Despite the importance of agriculture as driver of the economic growth in Malawi, agricultural sector investments remain volatile, highly reliant on external aid flows, and concentrated in input subsidies for maize cultivation. Consistently with the Malawi Growth and Development Strategy (MGDS) that emphasizes the importance of agricultural and rural development to ensure broad-based economic growth, the level of expenditure on food and agriculture was high from 2005 to 2013 averaging 17 percent of the total government spending according to MAFAP estimates. However, spending levels deviated significantly from the trend in some years as expenditures were reallocated toward non-agricultural sectors and donors suspended direct budget support. In addition, as MAFAP’s price incentive analyses show, producers of several key commodities, including cotton, groundnuts, sugar, and tea, were harmed by prevailing policies and the market environment.

While investments in trade and market infrastructure were significant (i.e. 26 percent of agricultural public expenditure was allocated to road development and rehabilitation), investments in “soft” market infrastructure (e.g. transport and storage services, inspection facilities, information systems etc.) were minimal. Lack of competition in the transport and processing sector, poor enforcement of market and price regulations, and weak contract farming practices, were the main contributors to the high transaction costs encountered by agents of the most relevant export value chains. These constraints, if not promptly addressed, could prevent Malawi from achieving the National Export Strategy 2013-2018 objectives of diversifying exports and enhancing export competitiveness through improved agro-processing and local value addition practices.

Moreover, the explicit focus on maize input subsidies arguably stifles the political will to diversify agricultural production, and crowds out spending on long-term investments in public goods such as research and extension, irrigation, as well as risk management tools to foster the agricultural sector resilience. All of these are primary objectives stated in several programmatic documents such as the MGDS, the Agricultural Sector Wide Approach (ASWAp), and the Green Belt Initiative (GBI).

Further investments in early warning and market information systems are crucial not only for empowering value chains agents to negotiate prices, but also for policymakers to improve the design and implementation of suitable and sustainable policies as well as monitoring their effects.

Download the report: Analysis of public expenditure in support of food and agriculture in Malawi, 2006-2013

For additional information on the indicators shown in the graphs and the terminology used, please refer to MAFAP’s Glossary on Public Expenditure and Methodological Guidelines - Volume II - Public Expenditure. For detailed information on the data provided, please go to the MAFAP database.