Key Messages
• Universal input subsidies are fiscally unsustainable and economically inefficient, often disproportionately benefiting large-scale farmers, plagued by implementation challenges, viz., untimely input delivery and cross-border leakages
• Climate shocks and lack of complementary practices (e.g., organic fertilizers, legume intercropping, irrigation) reduce fertilizer efficiency and undermine subsidy impacts on productivity and food security.
• A hybrid subsidy model is recommended and includes targeted (a) Conditional subsidies for productive smallholders tied to adoption of complementary interventions and national crop insurance and (b) Unconditional subsidies for vulnerable households during food shortages.
• Thus, future subsidy programs must be smarter, flexible, and better targeted, leveraging digital technologies and national databases to support productive farmers. In addition, future subsidy programs should prioritize promoting and scaling up organo-mineral fertilizers, which offer a more economically viable alternative.
• Achieving long-term sustainability requires agricultural policy reforms, including investments in digital-based performance-based accountability, R&D, agro-infrastructure, climate-smart agriculture, border control, increased private sector participation, and reduced dependence on government support.

1. Setting the Context
This policy paper discusses the sustained viability of input subsidies by analyzing historical trends, reforms, lessons learned, challenges, and opportunities for Malawi. Globally, input subsidies have been introduced to increase agricultural productivity by making essential inputs—such as chemical fertilizers, improved seeds for staple food, and sometimes pesticides—more affordable and accessible to smallholder farmers. Similarly, the government of Malawi has been implementing various input subsidy programs since 1998 to enhance the adoption of improved crop production technologies in order to boost agricultural productivity, enhance food security, indirectly increase farm income, and stimulate agricultural transformation. Malawi implemented the first input subsidy, called the Starter Pack Programme, during the 1998/99 cropping season in response to the chronic food crisis that hit the country in 1996 – 1997 (Fig. 1) during the post-referendum period. The program provided 2 kg of maize seed and 15 kg of chemical fertilizer to all 2.8 million smallholder farmers. It was intended to motivate smallholder farmers to enhance the adoption of improved crop production technologies. The Targeted Inputs Program (TIP) replaced the Starter Pack program covering 2000/1 to 2001/2 crop seasons. It targeted 1.5 million smallholder farmers in 2000/01 and 1 million in 2001/02. The TIP was followed by an Extended TIP, benefiting 2.8 million farmers in 2002/3 and 1.7 million in the 2003/4 cropping season.

In the 2004/05 cropping season, the government of Malawi launched a Universal Subsidy Programme to benefit all smallholder farmers. However, the challenges associated with this broad-based approach led to the introduction of the Farm Input Subsidy Program (FISP) in the 2005/06 season, which continued until the 2019/20 cropping season. Under FISP, farmers were required to contribute 900 kwacha, and later 3500 kwacha per 50 kg bag of subsidized inorganic fertilizers, a measure designed to encourage greater farmer participation while maintaining a level of cost-sharing (Fig. 2). This shift was intended to address issues of inefficiency and resource allocation that emerged during the universal subsidy phase. Moreover, the FISP witnessed several reforms during its implementation. In the 2010/11 cropping season, legumes were included in the subsidy package in 2010/11 to promote crop diversification, improve soil fertility, and enhance household nutrition. In the 2015/16 cropping season, the government involved more private sector in distributing subsidized inputs, reducing heavy reliance on state agencies. Later in the 2018/19 season, the government piloted a targeting of productive farmers in Dowa and Rumphi districts, where it only provided inputs to farmers who had enough land and assets, such that they would not sell inputs after benefiting. The objective of the pilot was to evaluate whether directing input subsidies toward the productive poor—those with some land and assets—could improve overall food security outcomes at the district level . The AIP was introduced in 2020 as a successor to FISP and benefited 3.8 million farmers during the inaugural year, dropping to 1.1 million farmers in 2024/25. Likewise, the AIP had several reforms, including Digital Vouchers allowing farmers to redeem input through an electronic platform and Domestic Fertilizer Blending in 2022 - 2024, to reduce reliance on imported fertilizers and lower subsidy costs.

