The Economywide Impacts and Risks of Malawi's Farm Input Subsidy Programme

We estimate the impact of Malawi's Farm Input Subsidy Programme using an economywide approach. We find potentially substantial net benefits with indirect benefits accounting for about two-fifths of total benefits. Due to these indirect benefits, the cut-off at which lower fertilizer yield response rates lead to net programme losses is much lower than the value suggested by existing partial equilibrium evaluations. Benefits decline with domestic financing and real fertilizer price increases. Abstracting from extreme events, Malawi's programme potentially generates double dividends through higher and more drought-resilient yields. Overall, our results buttress arguments for patience and a focus on programme efficiency improvements