## insea2024002 — Introduction

## Source details

**Canonical URL:** [insea2024002 — Introduction](https://www.imf.org/-/media/files/publications/imf-notes/2024/english/insea2024002.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/imf-notes/2024/english/insea2024002.pdf.md)
- [Structured JSON version](/-/media/files/publications/imf-notes/2024/english/insea2024002.pdf.json)

---

### Overview and key facts
- Agricultural producer subsidies are prevalent, large, and deployed to achieve diverse and, at times, overlapping policy objectives.
- Among countries accounting for 90 percent of global GDP, food and agriculture subsidies amount to 0.3–0.7 percent of GDP over the past decade and a half.
- More than half of total government support to the food and agriculture sector goes to agricultural producer subsidies; only a quarter is dedicated to support for public goods in the sector.
- Farmer subsidies were used by many governments in response to rising global food prices stoked by Russia’s invasion of Ukraine.

### Purpose, scope, and structure of the paper
- Purpose and scope:
  - Explores policy objectives, scope and size, economic impacts, drivers of success/failure, and alternative expenditure measures.
  - Focuses mainly on expenditure programs of direct support to producers (fiscal subsidies and price incentives).
- Structure (overview of sections):
  - Definition of “agricultural producer subsidies.”
  - Empirical overview of size and scope globally and by country group.
  - Intended benefits and actual limitations: efficiency, distributional, environmental/climate, international spillovers; alternatives.
  - Political economy and persistence.
  - Conceptual argument and assumptions for input and output subsidies.
  - Targeting opportunities and constraints; design and implementation constraints.
  - Final policy considerations.

### Farmer categories and differentiated impacts
- Farmer categories:
  - Commercially oriented farmers: higher production costs from rising input prices may be partially offset by higher output prices; price volatility affects profitability.
  - Subsistence-oriented farmers: may be unable to afford commercial inputs, risk reducing food intake or selling productive assets, compromising future productivity.
  - Net food buyers (relying on cash crops or nonfarming income): face significant risk from rising food prices.
- Many farmers in low- and middle-income countries fall into the latter two categories.

### Size, composition, and trends (exact figures)
- 2013–18, among 89 countries:
  - 57 percent of government support to food and agriculture allocated as subsidies to farmers.
  - Around 25 percent dedicated to public goods in the sector.
  - 17 percent flowed to food-related subsidies to consumers.
- Modalities of producer subsidies (shares of producer subsidies):
  - Input support: 38 percent
  - Subsidies connected to other factors of production (e.g., land): 30 percent
  - Decoupled producer subsidies (lump-sum, environmental outcomes): 28 percent
  - Output price support: 4 percent
- Global time-series estimates (country-level, 18-year panel, ~90 percent of global GDP):
  - Input subsidies and direct monetary transfers on the basis of outputs and other factors: between 0.32 and 0.43 percent of GDP over time.
  - Including all explicit and implicit subsidies from domestic and border policies: between 0.35 and 0.68 percent of GDP.
- Spikes in subsidies observed in:
  - 2009 (global food price shock)
  - 2020 (COVID-19)
- Income-group patterns:
  - EMEs (excluding EU) provided higher amounts (as percent of GDP) of input, food, explicit output, and other subsidies than AEs and LIDCs, reaching 0.7 percent of GDP during the food-price spike more than a decade ago.
  - Overall direct support to agriculture in LIDCs has been strongly negative for most years—driven by implicit taxation of outputs.
  - Dataset coverage: represents ~90 percent of global GDP overall but only 62 percent of LIDC GDP; representation of EMEs and AEs is 82 and 93 percent of GDP, respectively.
- Regional patterns:
  - Subsidies lowest, and often negative, in sub-Saharan Africa; relatively low in Latin America and the Caribbean; stable in AEs (including EU); highly volatile elsewhere.
  - Implicit output price support raises overall subsidization in AEs (including EU) and especially in Emerging Europe (without EU).
  - Emerging and Developing Asia: implicit support started negative and became strongly positive after the late 2000s.
  - Strong implicit taxation of LIDC agriculture is primarily a sub-Saharan African phenomenon.
- Global shares by country group:
  - Subsidies largest in AEs (with EU) and EMEs (without EU); generally declining in AEs and rising in EMEs.
  - Input and explicit output/other subsidies minimal (as share of global GDP) in LIDCs; mostly negative when including implicit support.
  - Overall subsidy support in AEs and the EU combined is on steady decline; Emerging/Developing Asia is rapidly rising.

### Historical evolution and regional examples
- Input subsidies widespread in developing countries in the 1960s and early 1970s, declined in the 1980s–1990s, re-established in early 2000s.
- Over past two decades, input subsidy programs became common again, particularly in sub-Saharan Africa.
- Country examples and program statistics (selected, exact figures preserved):
  - Kenya Fertilizer Subsidy Program, 2023:
    - Max. 200 kg (4 bags) fertilizer per acre cropland; max. 100 bags
    - 5 million farmers registered; 6 million bags available
    - Registered farmers only; roll-out by target district
    - 54 percent of fertilizer cost
    - 0.025 percent of GDP
  - Malawi Affordable Inputs Program, 2020/21–2022/23:
    - 5–7 kg maize, sorghum, or rice seed; 100 kg fertilizer
    - Around 3.7 million in 2020/21 and 2021/22; 2.5 million in 2022/23
    - Almost all smallholders in 2020/21; two-thirds in 2022/23
    - 33 percent of seed and fertilizer costs in 2020/21
    - 0.7 percent of GDP, 2020/21–2022/23
  - Nigeria Growth Enhancement Support Scheme, 2012–14:
    - 100 kg fertilizer
    - 7.2 million in 2014
    - “Poor” farmers, but criteria used to identify them not clear
    - 50 percent of fertilizer cost
    - 0.2 percent of GDP in 2014
  - Rwanda Crop Intensification Program, 2015–22:
    - Subsidy applied at point of input sale; effectively an untargeted subsidy of 65 percent to 85 percent of market price in 2021/22 depending on fertilizer type
    - 0.15 percent of GDP
  - Zambia Comprehensive Agricultural Support Program (formerly Farmer Input Support Program):
    - In 2022/23: 300 kg fertilizer; 10 kg maize; 20–25 kg groundnut or soybean seed
    - About two-thirds of all smallholders in 2021/22 and 2022/23
    - Less than 10 percent of seed and fertilizer cost
    - 3.3 percent of GDP in 2019/20
  - Additional program-level figures:
    - 1.95 million— two-thirds of smallholders
    - Resource-poor smallholders with between 0.4 and 2.0 hectares
    - 50 percent of seed and fertilizer cost
    - 0.25 percent of GDP from 2017 to 2022

### Intended objectives and political economy
- Key objectives motivating subsidies:
  - improving food access and availability,
  - reducing import dependence,
  - stabilizing prices,
  - boosting returns on farmers’ investments,
  - stimulating rural economic development,
  - sustaining competitiveness.
- Objectives can conflict for program design; subsidies are politically salient because they affect meaningful swaths of the electorate.

### Efficiency, environmental, and fiscal concerns
- Direct support that lowers production costs or assures higher output prices can cause resource misallocation and deadweight losses when failing to address market failures.
- Subsidies can contribute to fertilizer overuse, groundwater and surface-water contamination, agricultural extensification (deforestation), and long-term harm to the agricultural sector.
- Agricultural production subsidies are often fiscally costly and may be unfavorable compared to alternative public expenditures within and outside the sector.

### Design and implementation shortcomings (operational failures)
- Implementation problems reducing agronomic efficiency and program impact:
  - delays in delivering inputs to farmers (e.g., after planting rains),
  - inadequacies in tailoring input package size and composition to crops, land size, and soil conditions,
  - mistargeting of beneficiaries,
  - high administrative costs from low capacity,
  - leakages, smuggling, and rent-seeking/corruption.
- Empirical agronomic response example:
  - Expected maize response: "around 8 kg of maize grain for every kg of fertilizer applied" under good conditions.
  - Observed in Malawi evaluation: response rate of only 2.7 kg of maize grain per kilogram of fertilizer applied over three years.

### Targeting trade-offs and administrative costs
- Targeting can improve efficiency and equity and lower fiscal cost; input subsidies are more suitable for targeting than output price supports.
- Trade-offs:
  - Targeting aligning with food security may conflict with promoting agricultural growth.
  - Small farmers are more likely to be food insecure than nonpoor commercial farmers whose returns on inputs may be higher.
  - More targeting entails higher administrative costs and information systems; retail-point monitoring or cooperative membership may be required.

