Impact Of Agricultural Market Reforms On Smallholder Farmers In ...

the reduction of its operations in areas with low trading activities and poor infrastructure,
particularly roads. It has therefore been difficult for the private sector to penetrate and operate in
these areas for the same reasons that ADMARC withdrew from them. In certain areas, due to the
deterioration of agricultural market operations, ADMARC has been forced to reopen its markets.
Since 1999, there has been on-going negotiations to privatize ADMARC. However, no concrete
measures towards this end have been taken so far.
Starting again in 1998, the macroeconomic situation of the country deteriorated; Malawi’s fiscal
discipline weakened and its external debt situation worsened. The inflation rate increased as well
during this period, hovering between 20 and 40 percent in 1998 and 1999. The Malawian currency,
the Kwacha (MK) was devalued twice in 1998. Within that year, the official exchange rate had
increased from about MK/$ 15 to MK/$ 42. As of January 2001, the exchange rate was at MK/$
47. Malawi qualified as a Highly Indebted Poor Country (HIPC) and was therefore eligible for debt
forgiveness by the IMF and the World Bank. At the end of 2000, it was approved for an external
debt relief of about $ 1.1 billion.
3.3 Recent Agricultural Strategies and Safety Net Interventions
A combination of economic liberalization, favorable external circumstances, and other
government/donor initiatives have provided a boost to the agricultural sector in the last decade.
According to FAO data, the Agricultural Production Index per capita for Malawi (base year 1989-
91) grew from less than 100 in 1990 to about 125 in the year 2000. Growth in agricultural
production has been fuelled mainly by the smallholder sector. As Table 3.2 indicates, the
production of maize, cassava, groundnuts, rice, potatoes, and pulses has increased substantially
since the early 1990s. Depending on the crop, this has been due to area expansion and/or
improvements in yield. Since the liberalization of burley tobacco marketing by small farmers, the
number of smallholder farmers growing tobacco has also increased. The smallholder production
area allocated to tobacco swelled from 33,000 ha in 1990/91 to about 100,000 ha in 1996/97. The
production of smallholder burley tobacco increased from 1.6 thousand mt in 1990/91 to 66
thousand mt in 1996/97. Smallholder production of burley tobacco accounts now for more than 50
percent of total burley production in the country.
Despite these positive changes for the smallholder sector, food insecurity and persistent poverty
remain an important concern for policymakers in Malawi. A number of indicators which include
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