Despite the successive implementation of different models of the input subsidies over the past three decades, the country continues to grapple with persistent food insecurity and remains reliant on maize imports to meet national demand. This paper acknowledges that both universal and targeted subsidy models have their own challenges and varying impacts on production outcomes; however, research shows that drawbacks associated with universal subsidies tend to outweigh those of targeted input support. Integrating inorganic and organic fertilizer and other complementary interventions, such as legume intercropping and soil health amendments, have emerged as promising solutions for improving the effectiveness of input subsidies in the country. Nevertheless, the information is still scant, and the best viable subsidy model for achieving the core objectives of input subsidies has yet to be thoroughly examined. Thus, this paper analyses the various models of the previous input subsidy programs to identify and characterize a model that is inclusive, reduces spillage and achieves optimal production outcome. This paper addresses the following question: how do lessons learned from implementing input subsidies inform the design of a better and more inclusive strategy that produces optimal outcomes? Additionally, it highlights a key policy dilemma: What proportion of the input subsidy budget can smallholder farmers realistically co-finance?

2. Rationalizing the adoption of Input Subsidy Programs for agrarian economies
Research has shown that input subsidy programs have significantly contributed to the increased use of inorganic fertilizers from below 30kg to over 50kg per ha (NSO, 2020), which has, in turn, boosted agricultural productivity when complemented by favorable weather conditions. This rise in production has helped improve food availability and reduce malnutrition, particularly among resource-constrained smallholder farmers. For instance, productivity has annually increased to over 2 tons/ha in some years (Fig. 3). Additionally, input subsidies have created employment opportunities in rural areas by supporting the growth of farming activities. Though the extent of private sector involvement remains limited, the sector has observed some increase in private sector participation in the input supply chain, particularly among agro-dealers. However, all farm input subsidy programs had some implementation challenges. These include inefficient targeting, delayed distribution, and dependency on government funding, thereby hindering the full potential of input subsidies. We therefore use secondary data compiled from government reports, NSO, Reserve Bank of Malawi, World Bank Development Indicators database, key expert consultations, as well as scholastic publications to inform discussion in this paper.

3. What lessons have been learned from the implementation of input subsidies?
Agricultural Productivity Outcome: Input subsidies in Malawi have played a pivotal role in enhancing agricultural productivity, particularly among resource-constrained smallholder farmers who comprise most of the farming population and are central to national food production. These programs have improved food security by increasing crop yields, especially for staple crops, and supported rural livelihoods through job creation, and stimulated greater uptake of improved agricultural technologies, including high-yielding seed varieties and nitrogen-fixing legumes. For instance, harvests were relatively good during the periods when the input subsidies were introduced, namely, Starter Park Program in 1998/1999, 2008/2009 during FISP, and AIP in 2020/2021 as demonstrated in Fig. 4a. Despite these achievements, the full potential of input subsidies remains constrained by a range of structural and non-structural challenges. These include unfavorable weather conditions due to climate change, persistent foreign exchange shortages delaying the importation of inputs, logistical bottlenecks hampering timely distribution of inputs, and weaknesses in targeting mechanisms that often lead to the exclusion of intended beneficiaries as subsequently elaborated.

Targeting Criteria: The existing criteria for targeting beneficiaries in Malawi’s agricultural sector remain a significant challenge, undermining the effectiveness and equity of input subsidy programs. Current targeting mechanisms are constrained by inaccurately identifying and reaching out to the most deserving and productive smallholder farmers. As a result, many resource-poor but potentially productive farmers are excluded. Additionally, save for the 2024/2025 cropping seasons, the past subsidies were characterized by a lack of updated and reliable data on farm household characteristics, further complicating the targeting process. Addressing these flaws requires a more transparent, digital data-driven, and inclusive targeting approach that aligns with national development goals and local realities and integrates existing initiatives and databases, such as the Universal Beneficiary Registry (UBR) and the National Agricultural Management Information System (NAMIS).Moreover, the program should clearly define who qualifies as a productive farmer, establishing criteria such as geo-mapped landholding size and the extent of integration with complementary interventions to guide beneficiary selection for input subsidies.