### WTO compliance and transparency
- Subsidies should be consistent with WTO rules as laid out in the joint IMF, OECD, World Bank, and WTO report (IMF and others 2022).
- Trade- or production-distorting effects need avoidance; where measures distort production and trade, they should be limited and not exceed WTO limits.
- Measures should be implemented transparently, including timely notification to the WTO.
- Countries should support multilateral cooperation on agricultural reforms at the WTO, including new rules on domestic support and public stockholding for food security purposes.

### Reform sequencing and market systems
- Reform design and sequencing should ensure systems for efficient marketing and distribution of inputs and outputs exist.
- Past initiatives to eliminate producer subsidies (1980s and 1990s) show private market systems and input retailers did not always emerge to replace government supply.
- Structural reforms should accompany gradual subsidy phaseout to enable private delivery systems to meet farmers’ demands.

### Conceptual frameworks: input and output subsidies (summary)
- Input subsidies:
  - Rationale: overcome information problems and financial risks while farmers learn to use commercial inputs; accelerate adoption of high-productivity technologies.
  - Partial-equilibrium effects: reduce marginal cost, shift supply from S to S’, lower consumer price to P’, raise quantity to Q’; fiscal cost equals area between new and unsupported prices over subsidized quantity; deadweight loss where benefits < fiscal cost.
  - If subsidies address learning/externality market failures, supply shifts may persist after removal.
- Output subsidies:
  - Rationale: guarantee minimum prices to reduce price uncertainty at planting.
  - Effects/limits: likely to raise production of targeted crops but not total agricultural production due to low short-term supply elasticity; can alter sector composition and raise consumer prices, affecting poor households.

### Buffer stocks and price-setting approaches (Box 1 highlights)
- Approaches to setting supported output prices:
  - Based on average total cost of production under normal conditions.
  - Border prices (import or export parity) as reference.
  - Parity considerations: terms-of-trade parity, crop-based price parity, income parity.
- Buffer stock operational model:
  - Agency buys when market price < floor and sells when market price > ceiling; narrower price bands increase intervention frequency and fiscal cost.
- Costs/risks:
  - Storage capacity, logistics, financial resources, stock deterioration, reduction of private storage, and skewing consumption toward cereals and lower-quality calories.

### Use of vouchers and e-vouchers (Box 3 highlights)
- Vouchers have largely replaced direct physical distribution since about 2000 to enable private input supplier participation.
- E-vouchers increasingly used due to mobile-phone coverage; they reduce leakages but create operational challenges (illiteracy, connectivity, hardware, awareness).
- Empirical substitution estimates (Jayne and others 2018):
  - Each metric ton (1 MT) of subsidized fertilizer raised total fertilizer use by 0.38 MT in Kenya.
  - Each metric ton (1 MT) of subsidized fertilizer raised total fertilizer use by 0.55 MT in Malawi.
  - Each metric ton (1 MT) of subsidized fertilizer raised total fertilizer use by 0.58 MT in Zambia.
- Consequence: subsidies increased inputs used but production/food-security impact was significantly lower due to diversion of inputs.

### Trade, global distortion effects, and alternatives to subsidies
- Trade restrictions (import tariffs, nontariff barriers, export restrictions) can act similarly to output or input subsidies and may be used by LIDCs with limited fiscal space.
- High producer subsidies in AEs can create negative spillovers on LIDCs, hindering competitiveness.
- Trade liberalization can address some subsidy objectives without distortions and reduce volatility when country-specific shocks dominate.
- Alternative public spending that can be more effective than producer subsidies:
  - Agricultural R&D.
  - Extension services.
  - Agricultural infrastructure (for example, irrigation).
  - Rural infrastructure (information and communication technology, transport, electrification).
  - Land governance to secure property rights.
  - Strengthening agricultural financial markets.
  - Cash transfers to farmers.
- Green subsidies and payments for ecosystem services remain a minor share of subsidies, mainly in advanced economies, with muted impact and high compliance-monitoring costs.

### Policy recommendations and sequencing (illustrative measures from Table 2)
- Input subsidy where objective is incomes of commercialized/nonpoor farmers; administrative capacity Low; international price Medium or High; fiscal space Limited:
  - Phase out subsidies in the short term; create enabling regulatory environment for private agents in input supply chain.
- Input subsidy where objective is food security of consumers; administrative capacity Medium or High; international price Medium or High; fiscal space Some:
  - Gradually phase out (medium term); temporary, targeted cash transfers to most vulnerable consumers; public goods spending; reduce restrictions on food imports.
- Untargeted input subsidy where objective is agricultural productivity; administrative capacity Medium or High; international price Low or Medium; fiscal space Substantial:
  - Short term: target more narrowly to productive farmers; ensure subsidies address market failures; support public-goods spending.
- Untargeted input subsidy for food security of small subsistence farmers; administrative capacity Medium or High; international price Low; fiscal space Limited:
  - Short term: target more narrowly to poor subsistence farmers; medium term: gradually remove subsidies; strengthen extension services; social assistance during reduction.
- No subsidy (aggregate agricultural development/productivity objective); fiscal space Some or Substantial:
  - Maintain no-subsidy policy and strengthen public goods spending (extension, R&D, rural roads, rural electrification).
- Output subsidy where objective is income support for farmers of exported commodity; administrative capacity Low or Medium; international price Low; fiscal space Some:
  - Gradually reduce price floor; institute/strengthen social assistance; public investment in infrastructure; reduce agricultural trade distortions.
- Narrow farmgate price band for domestically consumed output where objective is income stability; administrative capacity Low or Medium; international price Low/Medium/High; fiscal space Some:
  - Gradually widen price band; adjust band around long-term market price trends; support market information systems; improve public infrastructure; limit marketing board activities to public-goods provision.

### Final policy considerations and political economy
- Subsidy reform requires attention to political economy: long-standing subsidies shape expectations; exits are rare without careful sequencing and communication.
- Smart exposure (information dissemination highlighting valuable public services) can raise political support for alternatives.
- Few empirical cases of permanent subsidy elimination; notable exception: New Zealand abolishing nearly all agricultural subsidies in the mid-1980s as part of broad economic reforms.

*IMF Note NOTE/2024/002 — Agricultural Producer Subsidies: Navigating Challenges and Policy Considerations; David Amaglobeli, Todd Benson, and Tewodaj Mogues; August 2024.*

### Introduction ...........................................................................................................

### Introduction

### Overview
- Agricultural producer subsidies are prevalent, large, and deployed to achieve diverse and, at times, overlapping policy objectives.
- Among countries accounting for 90 percent of global GDP, food and agriculture subsidies amount to 0.3–0.7 percent of GDP over the past decade and a half.
- More than half of total government support to the food and agriculture sector goes to agricultural producer subsidies, and only a quarter is dedicated to support for public goods in the sector.
- Farmer subsidies were used by many governments in response to rising global food prices stoked by Russia’s invasion of Ukraine.

### Intended Objectives and Political Economy
- Key objectives motivating subsidies include:
  - improving food access and availability,
  - reducing import dependence,
  - stabilizing prices,
  - boosting returns on farmers’ investments,
  - stimulating rural economic development,
  - sustaining competitiveness.
- These objectives can have conflicting implications for subsidy program design.
- Subsidies can be an attractive political instrument because they tend to affect meaningful swaths of the electorate.

### Efficiency, Environmental, and Fiscal Concerns
- By artificially lowering production costs or assuring higher output prices, direct support measures can result in resource misallocation.
- Where subsidies fail to address market failures (for example, imperfect information about the returns to fertilizers), they can result in deadweight losses.
- Subsidies can contribute to fertilizer overuse, harming the environment and the agricultural sector in the long term.
- Agricultural production subsidies are often fiscally costly and unfavorable compared to alternative uses of public funds—both within the agricultural sector and outside it—to achieve the same ends.

### Design and Implementation Shortcomings
- Numerous inefficiencies from design and operational failures result in farmers attaining significantly lower yield responses with subsidized inputs compared to potential yields.
- Prominent implementation problems include:
  - delays in delivering inputs to farmers,
  - inadequacies in tailoring the size and composition of input packages to match specific requirements of crops, land size, and soil conditions,
  - mistargeting of beneficiaries,
  - high administrative costs arising from low capacity,
  - leakages.

