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Agricultural Producer Subsidies: Navigating Challenges and Policy Considerations
Author:
David Amaglobeli
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Todd Benson
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Tewodaj Mogues
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Series:
IMF Notes
Volume/Issue:
Volume 2024: Issue 002
Language:
English
Publication Date:
26 Aug 2024
DOI:
https://doi.org/10.5089/9798400285950.068
ISBN:
9798400285950
ISSN:
2957-4390
Pages:
36
Keywords:
Agricultural subsidies; direct farmer support; payments to agricultural producers; producer subsidy; input subsidy program; IMF note 2024/002; output price subsidy; implementation challenge; Agricultural policy; Government subsidies; Agroindustries; Agricultural sector; Price incentives; Global; Sub-Saharan Africa
Legal-disclaimer:
The IMF Notes Series aims to quickly disseminate succinct IMF analysis on critical economic issues to member countries and the broader policy community. The views expressed in IMF Notes are those of the author(s), although they do not necessarily represent the views of the IMF, or its Executive Board, or its management.
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The objectives underlying agricultural output subsidies can have conflicting implications for the design of subsidy programs. As they tend to affect meaningful swaths of the electorate, subsidies can also be an attractive political instrument. By artificially lowering production costs or assuring higher output prices, direct support measures can result in resource misallocation in instances where they fail to address market failures, such as imperfect information about the returns to fertilizers. Subsidies can also contribute to fertilizer overuse, harming the environment and the agricultural sector in the long term. Furthermore, agricultural production subsidies are often fiscally costly and unfavorable compared to alternative uses of public funds—both within the agricultural sector and outside it—to achieve the same ends. Various design and implementation challenges amplify the shortcomings of producer subsidy programs.
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IMF Notes
Publisher:
International Monetary Fund