Maize subsidy welcome break for the poor

The Malawi government's decision to subsidise the price of maize was seen as a welcome break for the poor in the country who have struggled through months of critical food shortages and malnutrition. Faced with the prospect of over two million people currently receiving food aid in a country where the majority of the population was classified as poor, the government decided to sell maize at last year's price of Kwacha 17 per kilogram (US 20 cents) and subsidise the difference. The announcement was a turnaround on government's decision several years ago to abolish price controls and subsidies in favour of open markets. Although the government was steadily replenishing grain reserves depleted by the controversial sale of surplus stocks, and a poor harvest, millions of people still battled to raise the money to buy food. Malawi was also one of the southern African countries severely affected by the financial drain of HIV/AIDS. And at the height of this year's food shortages, other health problems like a rocketing cholera rate left communities too weak to plant crops and too poor to buy food. "It is a good thing, although for some households it will still not be low enough," Evance Chapasuka, Famine Early Warning Systems Network (FEWS NET) deputy representative in Malawi told IRIN. "But maybe those who can't afford it at all will be targeted through other programmes." Chapasuka said FEWS NET would monitor market prices of the maize but did not think there would be large mark-ups on the government granary ADMARC's prices. "Fortunately free food has been distributed this year, and ADMARC has stocks of maize, unlike last year, which pushed prices up. If the prices increase too much, people can buy directly from ADMARC, although this is difficult for very poor households who can only afford to buy by the plate, which is always more expensive than buying in bulk," he noted. Stanley Hiwa, senior agricultural economist for the World Bank in Malawi said that although increasing the price of maize would have been fiscally correct, it would have sent the wrong message as the government would appear to be making money out of poverty. "An option would have been to target the subsidies at low income households, but that would have required costs for assessments and to print vouchers. Here, if you don't target, 90 percent of the people you will reach are poor, and this informed the government decision." Hiwa explained that the World Bank was not covering the subsidy directly, but the US $50 million credit line given to the country earlier this year for specific programmes including balance of payment support and public works programmes, freed up some government money. "It eases government's fiscal constraints so they are better able to finance the subsidies," he added. However, the British government, which has withheld a tranche of development aid until the International Monetary Fund clears a revised government budget, felt that although not increasing the price was good, it would have preferred the targeted subsidy. "We would have preferred that but our concern now is that those who can't afford the Kwacha 17 must get some help," British High Commission spokesman Michael Nevin said. A World Food Programme (WFP) spokesman said it was currently reaching about 2.3 million people, although this figure would be revised when the results of a recent assessment were finalised. However, Abdelgadi Musallam told IRIN that although WFP cereal supplies were good, they were struggling to maintain the pulse and corn soya blend rations.