### Targeting Trade-offs and Administrative Costs
- Targeting producer subsidies can improve efficiency and equity and lower fiscal cost.
- Input subsidies are more suitable for targeting than output price support programs.
- Targeting may require compromising on some objectives:
  - moving from an untargeted to a targeted program may align with the food security objective, but it may conflict with the objective of promoting agricultural growth.
  - small farmers are more likely to face food insecurity than nonpoor commercial farmers whose returns on inputs may be higher.
- More targeting comes at a higher administrative cost.

### WTO Compliance and Transparency
- Implementation of agricultural subsidies should be consistent with World Trade Organization (WTO) rules as laid out in the joint IMF, OECD, World Bank, and WTO report on subsidies and trade (IMF and others 2022).
- Trade- or production-distorting effects need to be avoided; where measures do distort production and trade, they should be limited and not exceed WTO limits.
- Measures should be implemented transparently, including timely notification of agricultural domestic support measures to the WTO.
- Countries should support multilateral cooperation in advancing negotiations on agricultural reforms at the WTO, including new rules on domestic support and public stockholding for food security purposes.

### Reform Sequencing and Market Systems
- The design and sequencing of reforms to remove agricultural subsidies should be attentive to the need for systems that can ensure efficient marketing and distribution of agricultural inputs and outputs.
- Lessons from past initiatives to eliminate producer subsidies (including those from the 1980s and 1990s) show that market systems and private sector agents, such as agricultural input retailers and distributors, did not always emerge to step into the void.
- Carefully designed structural reforms should accompany gradual subsidy phaseout to enable private delivery systems to meet farmers’ demands.

*IMF Note NOTE/2024/002 — Agricultural Producer Subsidies: Navigating Challenges and Policy Considerations; David Amaglobeli, Todd Benson, and Tewodaj Mogues; August 2024.*

### Introduction

### insea2024002 - Introduction

### Purpose and scope
- Explores key dimensions of agricultural producer subsidies: policy objectives, scope and size, economic impacts, and drivers of success or failure.
- Examines policy considerations and alternative expenditure measures that may better achieve stated subsidy goals.
- Focuses mainly on expenditure programs of direct support to producers.

### Structure of the paper (overview)
- Defines “agricultural producer subsidies.”
- Empirical overview of the size and scope of food and agriculture subsidies globally and by country group.
- Discussion of “Intended Benefits and Actual Limitations of Producer Subsidies”: efficiency, distributional, environmental/climate consequences, and international spillovers; plus alternative measures.
- Political economy factors and implications for policy persistence.
- “The Conceptual Argument for Agricultural Subsidies and the Underlying Assumptions”: economic logic and features of input and output subsidies, fiscal and social costs.
- “Targeting Producer Subsidies: Opportunities and Constraints”: opportunities and constraints to targeting.
- “The Design and Implementation of Agricultural Producer Subsidies”: implementation constraints.
- Final section: policy considerations for agricultural producer subsidies.

### Farmer categories and differentiated impacts
- Three farmer categories with distinct exposure to price shocks:
  - Commercially oriented farmers: higher production costs from rising input prices may be partially offset by higher output prices; price volatility affects profitability.
  - Subsistence-oriented farmers: may be unable to afford commercial inputs, risk reducing food intake or selling productive assets, compromising future productivity.
  - Net food buyers (relying on cash crops or nonfarming income): face significant risk from rising food prices.
- Many farmers in low- and middle-income countries fall into the latter two categories.

### Forms of public intervention in food and agriculture (focus)
- Direct support to producers (this paper’s main focus): fiscal subsidies to producers and price incentives covering inputs (fertilizer, improved seeds), pesticides, animal feed, irrigation water, farming equipment, electricity and fuel for agricultural machinery and infrastructure; and output price support.
- Other interventions include: food subsidies to consumers; public-goods spending (e.g., agricultural R&D); price controls; taxation and VAT concessions on agricultural products.
- In this paper, “direct support” generally refers to fiscal subsidies to producers unless context indicates inclusion of non-fiscal direct support.

### Size and composition of government support (key statistics)
- During 2013–18, among 89 countries, 57 percent of government support to food and agriculture was allocated as subsidies to farmers.
- Around 25 percent of government support was dedicated to public goods in the sector; 17 percent flowed to food-related subsidies to consumers.
- Modalities of producer subsidies (shares of producer subsidies):
  - Input support: 38 percent
  - Subsidies connected to other factors of production (e.g., land): 30 percent
  - Decoupled producer subsidies (lump-sum, environmental outcomes): 28 percent
  - Output price support: 4 percent
- Global time-series estimates (country-level, 18-year panel, ~90 percent of global GDP):
  - Food and agriculture subsidies in the form of input subsidies and direct monetary transfers on the basis of outputs and other factors: between 0.32 and 0.43 percent of GDP over time.
  - When including all explicit and implicit subsidies from domestic and border policies, global direct support amounts to between 0.35 and 0.68 percent of GDP.
- Spikes in subsidies observed in:
  - 2009 (global food price shock)
  - 2020 (COVID-19)
- Income-group and regional patterns:
  - EMEs (excluding EU) provided higher amounts (as percent of GDP) of input, food, explicit output, and other subsidies than AEs and LIDCs, reaching 0.7 percent of GDP during the food-price spike more than a decade ago.
  - Overall direct support to agriculture in LIDCs has been strongly negative for most years—driven by implicit taxation of outputs (farmgate prices for certain crops far below border reference prices); implicit taxation applies to export/cash crops more than staples consumed domestically.
  - Data coverage caveats: dataset represents ~90 percent of global GDP overall but only 62 percent of LIDC GDP; representation of EMEs and AEs is 82 and 93 percent of GDP, respectively.
- Regional patterns:
  - Overall (explicit and implicit) agriculture and food subsidies are lowest, and often negative, in sub-Saharan Africa; relatively low in Latin America and the Caribbean; stable in AEs (including EU); highly volatile elsewhere.
  - Implicit output price support raises overall subsidization in AEs (including EU) and especially in Emerging Europe (without EU).
  - In Emerging and Developing Asia, implicit support started negative (a tax) and became strongly positive after the late 2000s.
  - Strong implicit taxation of LIDC agriculture is primarily a sub-Saharan African phenomenon.
- Global shares by country group (as share of global GDP):
  - Subsidies largest in AEs (with EU) and EMEs (without EU); generally declining in AEs and rising in EMEs.
  - Input and explicit output/other subsidies minimal (as share of global GDP) in LIDCs; mostly negative when including implicit support.
  - Overall subsidy support in AEs and the EU combined is on steady decline; Emerging/Developing Asia is rapidly rising.

### Composition trends and typology
- Implicit output price subsidies tend to dominate the overall food and agriculture subsidy portfolio globally and are on the rise.
- Input subsidies, decoupled subsidies, food subsidies, and other subsidies have been mildly declining globally.
- Explicit output subsidies are minor globally and across income groups.
- Regional portfolio features:
  - Emerging and Developing Europe (excluding EU): largest share of implicit and explicit output subsidies.
  - Latin America and the Caribbean: most dominant role for input subsidies in its portfolio.
  - AEs (including EU): decoupled, food, and other subsidies are most prominent.

### Historical evolution and examples
- Input subsidies were widespread in developing countries in the 1960s and early 1970s, fell in the 1980s and 1990s as policies favored urban consumers, and were re-established by many governments in the early 2000s, often with donor support.
- Over the past two decades, input subsidy programs have become common again, particularly in sub-Saharan Africa, aimed at bolstering agricultural development and addressing food insecurity by increasing productivity of staple food crops.
- Example: In Malawi, half of all public expenditures in support of food and agriculture between 2006 and 2013 went toward the country’s input subsidy program.
- Literature indicates input subsidy programs in Africa can range from a fraction of a percent to multiple percentages of GDP (systematic cross-country figures not available).

### Producer subsidies by income group (percent of value of agricultural production, 2013–18)
- LIDCs: 0.6 percent of the value of agricultural production.
- EMEs: between 4 and 5 percent.
- AEs: 12.6 percent.
- Limited fiscal space in LIDCs is the primary reason for relatively lower subsidy support; net assistance to agriculture in most low-income countries is negative when accounting for subsidies, public-goods expenditures, border measures, and market price control.