Fiscal Sustainability: A significant fiscal burden of the input subsidy programs continues to pose serious challenges to the country's budgetary sustainability and agricultural policy effectiveness (Fig. 4b). Over the years, a disproportionate share of the agricultural budget has been allocated to input subsidies, often exceeding 50% of the total sectoral expenditure. This heavy financial commitment limits the government’s ability to invest in other critical areas of the agricultural sector, such as research and extension services, irrigation infrastructure, and market development. The high cost of subsidies is further compounded by costly transportation expenses and leakages. Without a more cost-effective, targeted, and sustainable subsidy model, Malawi risks entrenching a cycle of fiscal dependency and limited agricultural transformation.

Private Sector Participation: The limited participation of the private sector in the agricultural input supply chain has compelled the government to assume a dominant role in the procurement and distribution of subsidized inputs. Meanwhile, most private actors cannot invest in distribution networks, particularly in remote and underserved areas, leading to a fragile and uncompetitive input market, with a heavy reliance on government funding. Over time, farmers have become dependent on government initiatives for input access, weakening the sustainability of input supply systems. For Malawi to build a robust and inclusive input market, the private sector must actively participate through smart subsidies, risk-sharing instruments, and targeted investments in the agro-input supply chain.

Leakage and Border Management: Porous borders in the country have facilitated the smuggling of subsidized inputs into neighboring countries, reducing the effectiveness of affordable input programs. More common under universal subsidies, leakages divert inputs away from local farmers, distorting markets and making it harder for legitimate agro-dealers to provide affordable supplies. The illegal trade undermines government efforts to improve food security and stimulate long-term agricultural productivity. Strengthening border security and improving enforcement are essential to preventing smuggling and ensuring that inputs reach their intended beneficiaries.

Climate Conditions, Economics Shocks and Resilience: Unfavorable weather conditions in the country, including recurring tropical cyclones, droughts, and floods, have severely undermined the effectiveness of input subsidies by disrupting agricultural productivity. Extreme weather events have led to crop failures, soil degradation, and reduced output, limiting the impact of subsidies aimed at boosting productivity. The unpredictability of these weather patterns makes it difficult for farmers to plan and gradually graduate from depending on government support, increasing their vulnerability to climate-related shocks. Input subsidy programs in Malawi have been constrained by persistent foreign exchange shortages, disrupting the timely procurement and distribution of agricultural inputs, undermining program effectiveness. Future input subsidy programs should integrate climate-resilient measures such as drought-tolerant crop varieties, improved water management, and integrated soil fertility practices, including organo-mineral fertilizers, alongside timely resource allocation for input procurement.

Food Security Outcome: Chronic food insecurity in Malawi persists, resulting in more farm households being pushed into a vicious cycle of poverty, despite the implementation of input subsidies, with one of the primary contributing factors being unfavorable weather conditions. While input subsidies have successfully increased the use of fertilizers and improved seeds, unpredictable and extreme weather patterns often undermine these gains, including droughts, floods, and cyclones. Data shows that the country has been procuring or importing maize to supplement input subsidy rainfed production (Fig.5). Attributions are made towards recurring unfavorable weather events that have severely disrupted food production, leading to crop failures and lower yields even though farmers have access to inputs.

Input Delivery and Distribution Systems: Untimely or delayed distribution of input subsidies has been a persistent challenge, significantly undermining the intended impact of these programs. The government has often launched the input subsidies in good time before the planting season. However, the distribution of input subsidies has faced delays, making farmers miss critical planting and fertilizer application windows. These delays often result from logistical bottlenecks, exacerbating food insecurity and undermining efforts to improve agricultural output. To address this, improving supply chain management, streamlining distribution processes, and ensuring adequate planning are essential for ensuring subsidies reach farmers when needed.

