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Keywords:

  • Fertilizer;
  • Input subsidies;
  • Targeting;
  • Crowding out;
  • Zambia;
  • sub-Saharan Africa;
  • H2;
  • Q12;
  • Q13;
  • Q15;
  • Q18

Abstract

Over the last decade, subsidies for fertilizer and hybrid maize seed have re-emerged as a cornerstone of the Government of the Republic of Zambia's (GRZ's) agricultural development and poverty reduction strategies. This article reviews the Farmer Input Support Programme (FISP) and other GRZ input subsidy programs since structural adjustment. It then synthesizes existing and presents new empirical evidence on the programs’ targeting outcomes and effects. Results suggest that although 73% of smallholder households cultivate less than 2 hectares of land, and that these households constitute 78% of the smallholder farms below the US$1.25/capita/day poverty line, the majority (55%) of FISP fertilizer goes to households that cultivate larger areas. Other factors constant, wealthier households receive more subsidized inputs. Subsidized fertilizer promotes maize intensification and extensification (at the expense of fallow land), but an additional kg of subsidized fertilizer only raises maize output by 1.88 kg on average. As a result of low maize–fertilizer response rates, poor targeting, crowding out, and diversion of fertilizer intended for the program, financial benefit–cost ratios for FISP fertilizer are well below one. The article concludes with recommended reforms to FISP, including that it be downsized and the savings invested in known drivers of pro-poor agricultural growth.