*Source: IMF Note (insea2024002 - Introduction).*

### 1.95 million—

### insea2024002 - 1.95 million—

### Program examples and key statistics
- Kenya Fertilizer Subsidy Program, 2023
  - Max. 200 kg (4 bags) fertilizer per acre cropland; max. 100 bags
  - 5 million farmers registered; 6 million bags available
  - Registered farmers only; roll-out by target district
  - 54 percent of fertilizer cost
  - 0.025 percent of GDP
- Malawi Affordable Inputs Program, 2020/21–2022/23
  - 5–7 kg maize, sorghum, or rice seed; 100 kg fertilizer
  - Around 3.7 million in 2020/21 and 2021/22; 2.5 million in 2022/23
  - Almost all smallholders in 2020/21; two-thirds in 2022/23
  - 33 percent of seed and fertilizer costs in 2020/21
  - 0.7 percent of GDP, 2020/21–2022/23
- Nigeria Growth Enhancement Support Scheme, 2012–14
  - 100 kg fertilizer
  - 7.2 million in 2014
  - “Poor” farmers, but criteria used to identify them not clear
  - 50 percent of fertilizer cost
  - 0.2 percent of GDP in 2014
- Rwanda Crop Intensification Program, 2015–22
  - Subsidy on fertilizer applied at point of input sale
  - Effectively an untargeted subsidy of 65 percent to 85 percent of market price, depending on fertilizer type in 2021/22
  - 0.15 percent of GDP
- Zambia Comprehensive Agricultural Support Program (formerly Farmer Input Support Program)
  - In 2022/23: 300 kg fertilizer; 10 kg maize; 20–25 kg groundnut or soybean seed
  - About two-thirds of all smallholders in 2021/22 and 2022/23
  - Agricultural cooperative members; larger landholders more likely to benefit
  - Less than 10 percent of seed and fertilizer cost
  - 3.3 percent of GDP in 2019/20
- Additional program-level figures excerpted
  - 1.95 million— two-thirds of smallholders
  - Resource-poor smallholders with between 0.4 and 2.0 hectares
  - 50 percent of seed and fertilizer cost
  - 0.25 percent of GDP from 2017 to 2022

(Sources: Authors’ compilation.)

### Intended benefits of producer subsidies
- Increase food availability through higher production.
- Improve food security of consumers by reducing prices through supply response to subsidies.
- Improve food security of farmers who consume their production.
- Stabilize food prices and, more generally, agricultural markets.
- Improve agriculture sector performance through higher returns on investments.
- Stimulate rural economic development by increasing demand for both farm and nonfarm products.
- Enhance competitiveness of agricultural exports.

### Actual limitations, distributional and efficiency concerns
- Institutional capacity constraints can delay inputs until after planting rains, reducing program effectiveness.
- Inaccurate national crop supply and demand estimates produce ineffective and expensive producer price support programs.
- By increasing net prices above market levels, direct support distorts production patterns:
  - Leads to production in locations not economically justified at unsupported prices.
  - Causes nonbeneficiary farmers to reduce production even where they have comparative advantage.
  - Results in aggregate net cost from misallocated production.
- Distributional evidence is mixed:
  - Subsidies linked to production tend to accrue to larger (usually better-off) farmers.
  - In some contexts, middle-income farmers participate at highest rates while received subsidies make up the highest percentage of poor farmers’ incomes.
  - Larger farmers benefit from direct payments in systems such as the EU’s Common Agriculture Policy and US farm subsidies, though subsidies can represent a larger share of smaller farmers’ assets.
- Targeting trade-offs:
  - If equity is an objective, regressive incidence implies targeting/design failures.
  - If productivity is the objective, concentration of benefits on larger, more productive farmers may be an accepted trade-off.
  - Local communities may favor efficiency over equity; recipient smallholders may resell inputs (converting subsidies into de facto cash transfers).

### Environmental and climate risks
- Overuse of nitrogen from fertilizer subsidies can contaminate groundwater and surface water.
- Excess fertilizer not absorbed by crops can leak into water systems.
- Fertilizer subsidies can stimulate agricultural extensification (conversion of forests to farmland), exacerbating climate change by reducing carbon sequestration.
- Output subsidies (e.g., livestock) can drive demand for pasture and feedstock production (maize, soybean), contributing to deforestation.
- Climate-change–induced productivity losses (droughts, disasters) can lead to food price surges, which may prompt policymakers to expand subsidies—potentially creating a vicious circle.
- “Green subsidies” (environmentally less harmful inputs, payments for ecosystem services) remain a minor share of all subsidies, mainly in advanced economies, with muted beneficial impact and high compliance-monitoring costs.

### Trade and global distortion effects
- Trade restrictions can substitute for subsidies:
  - High import tariffs and nontariff barriers can elevate domestic prices akin to output subsidies.
  - Export restrictions on inputs can lower domestic input prices, acting like input subsidies.
- LIDCs may rely more on trade restrictions given limited fiscal space; AEs may combine high output trade barriers with domestic support programs.
- High producer subsidies in AEs can create negative spillovers on LIDCs, hindering competitiveness and encouraging subsidy escalation elsewhere.
- Trade liberalization can address some subsidy objectives without distortionary effects and reduce economic volatility when country-specific shocks dominate sector-specific shocks.
- Geoeconomic tensions and trade fragmentation risk undermining gains from trade integration.

### Policy alternatives and recommendations
- More effective alternatives to producer subsidies include increased public spending on:
  - Agricultural R&D to improve technology.
  - Extension services to enhance farmers’ skills in using technology and better farming practices.
  - Agricultural infrastructure that increases yields (for example, irrigation).
  - Rural infrastructure that improves market efficiency (rural information and communication technology, rural transport, electrification).
  - Land governance to secure property rights.
  - Strengthening agricultural financial markets to relieve credit constraints for purchasing unsubsidized inputs.
  - Cash transfers to farmers to bolster incomes and enable private on-farm investments.
- Recognize political economy constraints:
  - Farmer-facing subsidies are often politically salient and easier for voters to recognize than indirect investments (R&D, extension), making exits from subsidies rare.
  - Smart exposure (dissemination of information that highlights valuable public services) can increase political cost of underinvestment in public goods and raise support for alternatives.
- Note on subsidy removal:
  - Few empirical cases of permanent subsidy elimination; temporary removals occurred during 1980s–1990s debt crises, often followed by reinstatement due to political pressures or inadequate market infrastructure.
  - A rare sustained successful removal example in the literature is New Zealand abolishing nearly all agricultural subsidies in the mid-1980s as part of broad-based economic reforms.

### Conceptual framework: input subsidies
- Rationale
  - Input subsidies can overcome information problems and financial risks while farmers learn to use commercial inputs.
  - Intended to accelerate adoption of high-productivity technologies by enabling farmers to discover increased returns and manage risks.
- Partial-equilibrium effects (stylized)
  - Subsidy reduces marginal cost of production; supply curve shifts rightward from S to S’.
  - New equilibrium yields lower consumer price P’, higher quantity Q’, and increased producer effective price relative to original P.
  - Fiscal cost of the subsidy is the area between new and unsupported prices over the subsidized quantity.
  - Deadweight loss arises where total benefits to producers and consumers do not cover fiscal cost.
- Role of market failures
  - If subsidies address learning/externality market failures, the supply shift can be persistent after subsidy removal as farmers retain learned practices.

### Conceptual framework: output subsidies
- Rationale
  - Guaranteeing minimum prices incentivizes farmers to produce specific crops by reducing price uncertainty at planting.
- Effects and limits
  - More likely to raise production of targeted crops but not total agricultural production because short-term supply elasticity for agricultural resources is low.
  - Sustained price support can alter sector composition by directing farmer and investor choices, potentially reallocating resources away from more productive sectors.
  - Effects on consumer welfare and income distribution depend on how prices are set; higher producer prices can raise consumer prices and reduce real incomes for poor households if consumer prices are not insulated.

*Sources: Authors’ compilation.*

### Box 1. Setting Crop Prices under Output Price Support Programs

### Box 1. Setting Crop Prices under Output Price Support Programs

### Approaches to setting supported output prices
- Output prices can be based on:
  - "The average total cost of production of the target crop(s) under normal growing conditions for typical farmers using improved production technologies at full market costs, including the costs of land and labor."
  - Border prices—the export or import parity prices—for the crop. For staple foods, the import parity price typically will be an important reference point. For export crops (for example, cotton), the export parity price, less processing costs, is at times used as a starting point for a guaranteed price.

### Parity considerations for choosing the supported price
- Terms-of-trade parity:
  - Set the support price so it does not diverge significantly from trends in a broader set of farm and nonfarm goods.
  - Initial level may address past divergence or promote development objectives; annual adjustments maintain parity.
- Crop-based price parity:
  - Focus on the output price relative to other prices associated with production or processing (for example input prices, prices of processed goods, intercrop price ratios such as maize to rice).
- Income parity:
  - Set target crop prices to ensure farmers can generate incomes comparable to nonfarmers.

