Effect of fertilizer subsidy expenditure on agricultural growth in Tanzania, 1995-2024

Abstract

Agricultural inputs are critical aspects for improving agricultural productivity and production. This paper analyses how fertilizer subsidy expenditure has impacted on agricultural growth in Tanzania from 1995 to 2024. The study used time series data utilizing Autoregressive Distributed Lag model mechanism with short-run and long-run dynamics. The data were analysed using the Augmented Dickey-Fuller unit test and the F-bound test for cointegration, revealing the existence of a long-run and short-run relationship necessary for Error Collection Model. The results indicate that for a unit percentage increase in fertilizer subsidies expenditure significantly reduces the growth percentage by 4.25 in a long run even though in short-run fertilizer subsidies expenditure has significant positive effects on agricultural growth as measured by GDP at 5 per cent level of significance due to inefficiency, misallocation, or crowding out of other agricultural investments such as irrigation schemes. Therefore, fertilizer subsidy expenditure should be correlated with advancements in agricultural technology, improvements in seeds, coordination of agro-dealers on timely distribution of fertilizer and the strengthening of research and development in the agricultural sector. The study recommends that financing for fertilizer subsidy programs should be linked with other factors of production, including agricultural technology, improved seeds, and strengthened research and development.