing their own maize in rented land around the cities. This drastically reduces the demand for maize hence very low prices, that does not help the farmers to get enough revenue to finance fertilizer in the subsequent year. Therefore. government intervention in such market imperfection can be justified in short run while creating an enabling environment for market development either internally of export. Malawi is now facing some serious economic problems due to huge expenditures on fertilizer subsidy that are not paying back because of lack of markets or liquidation of the surplus output. However, the alternatives to supporting large poor food insecure populations are not viable in short run. No wonder they are still sticking to the program ...the better devil!!