### Direct output price subsidy programs and buffer stocks
- Typical operational model:
  - Government agencies buy crops from producers and sell to consumers; agencies may commit to buy all crop offered after harvest at the guaranteed price, even if above local market price.
  - Governments establish parastatal crop marketing agencies or buffer stock management agencies to implement price supports.
- Price band mechanism:
  - Agency sets a floor price (producer guaranteed) and a ceiling price (maximum consumer price).
  - If market price < floor: agency buys up crops at the floor, adding to buffer stock.
  - If market price > ceiling: agency sells from inventory at the ceiling, subsidizing consumers.
  - Narrower price bands increase frequency of intervention and fiscal cost.
- Stylized supply-response dynamics (as described):
  - Supply increase (curve S’): market quantity rises to Q’, price drops to P’. Agency buys Q’ − Q to raise price to target P.
  - Supply contraction (curve S”): quantity contracts to Q”, price rises to P”. Agency sells Q − Q” to reduce price to target P.
  - Purchases from the agency benefit producers and reduce consumer welfare; sales benefit consumers and reduce producer welfare.

### Costs, risks, and undesirable outcomes of buffer stock programs
- Financial and operational risks:
  - Agency storage capacity, logistical ability, and financial resources can be overwhelmed as supply or demand conditions change.
  - Significant costs if accumulated stocks are not disposed of quickly: construction and maintenance of storage facilities, wastage from deterioration.
  - Continuous large public holdings or narrow price bands may reduce private sector storage and lead to private sector exit.
  - Public sector takeover can exacerbate price variability if public efficiency is lower than private efficiency.
- Commodity skew and nutrition:
  - Output subsidies and stockholdings are generally applied to cereals (more manageable than dairy, meat, fruits, vegetables), potentially skewing consumption toward lower-quality calories and away from more nutritious foods needed for physical and cognitive development.

### Targeting producer subsidies: opportunities and constraints
- Input vs. output subsidy targeting:
  - Input subsidies can be narrowly targeted if sufficient information exists on farmers.
  - Output (price support) programs are administratively difficult to target to selected producers and are "almost impossible to target at poorer producers" for poverty reduction.
- Empirical subsidy coverage examples:
  - Untargeted program in Rwanda: share of market price covered by subsidies range between 15 and 35 percent (leaving farmers to pay 65–85 percent of the market price).
  - Targeted programs in Malawi and Zambia: share covered range between 66–90 percent.
- Trade-offs:
  - Untargeted programs may exclude the poorest farmers who cannot afford the remaining price due to poorly functioning financial markets.
  - Broad provision of subsidized inputs increases fiscal costs and diversion to nontarget crops.
  - Targeting requires administrative resources and raises trade-offs about which farmers to prioritize.

### Box 2 summary: Which farmers should be targeted by input subsidies?
- Options and rationales:
  - Target poor and food insecure farmers to improve their productivity and food access.
  - Target farmers with highest productivity (likely nonpoor) to maximize aggregate crop production and food availability for vulnerable populations.
- Preconditions and risks:
  - Targeting productive nonpoor farmers assumes functioning local markets so poor households can purchase increased food supply.
  - Markets in LIDCs are often inefficient; political perceptions may view subsidizing nonpoor farmers as misjudged.
- Historical variability:
  - Malawi and Zambia vacillated between targeting poor food-insecure farmers and the most productive farmers over 15 years.
  - Zambia shifted toward more productive farmers; Malawi scaled up in 2020 to cover most smallholder households regardless of status.

### Design challenges of input subsidy programs
- Efficiency and agronomic response:
  - National input subsidy programs in LIDCs "consistently improve crop productivity and overall production of the targeted crops" but improvements are significantly less than agricultural research potential.
  - Example yield responses:
    - Expected: "around 8 kg of maize grain for every kg of fertilizer applied" under good conditions.
    - Observed in Malawi evaluation: a response rate of only 2.7 kg of maize grain per kilogram of fertilizer applied over three years.
- Causes of poor agronomic efficiency:
  - Late delivery of inputs (fertilizer arriving after planting rains) reduces yield response.
  - Inadequate technical content and inappropriate input composition for local agroecological conditions.
  - Lack of integrated agricultural extension and guidance on effective input use.
- Financial viability for farmers:
  - If unsubsidized input prices exceed the additional value of the output generated, the financial rationale for subsidized inputs as development strategy is weak.
  - Need for more efficient crop and input markets with favorable fertilizer-to-crop price ratios before sustained growth from commercial inputs is achievable.

### Implementation constraints of input subsidy programs
- Common weaknesses:
  - Sub-optimal targeting (providing inputs to farmers lacking complementary factors such as land or labor).
  - Leakage to unintended beneficiaries, including nonpoor commercial farmers who may apply inputs to cash crops.
  - Smuggling of subsidized inputs out of the country, reducing domestic production gains.
  - Rent-seeking and corruption by program administrators extracting bribes from beneficiaries.
  - Vulnerability to negative exogenous shocks (extreme weather, crop disease, pests, spikes in international prices) altering program costs and effectiveness.
- Administrative implications:
  - Effective targeting requires substantial, often expensive information systems, reducing the share of resources reaching beneficiaries.
  - Targeting may necessitate retail-point monitoring to ensure correct subsidy pass-through; beneficiaries may be required to join cooperatives to obtain economies of scale.

### Fostering sustainable commercial input supply
- Strategic role of subsidies:
  - Input subsidies are conceptually temporary to help farmers learn to use commercial inputs and build demand for sustainable private input supply.
  - Reliance on government supply of physical inputs is wasteful and unsustainable.
- Measures to support private input suppliers:
  - Design programs to encourage private sector investment in input supply within a regulatory framework that promotes competition and efficiency.
  - Use vouchers, increasingly digital, to expand private suppliers' role in implementation (described conceptually).
  - Governments can contract private firms for logistics and distribution, narrowing government role to program design, due diligence, support to contracted firms, and monitoring.
  - Even with private-sector implementation, direct fiscal outlay (difference between market and subsidized price) remains; a more efficient distribution system can reduce administrative costs.

*Source: insea2024002 - Box 1. Setting Crop Prices under Output Price Support Programs*

### Box 3. The Use of Vouchers in Agricultural Subsidy Programs—African Case Studies

### Box 3. The Use of Vouchers in Agricultural Subsidy Programs—African Case Studies

### Vouchers and digital (e-)vouchers: implementation and operational findings
- Since about 2000, most input subsidy programs have been replacing direct physical distribution by government agencies with the use of vouchers.
- Vouchers are intended to enable increased participation of private input suppliers: beneficiary farmers present vouchers to local input retailers to redeem physical inputs.
- Country examples:
  - Malawi has used vouchers since 2000, with private importers delivering subsidized fertilizer to distribution points but without involvement of private agro-input dealers’ distribution after their early engagement was aborted because of allegations of misuse of the vouchers.
  - Tanzania’s plan as of 2008 enabled farmers to redeem vouchers at any private input dealer.
  - Ghana’s program started in 2008 and restricted participation to agro-input dealers affiliated to the fertilizer importers.
- Common operational weakness: late delivery to farmers also affects voucher programs.
- Digital vouchers (e-vouchers) increasingly used due to widespread mobile-phone coverage; electronic transactions are used to distribute, validate, redeem, and submit vouchers for compensation.
- E-voucher advantages and implementation challenges:
  - E-vouchers reduce program leakages and have considerable potential to improve input subsidy programs.
  - Operational failures identified:
    - Zambia (Mason and others (2020)): e-vouchers did not meet objectives because farmers were unaware of the range of inputs/implements redeemable; many retailers did not stock all products due to uncertainty about program-eligible inputs; e-voucher holders had to travel farther to use vouchers than farmers relying on traditional distribution.
    - Mali, Niger, Guinea, Chad (World Bank (2019)): high illiteracy led to beneficiaries not absorbing key information or accidentally deleting vouchers; poor connectivity and lack of requisite hardware or a mobile phone number added failure points.
- Digital systems contain costs for both farmers and suppliers and reduce program leakages.

