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Government to phase out AIP, freeze new recruitments

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Malawi has committed to the International Monetary Fund (IMF) to end the flagship Affordable Inputs Programme (AIP) in a phased approach within the next five years.

This is contained in the Memorandum of Economic and Financial Policies, which is accompanying the country’s Letter of Intent on measures which the government intends to implement under the Staff Monitoring Programme with Executive Board Involvement (PMB) to build a track record for an Upper-Credit-Tranche (UCT) quality arrangement within the next 12 months.

The Letter of Intent to IMF Managing Director Kristalina Georgieva was signed by Finance Minister Sosten Gwengwe and Reserve Bank of Malawi Governor Wilson Banda on November 11 2022.

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In the memorandum, Gwengwe and Banda observe that the government would be reducing the number of AIP beneficiaries by 20 percent every year as part of the exit strategy.

They note that expenditure prioritisation is more critical than ever, given the need to support vulnerable people and invest in infrastructure.

Gwengwe and Banda promise the fund that Malawi will endeavour to improve efficiency of public spending and reduce non-critical spending.

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“We are implementing the first phase of reform to the fertiliser and seed subsidy programme (Affordable Inputs Program, AIP)) by having a Consolidated Social Protection Programme using the Unified Beneficiary Register to reduce duplication of access, hence bringing in efficiency in beneficiary targeting. We have taken necessary measures to prevent cost overrun in the AIP from escalating fertiliser prices and Kwacha depreciation including through increment to farmer contribution while capping the government subsidy and fast-tracking beneficiary reform.

“In subsequent phases of the AIP reform, we have adopted a plan to phase out the AIP in five years by reducing the number of beneficiaries by 20 percent every fiscal year. Furthermore, we have moved farmers at the lowest end of the income spectrum to social protection programmes and those at the higher end of the spectrum to commercial agriculture programmes, supported by development partners,” the memorandum reads.

Gwengwe and Banda further say Malawi is committed to rationalising the wage bill.

They argue that the personnel audit that was carried out in 2021 made a number of recommendations and the Government of Malawi is committed to managing its wage bill by freezing on new hiring to the public service, except in critical areas such as health and education sector.

The further note that government would strengthen approval processes to payroll and pension changes within the existing Human Resource Management Information System (HRMIS).

“To safeguard social protection and to protect the vulnerable, we will establish a floor on social spending as an indicative target (IT) under the programme. This will comprise of government contribution to health and basic and secondary education spending, as well as a number of social safety net spendings, including the social cash transfer programme and AIP,” the memorandum says.

Commenting on plans to phase out AIP, Mwapata Institute Executive Director William Chadza Sunday described it as progressive and achievable, provided there is commitment to translate the aspirations over the time lines.

“It would be important to have a monitoring mechanism in place to ensure that we are complying progressively.

“In the medium term, this would ease the fiscal burden and hopefully free resources to other productive subsectors, within the agricultural sector, such as research, extension and diversification into other value chains,” Chadza said.

National Smallholder Farmers Association of Malawi Chief Executive Officer Betty Chinyamunyamu said the issue is not just about scrapping off the AIP in five years but more about ensuring that smallholder farmers are supported in more appropriate ways.

According to Chinyamunyamu smallholder farmers in Malawi are not homogeneous and therefore one programme that targets all of them without due consideration of their differences may not be as effective in achieving the desired objectives.

“It is also good that there will be clarity on the direction of the programme over the next five years. This will assist farmers to plan accordingly,” she said

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