Integration of Complementary Interventions: The limited integration of complementary interventions, such as organic fertilizers, legume intercropping, irrigation, and sustainable land management practices, significantly reduces fertilizer use efficiency in the country. While input subsidy programs focus primarily on inorganic fertilizers, they often overlook environmentally sustainable practices that can enhance soil fertility and reduce dependence on chemical inputs. These complementary interventions can improve soil health, increase nutrient use efficiency (NUE), and boost agricultural productivity (Kanyamuka et al., 20180. To enhance fertilizer use’s sustainability and efficiency, integrating these practices into subsidy programs is essential for promoting a more holistic approach to soil health management.

Governance, Monitoring & Accountability: Governance, monitoring, and accountability of input subsidy programs in Malawi remain critical challenges. Weak institutional capacity, limited transparency, and political interference often undermine program effectiveness. Inadequate monitoring systems hinder the timely detection of fraud, inefficiencies, and leakages, while limited farmer feedback mechanisms reduce responsiveness. Meanwhile, farmers who receive subsidized inputs do not even report on what and how they used the inputs. Strengthening governance requires clear roles and responsibilities, robust digital tracking systems, independent audits, and greater stakeholder engagement, including private sector and civil society participation. Enhancing accountability through performance-based evaluations and real-time monitoring tools can ensure that subsidies reach intended beneficiaries, promote efficiency, and support broader agricultural development goals in a fiscally sustainable manner.

Investments in Research and Development: Low investment in research and development (R&D) for input subsidies has significantly hindered these programs’ effectiveness and long-term impact. While input subsidies are designed to increase access to critical agricultural inputs like fertilizers and improved seeds, the lack of national budget support towards R&D in this area has resulted in a narrow understanding of how best to integrate subsidies with local farming conditions, soil health, and environmental challenges. It also has limited innovation in developing more cost-effective, sustainable, and locally adapted impactful input solutions, such as blending organo-mineral fertilizers or promoting drought-resistant crop varieties. Additionally, inadequate R&D investments mean little information is available on the long-term effects of subsidized inputs on soil fertility, productivity, and environmental sustainability, which is crucial for designing more effective and adaptive subsidy programs.

Economic Growth Outcomes: Overall, investments in farm input subsidies in Malawi have not translated into commensurate increases in economic growth over the years, raising questions about their overall effectiveness of subsidies (Fig. 6). While these subsidies, primarily targeting fertilizer and improved seed access, have aimed to boost agricultural productivity and partially enhance food security, their broader economic impact remains limited. The heavy fiscal burden, inefficiencies in targeting, and leakages in implementation have often undermined the potential benefits of input subsidies. As a result, despite substantial public spending, the contribution of these subsidies to sustained economic transformation and poverty reduction has been minimal, with the National Statistics Office reporting slightly above half of the population still poor.

Exit Strategies and Transition Planning: Effective exit strategies and transition planning are critical to ensure the long-term sustainability of input subsidy programs in Malawi. Gradual phasing out should be guided by clear timelines, performance indicators, and farmer graduation criteria. Emphasis should shift toward empowering farmers through targeted support, digital tools, and capacity building, while fostering private sector-led input markets. Strengthening institutional frameworks, improving accountability, and investing in research and infrastructure can support this transition. Ultimately, a well-planned exit must balance fiscal responsibility with the need to protect vulnerable farmers and sustain productivity gains achieved through subsidies.

4. What can Malawi learn from other countries implementing Universal Subsidies?
The adoption of Universal Subsidy Programs in countries like Malawi, Zambia, Tanzania, Mozambique, and Zimbabwe has been driven by the desire to simplify beneficiary targeting and address the low productivity of staple foods. Universal subsidies have also increased access to inputs and other agricultural technologies for all farmers regardless of their farm sizes, which is critical for increasing agricultural productivity and economic growth. They have also stimulated rural economies, enhanced economic stability, and generated employment, improving livelihoods for agricultural-dependent communities. Under favorable weather conditions, universal subsidies have enhanced food availability, potentially reducing food insecurity in rural areas.

