On 19th May 2017, Malawi’s Minister of Finance, Economic Planning and Development presented the 2017/18 National Budget in Parliament—a critical step in the process for approving the next fiscal year budget by 1st July. The total National Budget is planned at Malawian Kwacha (MK) 1, 299,379 million out of which 85 percent (MK1,108,010 million) will be financed from domestic revenues and grants, leaving a budget deficit of 15 percent (MK191, 400 million) to be externally financed.
Overview of 2017/18 Agriculture Budget
- Agriculture remains within top three funded sectors in Malawi;
- About 56 percent of total agriculture budget will be allocated directly to the Ministry of Agriculture Irrigation and Water Development (MoAIWD);
- Unclassified agriculture allocation of about MK57,000 million will likely go to agriculture expenditure in other Ministries; and
- Overall, 46 percent reduction of National Budget to agriculture allocated directly to MoAIWD from the previous year.
A Closer Look
The agriculture sector still remains one of the major beneficiaries of Malawi’s national pie in 2017/18. It will receive 15 percent of the National Budget—second to the education sector (allocated 18 percent), followed by the health sector (10 percent allocation).
Overall, the agriculture sector will receive MK192, 000 million in 2017/18, of which MK108, 794 million has been allocated directly to MoAIWD. The MoAIWD allocation is 8 percent of the National Budget and also represents a 46 percent nominal reduction from their MK199, 713 million allotment in 2016/17.
More than half of the budget’s recurrent allocations fall into a category called Other Recurrent Transactions (ORT)—94 percent of which will likely finance subsidy and maize purchases, slightly higher than the 2016/17 allocation (88 percent). Although these expenditures are important, they must be balanced with other prioritized activities, such as extension, irrigation, livestock, and research development.
Figure 1: Main Components of Total Agriculture Ministry Budget (%)
Source: Budget Documents, Ministry of Finance Economic Planning and Development
Note: Total Ministry approved budget in 2016/17 was MK199, 407 million of which MK71, 072 million was ORT. While the total estimates in 2017/18 is MK108, 794 million of which MK58, 441 million is ORT.
MoAIWD has five programs, four of which are skewed towards food production and management, dominated by allocations to support subsidy and maize purchases. Research (i.e. technology generation) has received a greater allocation in 2017/18, but mostly towards salaries. Allocations to the Administration, Planning, and Monitoring and Evaluation sub-program has more than doubled in 2017/18, partly due to additional allocation of MK22,000 million for agriculture inputs to support maize purchase.
Below are several under-resourced areas where Government allocations could have been beneficial within the agriculture sector:
- Resources to ease the phasing out of some of large agriculture projects this coming year could have ensured that gains realized continue to benefit smallholder farmers.
- Support to winter cropping has also been phased out entirely, but could have been used to engage commercial farmers to produce irrigated crops in the lean season.
- Support to promote legume production (a promising alternative cash crop to tobacco), which has declined from MK2, 000 million in 2014/15, to just MK500 million in 2017/18.
Another challenge is the nature of donor funding in agriculture, which is extremely fragmented, with many on-budget and off-budget projects and programs. To address this problem, Government is formulating the National Agricultural Investment Plan (NAIP), which could further be bolstered by using a pool funding mechanism to improve coordination of agriculture investments.
According to Table 1, the Government has allocated agricultural funds directly to district assemblies to boost activities in Agriculture, Fisheries, and Irrigation, based on the decentralization process. While MK192, 000 million has been allocated to the agriculture sector, only MK108, 794 million of this total is allocated directly to the MoAIWD. A further MK26, 192 million is allocated to Green Belt Authority and Assemblies, leaving a balance of MK57, 013 million, supposedly for agriculture, but as of yet, unclassified.
Table 1: Summarized Agricultural Budget Allocations (MK’ Millions)
Note: 1. Estimated based on the revised wages and salaries (MK12106.14) in 2016/17 subtract wages and salaries (MK5753.23) estimated in 2017/18 of the Ministry
Agricultural inputs and subsidies dominate allocations among agricultural activities, with input subsidies and maize purchases taking the lion’s share (51 percent) of total expenditures. Acquisition of technical services is allocated 14 percent, much lower than the 45 percent budgeted in 2016/17. The decline is partly due to the phasing out of projects, such as the Agriculture Sector Wide Approach Support Project (ASWAp), but Ministry travel expenditures also decreased. Training will receive limited allocations under both the recurrent and development budgets (approximately 1 percent of the total Ministry budget). This is concerning at a time when there is great need to build capacity among front-line staff.
Recommendations
Below are some recommendations on the agriculture budget for 2017/18:
- Allocate more funds to MoAIWD for extension, fisheries, irrigation, land resources, livestock, research, and training activities to build needed capacity of frontline staff and farmers.
- Consider allocating more Government funds to other critical areas, such as training, buffers for large projects phasing out (to ensure continuation of project gains), winter cropping, and legume production.
- Strengthen coordination and monitoring mechanisms by providing more human and financial resources to MoAIWD, especially to help regulate and track currently unclassified agriculture investments, which are allocated to other parts of Government.
This blog post was co-written by Chance Mwabutwa and Kimberly Keeton, IFPRI-Malawi.