### Leakage, substitution effects, and measured impacts
- Input subsidy programs can impede development of private input supply because leakage and mistargeting substitute subsidized for commercial inputs, imposing costs on government and reducing commercial sales.
- Empirical estimates of substitution from recent subsidy programs (Jayne and others 2018):
  - Each metric ton (1 MT) of subsidized fertilizer raised total fertilizer use by 0.38 MT in Kenya.
  - Each metric ton (1 MT) of subsidized fertilizer raised total fertilizer use by 0.55 MT in Malawi.
  - Each metric ton (1 MT) of subsidized fertilizer raised total fertilizer use by 0.58 MT in Zambia.
- Consequence: while subsidies increased inputs used by farmers, the impact on agricultural production and improving food security was significantly lower than it would have been without diversion of inputs.

### Design and implementation challenges of output price subsidies
- Sustainability of price support programs is a key challenge in most EMDEs because of high prevalence of poverty among farmers and potential food insecurity among consumers.
- If consumers pay higher prices due to output price support, many poor households may be unable to afford required food; some countries provide food subsidies to consumers concurrently, which can lead to high fiscal costs.
- Alternatives to holding buffer stocks for price stabilization:
  - Relying on imports may be as effective and cheaper in the long term for many countries.
  - Developing drought-resilient crop varieties through agricultural R&D investments is a better long-term solution if staple price spikes arise from negative supply shocks.
- Producer price support programs are difficult for LIDCs to implement effectively; declared producer prices are often aspirational because governments lack resources to compel or guarantee purchases at stated prices.
- Few LIDCs’ interventions to maintain higher-than-market staple food prices succeed.

### Navigating policy considerations: objectives, context, and commonly suitable measures
- Policy stance toward agricultural producer subsidies depends on multiple considerations: policy objective, fiscal space, fiscal cost/savings, market failures, administrative capacity, political constraints, and other factors.
- Careful reform sequencing and communication strategy are essential: long-standing subsidies shape beneficiary expectations and norms, and reforms affect many stakeholders along value chains.
- Table 2 (summarized policy considerations) — illustrative measures and rationales by subsidy type and context:
  - Input subsidy where primary objective is incomes of commercialized/nonpoor farmers; administrative capacity Low; international price Medium or High; fiscal space Limited:
    - Measures: Phase out subsidies in the short term; create enabling regulatory environment for private agents in input supply chain (import, wholesale, distribution, retail).
    - Rationale: Constrained fiscal space and medium/high international input prices imply sizable fiscal savings from timely removal; enabling private input supply supports access for commercialized farmers.
  - Input subsidy where primary objective is food security of consumers; administrative capacity Medium or High; international price Medium or High; fiscal space Some:
    - Measures: Phase out subsidies gradually (in the medium term); temporary, targeted cash transfers to the most vulnerable consumers; agricultural and other public goods spending to improve efficiency of domestic food systems; reduce restrictions on food imports.
    - Rationale: Phase-out generates sizeable fiscal savings given medium/high international input prices; existence of some fiscal space and moderate/low inefficiencies allow graduality given food security concerns.
  - Untargeted input subsidy where primary objective is agricultural productivity; administrative capacity Medium or High; international price Low or Medium; fiscal space Substantial:
    - Measures (short term): Target subsidies more narrowly to productive farmers; ensure subsidies alleviate market failure.
    - Measures (other): Agricultural and other public goods spending to improve efficiency of agricultural production and markets.
    - Rationale: Adequate fiscal space enables maintaining subsidies if economically justified and administrable; targeting aligns with objectives.
  - Untargeted input subsidy for food security of small subsistence farmers; administrative capacity Medium or High; international price Low; fiscal space Limited:
    - Measures (short term): Target more narrowly to poor subsistence farmers. (Medium term): gradually remove subsidies.
    - Measures: Strengthen extension services for smallholders; social assistance to poorest farmers during subsidy reduction.
    - Rationale: Short-run targeting manages impact on poor farmers and yields limited fiscal savings if fully removed; medium-term replacement by demand- and supply-side measures.
  - No subsidy (aggregate agricultural development/productivity objective); administrative capacity Low, Medium, or High; international price Low, Medium, or High; fiscal space Some or Substantial:
    - Measures: Maintain existing policy (i.e., no subsidy); robust public goods spending (extension, agricultural data systems, R&D, rural roads, rural electrification).
    - Rationale: Strengthen public-goods spending to support objectives.
  - Output subsidy where objective is income support for farmers of exported commodity; administrative capacity Low or Medium; international price Low; fiscal space Some:
    - Measures: Gradually reduce price floor; institute/strengthen social assistance for affected poorest farmers; public investment in agricultural and rural infrastructure; reduce agricultural trade distortions.
    - Rationale: Subsidy reduction called for due to operational costs, high fiscal costs from gaps between international and administered prices, and fiscal space limits; gradual adjustment allows time for other measures to take effect.
  - Narrow band for farmgate price on domestically consumed output where objective is income stability by stabilizing output prices; administrative capacity Low or Medium; international price Low, Medium, or High; fiscal space Some:
    - Measures: Gradually widen price band; adjust band around long-term market price trends throughout the supply chain; support market information systems; public infrastructure improvements to crowd in private investment; gradually limit marketing board activities to public goods provision (insurance against extreme price volatility, strategic grain reserves for emergencies).
    - Rationale: Operational costs of public marketing boards can be high; constrained capacity leads to inefficiencies and food waste; non-subsidy measures help reduce price volatility by addressing sources.
- Final points on reform:
  - Subsidy reform is more than a technical problem; changing misinformation, perceptions, and norms and addressing short-run losers requires time and a well-planned communication strategy.
  - Timing and sequencing of reforms must be carefully designed on a country- and program-specific basis.

*Source: Box 3. The Use of Vouchers in Agricultural Subsidy Programs—African Case Studies (insea2024002).*