However, universal subsidies have often not realized the desired outcomes due to poor designs, inefficiencies during implementation, and increased leakages to neighboring countries, with large-scale commercial farmers benefiting more than smallholders. Universal subsidies have exacerbated inequalities by favoring wealthier farmers with better resource access. They have also exerted a high fiscal burden that has strained the national budgets, diverting funds from other vital agricultural investments like research, infrastructure, and extension services. They have further created a high dependency level among benefiting farmers, with limited prospects for graduation. Additionally, universal subsidies have been poorly designed, leading to environmental degradation and reducing long-term productivity gains due to the overuse or misuse of inputs. They have crowded out private sector participation by introducing distortions in the supply chain of critical agricultural inputs. Equally important, universal subsidies have been susceptible to increased leakages and smuggling of subsidized inputs into informal cross-border trading, thereby reducing the availability of inputs for local farmers.

The prevailing lessons emphasize the need for well-targeted, fiscally sustainable, and comprehensive subsidy programs integrated with broader agricultural development strategies. These programs should focus on supporting resource-constrained but productive smallholder farmers while avoiding excessive strain on national budgets. Incorporating exit strategies, shifting towards market-based mechanisms, and integrating research, extension services, and climate-smart practices can enhance long-term sector resilience. Indeed, addressing productivity challenges and fostering agrifood systems transformation through input subsidies can enhance food security, increase farm incomes, and drive national economic growth. Moreover, our simulations, presented in Fig. 7, indicate that productive farmers contribute more significantly to employment generation compared to traditional farmers. Additionally, a larger share of agricultural gross domestic product (GDP) is driven by the activities of productive farmers, highlighting their central role in the sector's economic performance. Furthermore, Fig. 7 shows minimal differences in employment and GDP contributions when targeting productive farmers within the 40–60% range, suggesting that expanding coverage within this bracket yields no value for limited budget allocations.

4.1. What future pathways exist for implementing input subsidies in Malawi?
Agricultural input subsidies are pivotal for driving agricultural transformation and realizing Malawi’s Vision 2063 aspirations, particularly under Pillar 1: “Enhanced Agricultural Productivity and Commercialization.” To optimize their effectiveness, ensure sustainability, and enhance long-term impacts on productivity and economic growth (Fig.7), Malawi must pursue pro-productivity implementation pathways that align input support with farmers’ potential to produce, commercialize, and contribute meaningfully to national development. Such approaches have the potential to significantly improve food security, raise farm incomes, and stimulate inclusive economic growth. Drawing on both the challenges and the demonstrated benefits of input subsidy programs in Malawi and other developing countries, as previously discussed, this paper proposes two feasible policy options for reforming Malawi’s input subsidy program: (i) Conditional subsidies, and (ii) Unconditional subsidies, as elaborated in the following sections.

4.1.1. What could Conditional subsidies look like for Malawi?
Conditional subsidies link access to inputs, such as fertilizers and other agricultural inputs, to specific practices or outcomes promoting long-term agricultural sustainability. Unlike universal subsidies, which provide inputs indiscriminately, conditional subsidies ensure that inputs are used effectively to enhance productivity while promoting soil health and environmental sustainability. The conditional nature of these subsidies incentivizes farmers to adopt agricultural technologies that provide both immediate economic benefits and long-term environmental gains, viz., integration of integrated soil fertility management (ISFM) interventions like soil amendments, existing national programs, and inclusion of crop insurance.

Complementary ISFM interventions to enhance soil health improvements: To improve the effectiveness and profitability of fertilizer use, the conditional subsidies must integrate ISFM practices, including promoting soil amendments, intercropping with legumes, and adopting other soil health investments that help restore soil fertility and improve nutrient availability. The agri-extension system can encourage farmers to adopt organo-mineral fertilizers to address soil acidity and improve nutrient uptake. Farmers can also grow and intercrop legumes which not only fix nitrogen but also improve soil structure, thereby reducing the dependency on synthetic fertilizers. The conditional subsidies ensure fertilizer use is more effective, leading to better yields, reducing environmental degradation, and increasing long-term productivity.

