Recent years have seen a resurgent interest in large scale input subsidies, and
particularly fertilizer subsidies, in agricultural development and food security policies in
Africa. Very high global grain prices in the first part of 2008 appeared to make such
subsidies even more attractive, but this was complicated by even more dramatic rises in
fertilizer prices. While global grain and fertiliser prices have subsequently fallen back, high
grain prices have persisted in many domestic markets, and future food and fertiliser prices
are very uncertain.
This paper considers the roles of input subsidy programmes in poor rural economies in
Africa in these difficult times. The paper begins with a brief review of historical changes in
experience with and views of input subsidies, and of the factors behind resurgent interest
in input subsidy programmes, particularly with a new generation of so called ‘smart
subsidies’. We then consider how the features of smart subsidies may demand a
rethinking of economic analysis of the benefits of subsidies in different contexts. This
provides the foundation for a conceptual framework for considering the key issues
affecting the performance of subsidy programmes. This framework is then applied to
discussion of recent experience of specific input subsidy programmes.
The final part of the paper considers how current grain and fertiliser prices, and
uncertainty regarding future prices, impacts on subsidy programmes, and asks what roles
input subsidy programmes may have under different price regimes in different contexts in
the future, and what critical factors will determine their performance.