### Bibliography

### Bibliography

### Key thematic references on agricultural policies, subsidies, and food security
- AgIncentives Consortium. 2024. “Nominal Rate of Assistance (NRA).” Accessed January 4, 2024. https://www.agincentives.org/nominal-rate-of-assistance-nra/. Based on data from OECD, FAO, IDB, and World Bank compiled by the International Food Policy Research Institute (IFPRI).
- Ahmed, Ismail, and Michael Lipton. 1997. “Impact of Structural Adjustment on Sustainable Rural Livelihoods: A Review of the Literature.” IDS Working Paper 62. Poverty Research Unit, Institute of Development Studies.
- Aiyar, Shekhar, et al. 2023. “Geoeconomic Fragmentation and the Future of Multilateralism.” Staff Discussion Note SDN/2023/001. International Monetary Fund, Washington, DC.
- Alston, Julian. 2010. “The Benefits from Agricultural Research and Development, Innovation, and Productivity Growth.” OECD Food, Agriculture and Fisheries Papers, No. 31, OECD Publishing, Paris.
- Amaglobeli, David, Mengfei Gu, Emine Hanedar, Gee Hee Hong, and Céline Thévenot. 2023. “Policy Responses to High Energy and Food Prices”. IMF Working Paper WP/23/74, International Monetary Fund, Washington DC.
- Abokyi, Emmanuel, Dirk Strijker, Kofi Fred Asiedu, and Michiel Daams. 2020. “The Impact of Output Price Support on Smallholder Farmers’ Income: Evidence from Maize Farmers in Ghana.” Heliyon 6 (9): e05013.
- Bailey, Rob, Antony Froggatt, and Laura Wellesley. 2014. “Livestock—Climate Change’s Forgotten Sector.” Energy, Environment and Resources, Chatham House. Royal Institute of International Affairs.
- Bates, Robert, and Steven Block. 2011. “Political Institutions and Agricultural Trade in Africa.” American Journal of Agricultural Economics, 93(2): 317-23.
- Baulch, Bob, and Rosemary Botha. 2020. “Can a Maize Price Band Work in Malawi?” Malawi Strategy Support Program Policy Note 38, International Food Policy Research Institute, Lilongwe.
- Benson, Todd. 2021. Disentangling Food Security from Subsistence Agriculture in Malawi. Washington, DC: International Food Policy Research Institute.
- Benson, Todd, and Joachim De Weerdt. 2023. “Employment Options and Challenges for Rural Households in Malawi.” Malawi Strategy Support Program Working Paper 40, International Food Policy Research Institute, Lilongwe.
- Benson, Todd, and Tewodaj Mogues. 2018. “Constraints in the Fertilizer Supply Chain: Evidence for Fertilizer Policy Development from Three African Countries.” Food Security 10: 1479–500.
- Bonilla-Cedrez, Camila, Jordan Chamberlin, and Robert Hijmans. 2021. “Fertilizer and Grain Prices Constrain Food Production in Sub-Saharan Africa.” Nature Food 2: 766–72.
- Carr, Stephen. 2014. “The Challenge of Africa’s Nitrogen Drought: Some Indicators from the Malawian Experience.” Malawi Strategy Support Program Policy Note 19, International Food Policy Research Institute, Lilongwe.
- Caselli, Francesco, Miklós Koren, Milan Lisicky, and Silvana Tenreyro. 2020. “Diversification through Trade”. Quarterly Journal of Economics 135 (1): 449–502.
- CIAT and World Bank. 2018. “Climate-Resilient Agriculture in the Kyrgyz Republic.” CSA Country Profiles for Asia Series. International Center for Tropical Agriculture; World Bank, Washington, DC.
- Chirwa, Ephraim, and Andrew Dorward. 2013. Agricultural Input Subsidies: The Recent Malawi Experience. Oxford: Oxford University Press.
- Christen, Robert Peck, and Jamie Anderson. 2013. “Segmentation of Smallholder Households: Meeting the Range of Financial Needs in Agricultural Families.” Focus Note 85, Consultative Group to Assist the Poor (CGAP), Washington, DC.
- Coady, Dave, Margaret Grosh, and John Hoddinott. 2004. Targeting of Transfers in Developing Countries: Review of Lessons and Experience. Washington, DC: World Bank.
- Daidone, Silvio, Benjamin Davis, Sudhanshu Handa, and Paul Winters. 2019. “The Household and Individual-Level Productive Impacts of Cash Transfer Programs in Sub-Saharan Africa.” American Journal of Agricultural Economics 101: 1401–31.
- Damania, Richard, et al. 2023. Detox Development: Repurposing Environmentally Harmful Subsidies. Washington, DC: World Bank.
- Dinis, Isabel. 2024. “Examining Disparities in Common Agriculture Policy Direct Payments among Farming Systems: Evidence from Portugal” Agriculture and Food Economics 12 (7): 1–23.
- Ellis, Frank. 1992. Agricultural Policies in Developing Countries. Cambridge: Cambridge University Press.
- FAO. 2015. “Analysis of Public Expenditure in Support of Food and Agriculture in Malawi.” MAFAP Technical Notes Series, Rome: Food and Agriculture Organization of the United Nations (FAO).
- FAO. 2021. Public Food Stockholding: A Review of Policies and Practices. Rome: Food and Agriculture Organization.
- FAO, IFAD, UNICEF, WFP, and WHO. 2022. The State of Food Security and Nutrition in the World 2022: Repurposing Food and Agricultural Policies to Make Healthy Diets More Affordable. Rome: FAO.
- FAO, IFAD, UNICEF, WFP, and WHO. 2023. The State of Food Security and Nutrition in the World 2023. Urbanization, Agrifood Systems Transformation and Healthy Diets across the Rural–Urban Continuum. Rome: FAO.
- FAO, IFAD, and WFP. 2013. The State of Food Insecurity in the World 2013: The Multiple Dimensions of Food Security. Food and Agriculture Organization, Rome, Italy.
- FAO, IMF, World Bank, WFP, and WTO. 2022. “Second Joint Statement by the Heads of Food and Agricultural Organization, International Monetary Fund, World Bank Group, World Food Program, and World Trade Organization on the Global Food Security and Nutrition Crisis.” September 21. https://www.imf.org/en/News/Articles/2022/09/21/pr22313-second-joint-statement-by-the-heads-of-fao-imf-wb-wfp-and-wto-on-the-global-food-security.
- Gautam, Madhur, David Laborde, Abdullah Mamun, Will Martin, Valeria Piñeiro, and Rob Vos. 2022. “Repurposing Agricultural Policies and Support: Options to Transform Agriculture and Food Systems to Better Serve the Health of People, Economies, and the Planet.” World Bank and IFPRI, Washington, DC.
- Giller, Ken. 2020. “The Food Security Conundrum of Sub-Saharan Africa.” Global Food Security 26: 100431.
- Giné, Xavier, Shreena Patel, Bernardo Ribeiro, and Ildrim Valley. 2022. “Efficiency and Equity of Input Subsidies: Experimental Evidence from Tanzania.” American Journal of Agricultural Economics 104 (5): 1625–55.
- Gordeev, Stepan. 2022. “Nutrition Demand, Subsistence Farming, and Agricultural Productivity.” STEG Working Paper WP010, Structural Transformation and Economic Growth.
- Goyal, Aparajita, and John Nash. 2017. Reaping Richer Returns: Public Spending Priorities for African Agriculture Productivity Growth. Washington, DC: World Bank.
- Hazell, Peter, Stan Wood, Melanie Bacou, and Bhramar Dey. 2017. “Operationalizing the Typology of Small Farm Households.” In Africa Agriculture Status Report: The Business of Smallholder Agriculture in Sub-Saharan Africa, by Alliance for a Green Revolution in Africa, 20–24. Nairobi: Alliance for a Green Revolution in Africa.
- Hemming, David, Ephraim Chirwa, Andrew Dorward, Holly Ruffhead, Rachel Hill, Janice Osborn, Laurenz Langer, Luke Harman, Hiro Asaoka, Chris Coffey, and Daniel Phillips. 2018. “Agricultural Input Subsidies for Improving Productivity, Farm Income, Consumer Welfare and Wider Growth in Low- and Lower-Middle-Income Countries: A Systematic Review.” Campbell Systematic Reviews 14: 1–153.
- Herzfeld, Thomas, Eugenia Lucasenco, and Dmitry Zvyagintsev. 2022. “Agricultural Policy Development in Moldova Over One Decade: Recent Estimates and an Outlook towards EU Accession.” Economy and Sociology 2: 7–21.
- Holden, Stein. 2018. “The Economics of Fertilizer Subsidies.” Center for Land Tenure Studies Working Paper No. 9/18, Norwegian University of Life Sciences (NBMU).
- Houssou, Nazaire, Collins Asante-Addo, Kwaw Andam, and Catherine Ragasa. 2019. “How Can African Governments Reach Poor Farmers with Fertilizer Subsidies? Exploring a Targeting Approach in Ghana.” Journal of Development Studies 15 (9): 1983–2007.
- IMF. 2018. “Assessing Fiscal Space: An Update and Stocktaking.” IMF Policy Paper, International Monetary Fund, Washington, DC.
- IMF, OECD, World Bank, and WTO. 2022. “Subsidies, Trade, and International Cooperation.” International Monetary Fund, Organisation for Economic Co-operation and Development, World Bank, and World Trade Organization. Washington DC.
- Jayne, Thomas, and Shahidur Rashid. 2013. “Input Subsidy Programs in Sub-Saharan Africa: A Synthesis of Recent Evidence.” Agricultural Economics 44: 547–62.
- Jayne, Thomas, Nicole Mason, William Burke, and Joshua Ariga. 2018. “Review: Taking Stock of Africa’s Second-Generation Agricultural Input Subsidy Programs.” Food Policy 75: 1–14.
- Kherallah, Mylène, Christopher Delgado, Eleni Gabre-Madhin, Nicholas Minot, and Michael Johnson. 2002. Reforming Agricultural Markets in Africa. Baltimore: IFPRI and Johns Hopkins University Press.
- Kirwan, Barrett. 2017. “U.S. Farm Dynamics and the Distribution of U.S. Agricultural Subsidies.” Applied Economics Letters, 24(3): 207-9.
- Lloyd’s. 2015. “Food System Shock: The Insurance Impacts of Acute Disruption to Global Food Supply. Emerging Risk Report, Lloyd’s, London.
- Lunduka, Rordney, Jacob Ricker-Gilbert, and Monica Fischer. 2013. “What Are the Farm-level Impacts of Malawi’s Farm Input Subsidy Program? A Critical Review.” Agricultural Economics 41: 563–79.
- MAFAP. 2022. Monitoring and Analyzing Food and Agricultural Policies (MAFAP) price incentives dataset. https://www.fao.org/fileadmin/user_upload/mafap/docs/1_Price%20incentives%20dataset_MAFAP_Sept2022.xlsx.
- Mason, Nicole, et al. 2020. “Does Shifting to a Flexible e-voucher Approach Improve Input Subsidy Program Outcomes? Quasi-experimental Evidence from Zambia’s Crop Forecast Surveys.” Feed the Future Innovation Lab for Food Security Policy Research Paper 165, Michigan State University, East Lansing, MI.
- Mason, Nicole, Thom Jayne, and Rhoda Mofya-Mukuka. 2013. “Zambia’s Input Subsidy Programs.” Agricultural Economics 44: 613–28.
- Mellor, John. 2017. Agricultural Development and Economic Transformation: Promoting Growth with Poverty Reduction. Cham, Switzerland: Palgrave Macmillan.
- Minot, Nicholas. 2014. “Food Price Volatility in Sub-Saharan Africa: Has It Really Increased?” Food Policy 45: 45–56.
- Minot, Nicholas, and Todd Benson. 2009. “Fertilizer Subsidies in Africa: Are Vouchers the Answer?” IFPRI Issue Brief 60, International Food Policy Research Institute, Washington, DC.
- MoAFS, Malawi. 2012. Guide to Agricultural Production and Natural Resources Management in Malawi. Lilongwe: Department of Agricultural Extension Services, Ministry of Agriculture and Food Security, Government of Malawi.
- Mogues, Tewodaj. 2015. “Political Economy Determinants of Public Spending Allocations: A Review of Theories, and Implications for Agricultural Public Investment”, European Journal of Development Research, 27(3): 452-73.
- Mogues, Tewodaj. 2020. “Food Markets during COVID-19.” Note in Special Series on COVID-19, International Monetary Fund, Washington, DC.
- Mogues, Tewodaj, and Lucy Billings. 2019. “The Making of Public Investments: The Role of Champions, Co-ordination, and Characteristics of Nutrition Programs in Mozambique.” Food Policy, 83: 29–38.
- Mogues, Tewodaj, Shenggen Fan, and Samuel Benin. 2015. “Public Investments in and for Agriculture.” European Journal of Development Research, 27(3): 337-52.
- Mogues, Tewodaj, and Tolulope Olofinbiyi. 2020. “Budgetary Influence under Information Asymmetries: Evidence from Nigeria’s Subnational Agricultural Investments.” World Development 129: 104902.
- Morris, Michael, Valerie Kelly, Ronald Kopicki, and Derek Byerlee. 2007. Fertilizer Use in African Agriculture: Lessons Learned and Good Practice Guidelines. Directions in Development; Agriculture and Rural Development, Washington, DC: World Bank.
- National Cereals & Produce Board, Kenya. 2022. Government Subsidized Fertilizer Program - FAQs. https://ncpb.co.ke/wp-content/uploads/dlm_uploads/2022/10/FAQS-on-Subsidy-Fertilizers-October-2022.pdf.
- Nyondo, Christone, et al. 2021. “Lessons Learnt: Promises, Achievements, Shortcomings, and Pitfalls of Inputs Subsidy Programs in Malawi.” Working Paper No. 21/05, MwAPATA Institute, Lilongwe.
- OECD. 2012. “Water Quality and Agriculture: Meeting the Policy Challenge.” OECD Studies on Water. OECD Publishing, Paris.
- OECD. 2022. Agricultural Policy Monitoring and Evaluation 2022: Reforming Agricultural Policies for Climate Change Mitigation. Paris: OECD Publishing.
- Okou, Cedric, John Spray, and Filiz Unsal. 2022. “Staple Food Prices in Sub-Saharan Africa: An Empirical Assessment.” IMF Working Paper No. WP/22/135. International Monetary Fund, Washington DC.
- Olomola, Aderibigbe. 2016. “Driving Agricultural Transformation with the Power of Information and Communication Technology: The Performance of Nigeria’s Growth Enhancement Support Scheme.” Nigeria Strategy Support Program Working Paper 30, IFPRI, Abuja.
- Pauw, Karl. 2022. “A Review of Ghana’s Planting for Food and Jobs Program: Implementation, Impacts, Benefits, and Costs.” Food Security 14: 1321–35.
- Prifti, Ervin, Silvio Daidone, and Benjamin Davis. 2019. “Causal Pathways of the Productive Impacts of Cash Transfers: Experimental Evidence from Lesotho.” World Development 115: 258–68.
- Rother, Bjoern, et al. 2022. “Tackling the Global Food Crisis: Impact, Policy Response, and the Role of the IMF.” Note/2022/004, International Monetary Fund, Washington, DC.
- Saunders, Caroline. 2019. “Sustainable Agriculture – Life beyond Subsidies: Lessons from New Zealand.” Journal of Agricultural Economics 70 (3): 579–94.
- Spielman, David, et al. 2022. “Policy Options for Fertilizer Subsidy Reforms in Rwanda: A Simulation-Based Analysis and Synthesis of Prior Studies.” Rwanda Strategy Support Program Working Paper 5, IFPRI, Kigali.
- Swinnen, Johan, Harry de Gorter, Gorden Rausser, Anurag Banerjee. 2000. “The Political Economy of Public Research Investment and Commodity Policies in Agriculture: An Empirical Study“. Agricultural Economics, 22: 111-22.
- Timmer, Peter. 2015. Food Security and Scarcity: Why Ending Hunger Is So Hard. Philadelphia: University of Pennsylvania Press.
- World Bank. 2012. “Using Public Foodgrain Stocks to Enhance Food Security.” ARD Report no. 71280-GLB, World Bank, Washington, DC.
- World Bank. 2019. “Digitizing Agriculture: Evidence from e-voucher Programs in Mali, Chad, Niger, and Guinea.” AFCW3 Economic Update, Washington, DC: World Bank.
- World Bank. 2023. World Development Indicators. https://databank.worldbank.org/source/world-development-indicators.
- World Bank. 2021. “Zambia’s Farmer Input Support Program and Recommendations for Re-designing the Program.” World Bank Discussion Note, World Bank, Washington, DC.

