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World Bank faults maize export ban

 

The World Bank says while maize export ban leads to low domestic prices which benefit consumers, incomes of producers is adversely affected, thereby discouraging farmers from growing the staple crop.

The bank’s senior country economist Patrick Hettinger said in an interview on Tuesday that depending on the elasticity of supply and demand, this may end up with maize prices being higher because of lower aggregate supply in subsequent years, which could have implications on macroeconomic stability, as maize carries a huge weight, at 42.5 percent, of the Consumer Price Index (CPI)—an aggregate basket for computing inflation.

Export ban heavily affected maize traders

He said: “Beyond price and trade flows, ad-hoc and impromptu policies affect private sector decision making processes. These factors make it difficult to plan, potentially impacting decisions related to investment and medium-term production.

“Farmers’ incomes are affected by price volatility, in addition to the impact of weather shocks. As a result, the banking sector has seen a relative rise in non-performing loans, particularly involving loans to the agriculture sector.”

Hettinger blamed discretionary policy interventions which he said has led to market uncertainty, with long-term implications for food security and international trade.

For instance, the maize export ban imposed after the 2016/17 harvesting period costed Malawi K69 billion in potential export revenue, according to a study by the International Food Policy Research (Ifpri) published December last year.

Within the ban period, wholesale maize prices in the country were said to be between 45 to 70 percent lower than in Kenya, Rwanda and Tanzania, according to Ifpri.

Since the 2000s, Malawi has implemented bans on the export of agricultural commodities, particularly maize and soya.

Ironically, Malawi’s crop production is heavily weighted towards maize, with 76 percent of farmland utilised for the production of this crop by smallholder farmers on an average plot area of 0.8 acres, according to the National Statistical Office (NSO).

Speaking during the launch of the National Security Policy in Lilongwe in March last year, President Peter Mutharika hinted on renewing the maize export ban as one way of ensuring food availability in the country.

The move, if effected, may antagonise commercial farmers who blamed the previous export ban lifted last October for negatively affecting prices of the staple grain.

But Malawi Confederation of Chambers of Commerce and Industry (MCCCI) chief executive officer Chancellor Kaferapanjira said in an interview that placing export ban on commodities, transfers revenue from farmers to consumers and vendors, thereby removing incentives for farmers to make independent decisions on what they produce.

 

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