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Government says the size of this year’s fertiliser subsidy will remain the same as last year at around 147,000 metric tonnes.
It should, however, expect to pay for the subsidy through the nose in view of the current depreciation of the local currency.
“The size of this year’s subsidy will not change. But we’re still working on the costing,” Randson Mwadiwa, Secretary to the Treasury confirmed in a telephone interview on Wednesday.
The cost of last year’s subsidy shot from the budgeted K2.5 billion to K4.5 billion (about US$36 million) after Leader of Opposition John Tembo lobbied for inclusion of the tobacco sector.
However, with the current depreciation of the kwacha against the US dollar, the cost of importing the fertilisers is likely to shoot beyond K4.5 billion.
At the time of ordering the fertiliser last year, the local currency was trading at K124 to the US dollar. But this year, the local currency has depreciated to a range of K130-K135 to the dollar.
Mwadiwa said government is currently preparing tender documents for the importation of the fertilisers by private sector companies.
He said a tender for procurement would be advertised soon, in line with a timetable that government has adopted for implementation of the subsidy scheme.
“Our role will be to ensure that the fertilisers land in Malawi in good time, at least starting from August,” Mwadiwa said.
He said full details of the actual procurement cost for this year’s subsidy would depend on the tender documents that would be submitted by private sector.
Current fertiliser subsidies—which succeeded donor-funded input interventions in 2004—have produced mixed results with the 2004 subsidy being poorly executed and last year’s being fairly-well executed.
The 2004 subsidy was dogged by delays in distribution of the fertiliser to farmers as a result of a collapse in procurement negotiations between government and fertiliser.
The result was poor output of the staple grain, maize, which left about five million people in need of food aid.
In turn, government last year opted to work with its own two companies—Smallholder Farmers Fertiliser Revolving Fund of Malawi (SFFRFM) and Admarc—a move which drew the ire of private fertiliser companies as they ended up getting very little from the deal.
Meanwhile, a study on the impact of the 2005 subsidy has recommended that government works together with private sector in implementing this year’s subsidy with the aim of sharing costs and boosting the fertiliser market.
Other key recommendations of the study are drawing a distinction between maize fertiliser coupons and those for cash crop fertilisers to resolve the confusion that was created last year.
Mwadiwa said the recommendations were being considered.
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