### Appendix: World Trade Organization Rules on Agricultural Subsidies (summary points retained verbatim)
- Under the World Trade Organization (WTO) Agreement on Agriculture, all domestic support for agricultural producers is subject to rules. The Agreement sets out two categories of domestic support:
  - “Green box” measures with no, or minimal, trade-distorting effects or effects on production. There are no financial limitations on the ability of countries to use these measures. These measures must be from public-funded government programs and must not be transfers from consumers or provide price support for producers. The measures can include direct payments to producers that are decoupled from production, as well as general governance service programs, such as R&D. There is special treatment for developing countries, which also permits government stockholding for food security and subsidized food prices for urban and rural poor. Outside of the “green box” measures, the WTO also exempts other categories of measures from reduction commitments, including measures to support the development programs of developing countries, direct payments liked to production limiting programs, and a de minimis threshold.
  - “Amber box” measures are considered to distort production and trade. This category covers all measures not specified in the “green box” or other exempt measures. The WTO members can only use these subsidy measures if they are below the de minimis threshold or are within the “Total Aggregate Measurement of Support” (Total AMS) for the 32 members that have specific reduction commitments.
- In addition, all WTO members are allowed certain de minimis amounts of distortionary support, while some are allowed additional amounts of support up to their final bound total AMS limits. Two other categories of support are also excluded from the Total AMS calculators: (1) development programs under Article 6.2 and (2) direct payments under production-limiting programs under Article 6.5.
- The WTO also has notification obligations for all members to notify the Committee on Agriculture of the extent of their domestic support measures. This notification requires members to list all measures under the different exempt categories and show that any other measures are within the de minimis threshold or within their Total AMS. Notifications are required annually, with additional notification of any modifications or additions of measures in the exempt category.
- The 2015 Nairobi Decision prohibits agricultural export subsidies. These obligations immediately applied the developed countries, with a phase in for developing and the least developed countries. The Nairobi decision also introduced new rules on other forms of farm export support including export credits, agricultural exporting state trading enterprises, and international food aid.
- The WTO Agreement on Fisheries Subsidies will prohibit fisheries subsidies, which promote the unsustainable depletion of fish stocks. The Agreement was adopted in 2022 and will enter into force when two-thirds of the WTO members deposit instruments of acceptance. The Agreement includes provisions, which prohibit illegal, unreported, and unregulated fishing; prohibit subsidies for fishing of overfished stock; prohibit subsidies to fishing on the unregulated high seas; and promote transparency and capacity building. Negotiations continue on Phase II including obligations on the issues of overfishing and overcapacity.
- Negotiations at the WTO continue on agricultural reform, including on new rules on public stockholding for food security purposes and domestic support.
- Further information on the WTO rules on subsidies is included in IMF and others (2022).

*IMF | IMF Note: Agricultural Producer Subsidies: Navigating Challenges and Policy Considerations — NOTE/2024/002*

---


_Source: https://www.imf.org/-/media/files/publications/imf-notes/2024/english/insea2024002.pdf_