Integration with existing national programs to lessen fiscal pressure on input subsidies: The success of a conditional subsidy programs will depend on how well it integrates with other ongoing programs, such as the Climate Smart Enhanced Productive Public Works Programme. Linking conditional subsidies with access to existing national programs can give farmers access to financial resources to invest in improved farming technologies, irrigation systems, or infrastructure projects that support sustainable agriculture. This approach can be complemented with initiatives under public-led credit schemes like the National Economic Empowerment Fund, ensuring that subsidies are sustainably used to achieve their design objectives.

Incorporating crop insurance to hedge input subsidy beneficiaries from devastating effects of climate shocks: The introduction of Area-Yield Index Crop Insurance under the input subsidies coupled with improved data systems would provide a safety net for farm households, particularly those in drought-prone areas like Balaka, Karonga, Salima, Chikwawa, and Nsanje. Input subsidies could cover a portion of the insurance premium for farmers in these areas, ensuring they can access crop insurance without bearing the full financial burden. In addition, districts prone to drought can benefit from an input subsidy that focuses on drought-resistant livestock species such as goats. In the short to medium term, the country can invest in national crop-insurance programme that safeguard the national food security.

Conditional subsidies should mandate that productive farmers receiving subsidized inputs demonstrate performance-based accountability for their use and outcomes. District authorities must also be held accountable for inputs distributed within their regions, providing detailed reports on their utilization and the resulting impact. These reports should outline the effectiveness of the inputs, any gaps or deficits in distribution or usage, and the overall achievement of intended outcomes. Such accountability mechanisms will ensure transparency, reduce inefficiencies, and improve the overall effectiveness of input subsidy programs, ultimately supporting enhanced productivity and sustainability in the agricultural sector.

Future conditional subsidy programs should be flexible and tailored to specific agricultural commodities based on regional and district-level priorities. The current maize-focused approach is often misaligned with local contexts, particularly in areas where maize is not the primary crop or livelihood source. For instance, in Balaka, Chikwawa, and Nsanje, subsidies could prioritize livestock production, while lake shore districts like Karonga and Nkhatabay may benefit more from support for rice and cassava. In unique areas such as Likoma Island, targeted interventions like fisheries training and support would be more appropriate. Such a localized approach enhances resource efficiency, promotes sustainability, and reduces fiscal pressure by limiting reliance on imported inputs like inorganic fertilizers.

4.1.2. What could Unconditional subsidies look like for Malawi?
Unconditional subsidies involve providing support without predetermined conditions, focusing on immediate relief and widespread access, particularly for vulnerable farming communities, during food insecurity and market instability. The primary goal of this program would be to enhance food security among vulnerable farming communities while integrating with existing social protection mechanisms such as the Social Protection Programme. Subsequently, the key components of the unconditional subsidy are highlighted. Targeting and Eligibility: This can leverage existing databases such as the NAMIS and UBR to identify households classified as vulnerable based on income, food security status, and geographic location (e.g., drought-prone, or flood-affected areas). Geographic Focus: This can prioritize regions with a history of food insecurity and low agricultural productivity. Special focus can be given to areas such as Balaka, Karonga, Salima, Chikwawa, and Nsanje.

