- Fertiliser only contributes 20% of the total cost of production hence need for government to look into other factors.
- Farmers are having a hard time accessing credits which would back them to increase production.
Image: WINNIE WANJIKU
Giving farmers subsidised fertiliser is not enough, economic experts now say, calling for increased access to credit for farmers.
They have termed the subsidy as a basic political solution to an economic problem, saying subsidies generally have proven to be ineffective in addressing real economic issues.
“In recent past, we’ve had subsidies on fuel and maize flour. We witnessed a case where not all citizens and business operators benefit from the programme as other players were excluded," senior lecturer at Strathmore University, Lucy Muthoni, said.
In other cases, distributors were hoarding the subsidised products for their personal gain.
“Just like maize flour, we could foresee much like same scenario where some farmers will not have access to the subsidised fertiliser,” Muthoni said.
Fertiliser contributes about 20 per cent of the total cost of agricultural production, hence there’s need for the government to look into other factors such as credit facilitation, she said.
A lead markets analyst at trading company FXPesa, Rufas Kamau, said farmers are having a hard time accessing credits which would back them on strategies to increase production.
“It is very hard for farmers to borrow agricultural loans because of the uncertainty in production, market availability, and harvest price fluctuations. Unless it is government subsidised loans,” Kamau said.
The subsidised fertiliser programme will see a 50kg bag of DAP fertiliser retail at Sh3,500, CAN at Sh2,875, Urea at Sh3,500, NPK at Sh3,275, MOP at Sh1,775 and Sulphate of Ammonia at Sh2,220.
Speaking during a twitter forum on the economic outlook, experts reiterated that subsidies are short term measures that have far reaching consequences in the future.
They urged the government, together with the exchequer, to enhance the country’s fiscal and monetary policies in order to do away with subsidies.
"Subsidised loans could lead to commercial lenders choking farmers with high interest rates which would only repel the farmers from accessing the credit," Kamau said.
According to the Central Bank of Kenya–Bank Supervision Annual Report (2021), the agricultural sector recorded mixed performance in 2021, a year that the sector's growth contracted by 0.1 per cent.
This was after a 5.2 per cent growth in 2020.
The contraction was attributed to erratic and poorly distributed long rains, as well as inadequate short rains.
There has been calls for strategies such as affordable loans to boost the declining production.
With the sector projected to grow by 6.3 per cent this year, efforts to increase lending to this critical segment of the economy needs to be enhanced, CBK notes.