June 13, 2005

Tax reforms and subsidies for farmers announced

Malawian civil society has welcomed tax reforms and subsidies for agricultural inputs in the 2005/06 budget that will ease the burden of small-scale farmers plagued by poor harvests again this year. By unveiling the budget Finance Minister Goodall Gondwe described the reforms as an attempt to "improve the economic buying power of individual Malawians", and said those earning less than US $40 a month would not be taxed. The government has also allocated $18 million for fertiliser subsidies and about $14 million to the Public Works Programme. "The increase of the tax-free income means that the majority of smallholder farmers will be exempt from taxes," the Minister announced.
Gondwe also revealed that about $45 million would be spent on procuring and distributing maize: the government is to buy 300.000 mt of maize, 250.000 mt of which would be distributed and the rest sold at a subsidised price. A prolonged dry spell and inadequate inputs has affected harvests in the main maize-growing areas in south and central Malawi. "... the disappointing harvest has necessitated that the importation of maize should once again be a major element of the budget. This is the largest amount that has ever been imported, and reflects government's view of the intensity of maize shortage," Gondwe told parliament.
According to the Malawi Vulnerability Assessment Committee, a production shortfall of over 600,000 mt, a strategic grain reserve of 15.000 mt and imports (including informal cross-border trade) of 104.000 mt, meant the country could face an overall cereal shortage of 482.000 mt. Food aid of 271.000 mt was expected to bring this down to 210.000 mt. According to Gondwe, the British Department for International Development and the European Union would co-fund the importation and distribution of maize in the northern and central regions, while the local Malawi Nation daily newspaper quoted him as saying that the World Bank and the International Monetary Fund had also pledged financial support.
Parliament heard that free food, procured from South Africa, was already being distributed in some areas, while the World Food Programme was providing food in parts of southern Malawi. Gondwe also announced that government had organised a Public Works Programme in every district to give families opportunities to earn money, which would in turn be used to buy subsidised fertiliser. The Expanded Targeted Input Programme, launched in 2004 to ensure that poor households had access to small quantities of free seed and fertiliser, would be replaced by the public works programme and the subsidy scheme. Rafiq Hajat, executive director of the Institute for Policy Interaction, described the budget as "very promising ... food security is vital for Malawi ... but what remains now is the implementation". (IRIN)

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