4.2. The Policy Dilemma: What Proportion of the Input Subsidy Budget Can Government sustainably finance, and Smallholder Farmers Realistically contribute?
Most smallholder farmers in Malawi face severe resource constraints, making it challenging to afford agricultural inputs sold on the open market without government support—unless their productivity and income levels significantly improve. Recognizing the importance of fiscal sustainability and farmer empowerment, there is a pressing need to establish a more effective cost-sharing mechanism that enables farmers to gradually contribute to the financing of input subsidies. This approach would reduce the financial burden on the government and promote a sense of ownership and accountability among beneficiaries. In this section, using the tool developed by the International Food Policy Research Institute (IFPRI), this paper estimates the amount in USD that farmers can feasibly co-finance alongside the government, as presented in Fig.8. Such evidence-based targeting will enable policymakers to extend support to a broader base of smallholder farmers without compromising the quality or reach of the program. The paper further assumes that there are at least 3.5 million smallholder farmers. Besides, the paper acknowledges that the country requires at least 3.5 – 4.0 million metric tons of maize to be food-secure. To achieve the food requirement, the paper run microsimulations in three levels: a) Universal Coverage of Input Survey; b) Extended Affordable Input Programme with Targeted Inorganic Fertilizer Input Subsidy only; and c) Extended Affordable Input Program with Organo-Mineral Fertilizer Input Subsidy.

Universal Inorganic Fertilizer Input Subsidy: Fig. 8 presents micro-simulations of government and smallholder farmer (SHH) contributions under a universal (100%) input subsidy scenario. The findings reveal that such an approach would be fiscally unsustainable for the government, requiring over half a trillion Malawi Kwacha to finance procurement of inorganic fertilizers (INORGA-F) alone. This would force the Ministry of Finance to allocate the entire agriculture budget solely to fertilizer procurement, leaving no room for other essential agricultural investments. The analysis strongly suggests that a universal subsidy is financially unviable and poses a significant risk to broader sectoral development and budgetary balance within the Ministry of Agriculture. Universal financing of the INORGA-F would lead to the government incurring a deficit of about USD 60 million given the current level of national budget towards input subsidy. In general, the country would have a deficit of USD 349 million. Moreover, the universal subsidy would suffer from implementation challenges such as delayed input distribution, smuggling and leakages to neighboring countries through informal cross borders, as well as benefiting more wealthy large-scale farmers than smallholder farmers. However, if an option for organo-mineral fertilizers (ORGANOM-F) is adopted, Fig. 8 shows that government would still save some resources given the current budget where they would push much of the cost to productive smallholder farmers’ contribution. Universal financing of the ORGANOM-F would lead to the government saving USD 15 million given the current level of national budget towards input subsidy but the country having a deficit of USD 56 million.

Extended Affordable Input Programme with Targeted Inorganic Fertilizer (INORGA-F) Input Subsidy only: Under the extended Affordable Inputs Programme (AIP) using inorganic fertilizers, this paper evaluates a viable, targeted input subsidy scheme for beneficiaries ranging from 40% (i.e., 1.4 million) to 90% (i.e., 3.15 million) of smallholder farmers. In our simulation, we assume the landing cost of one metric ton of inorganic fertilizer is USD 842. The paper adopted the most expensive landing cost of one metric of inorganic fertilizers given the landlock nature of our country. We further include a transport cost of 10%, an administrative cost of 10%, and a 20% profit margin. It is assumed that farmers will cover 70% of the fertilizer cost, while the government provides a 30% subsidy. The government is also assumed to procure fertilizers in bulk, enabling private sector entities to purchase for distribution within the country. Moreover, the analysis adopts a current market price of USD 60 per 50kg bag of inorganic fertilizer, based on the official exchange rate of USD 1 = MWK 1,751. We also use a price elasticity of demand of 51%, as reported by Chirwa and Dorward (2013). Findings show that each farmer would contribute approximately USD 41 per 50kg bag, while the government covers USD 18 through the subsidy. To ensure cost-effectiveness and maximize impact, the subsidy should target only productive and commercially oriented farmers. Government can sustainably support up to 55% of the targeted farmers given the current resource allocations towards AIP (Fig. 9). A conditional and targeted subsidy approach is therefore recommended—linking support to measurable productivity outcomes to promote efficiency and long-term transformation in Malawi’s agricultural sector.

