June 2, 2011 / 11:25 AM / 6 years ago

Britain stops fertilizer subsidy support to Malawi

3 Min Read

* Fertiliser subsidy has been key to food security

* Britain is Malawi's largest donor

* Malawi economy heavily dependent on agriculture

By Mabvuto Banda

LILONGWE, June 2 (Reuters) - Britain has cut financial support for a highly successful seed and fertiliser programme in Malawi, the latest round in a spiralling diplomatic dispute between London and the impoverished southern African nation.

Malawi's former colonial master has also suspended visa-free travel for President Bingu wa Mutharika, his wife, and other top officials pending a "review" of bilateral ties, High Commission political officer Lewis Kulisewa told Reuters.

Britain said last month it was freezing aid worth $550 million over the next four years following the spat, which started with a leaked cable that described Mutharika as "autocratic and intolerant of criticism".

It had been unclear whether the Farm Inputs Subsidy Programme (FISP), as the fertiliser scheme was called, was included in the suspension given the huge benefits it has brought to thousands of Malawian farmers and the wider economy.

"New aid commitments are on hold while this review takes place and the 2011/2012 FISP is part of this," the Department of International Development (DfID), Britain's aid arm, said in an e-mailed response to a query.

The programme, which provides subsidies to small farmers, has been in place since 2004 and has boosted harvests in a country that has historically suffered from food shortages.

In the last four years, Britain has spent $20 million on the programme.

Malawi has already announced that this year it will only import 90,000 tonmes of fertilizer, half of last year's amount.

The number of farmers under the programme is also expected to be reduced from the 1.6 million families that have benefited from the subsidy, so hunger could increase in rural areas.

Malawi is expected to harvest 3.8 million tonnes of maize this year, up from 3.5 million the previous year, despite some dry periods during the year.

Growing harvests have helped annual economic growth to average a brisk 7 percent in the last five years and contain inflation to single digits. Food accounts for 58 percent of the consumer price index.

Reflecting the aid freeze, the finance ministry is planning a budget based on zero funding from the foreign donors that have typically provided 40 percent of government revenues -- a ploy derided by some newspapers as a "time bomb" that could trigger an uprising against Mutharika.

"Let us stop the charade and accept that we are, at best, undertaking an exercise in futility," the Maravi Post newspaper said in an editorial. " (Editing by Ed Stoddard)

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