Extended Affordable Input Program with Organo-Mineral Fertilizer (OGRANO-F) Input Subsidy: Research highlight the promising solutions offered by blending fertilizers to produce organo-mineral fertilizers as a cost-effective and sustainable strategy to improving long term soil health nutrients’ profiles. Organo-mineral fertilizers are soil amendments that combine organic materials—such as compost, manure, or plant residues—with inorganic fertilizers. This blend harnesses the quick nutrient release from mineral fertilizers while benefiting from the long-term soil health improvements brought by organic matter. These fertilizers enhance nutrient use efficiency, promote sustainable crop production, and mitigate environmental harm linked to overuse of synthetic fertilizers. According to consultations with soil scientists, producing one 50kg bag of organo-mineral fertilizer typically requires only 10–15kg of inorganic fertilizer, making this an efficient use of inputs. From every 50kg bag of inorganic fertilizer, three to four bags of organo-mineral fertilizer can be produced, reducing national demand for inorganic fertilizer by two-thirds. However, production requires time for decomposition to ensure nutrient availability. Targeting for ORGANOM-F ranging from 40% to 90%, assuming 10% transport, 5% administrative, 20% input, and 20% profit margin, cost estimates yield a price of USD 19 per 50kg bag. The government and smallholder farmers would contribute USD 8 and USD 11, respectively. This means farmers can access four bags of organo-mineral fertilizer for the cost of one inorganic bag. Fig. 10 shows this approach generates government savings without incurring a fiscal deficit. Moreover, the data reveals that the current allocation to input subsidy is enough to cover up to 60% of the beneficiaries if the country would opt for organo-mineral fertilizers. Therefore, this paper recommends that future input subsidy programs should prioritize scaling up of ORGANOM-F, which offers a more economically viable alternative to purely inorganic options, allowing the country to achieve significant savings and universal coverage.

4.3. What could be ideal for Malawi– moving forward?
The feasibility of a universal input subsidy in Malawi hinges on addressing the significant inefficiencies in targeting, fiscal burden, and implementation that have hindered the effectiveness of past efforts. Moreover, given the severe resource constraints faced by her smallholder farmers, Malawi cannot afford the luxury of foregoing input subsidies if it is to safeguard food security and support inclusive agricultural transformation. However, long-term sustainability of input subsidy remains a pressing concern. Besides, given the porous borders and high demand for inputs, universal input subsidies would likely benefit farmers across the borders. Moreover, per a cost-effective standpoint, an input subsidy program targeting up to 60% of smallholder farmers remains fiscally manageable within current national budget allocations. At this threshold, the government can still achieve meaningful impact while maintaining budgetary sustainability.

Thus, a hybrid approach, in the form of an Extended-AIP, should be considered, where both conditional and unconditional targeted subsidies are adopted and adapted to enhance their effectiveness, impact, and sustainability. Conditional subsidies should incentivize adoption of sustainable agricultural practices like soil health improvement services among productive farmers, while unconditional subsidies should provide basic access to vulnerable households during food insecurity period. In addition to improving subsidy design, broader agricultural policy reforms are necessary, including timely distribution of input, heightening private participation, reducing government dependency, biometric beneficiary selection, targeted extension advisory services, and a traceable, digital-based, performance-based accountability framework. Achieving long-term sustainability requires comprehensive reforms, including increased investment in R&D, agro-infrastructure, climate-smart agriculture, strengthened border control, private participation, and reduced government dependence. Moreover, future subsidy programs should be designed with flexibility to accommodate the specific commodity needs of each district, thereby enhancing its relevance, effectiveness, and alignment with district agro-ecological conditions and market opportunities.

Citation: Pangapanga-Phiri I, Kanyamuka J, Chitete M, Chafuwa C, Kawaye-Chimseu P, Makoka D, Chilongo T, and Jumbe C. 2025. Leaving No Farmer Behind: Rethinking Inclusive Input Subsidy for Malawi. Policy Paper 100100026, Center for Agricultural Research and Development. Lilongwe University of Agriculture and Natural Resources. Bunda College Campus, Lilongwe, Malawi.

** Figures 1-10 can be accessed upon request.

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