Traditional public sector market level interventions, i.e., price bands, Strategic
Grain Reserve, etc., mostly benefit a small number of food insecure households and
generally exclude the poorest households. In an agricultural economy, production instability
not only affects supply of food on the market but also has an impact on household income and
effective demand. Price stabilization may be an element for dealing with transitory food
insecurity, but it does not assure food security at the household level. Many poor households
are outside the market. Market stabilization is useful to the extent that it compensates for
losses of income resulting from production shortfalls. The Strategic Grain Reserve (SGR) is
one of several means for stabilizing the market. Other means are imports and exports. The
relative size and composition of the SGR should be based on the cost of operating the SGR and
import and export parity prices of relevant food staples. Food aid should be principally
regarded as a source of foreign exchange and should be encouraged in that capacity as a
substitute for commercial imports. In a liberalized market, food aid should be released, to the
extent possible, through private channels at free market prices.

 The report looks at three possible actions government can take to support food
security: direct or indirect market interventions, encouragement of market development, and
market development with income redistribution.

 Direct or indirect market intervention to support food security is usually a
mistake. Market interventions by the state are not sustainable, create increased donor
dependence, and perpetuate an inefficient economic structure with distorted allocation of
resources. Interventions that distort the market make the goal of reaching food security in
Malawi more difficult to attain.

 Encouraging competitive market development is the best short-term answer to food
security in Malawi. Food insecurity in Malawi is related to income and poverty. Solving the
problem of food insecurity requires increasing household income through greater productivity
i the economy. This productivity can come from transforming the economy from one based
on subsistence to one based on exchange. Such a shift requires lowering the risk inherent in
market exchange, particularly in te food market. The most urgent priority for action to
achieve these objectives is development of competitive markets. Important areas to support in
this regard are: broadening the food market and lowering transaction costs, enhancing greater
differentiation of food products in the market, increasing viable investment opportunities for
smallholders, establishing a viable land market, expanding the trucking fleet, especially with
small capacity trucks, and improving market price information.

 Long-term solutions for food security in Malawi are market development coupled
with more equitable distribution of income. Food security is related to household income.
Ultimately, more equitable distribution of wealth is required before Malawi's people can be
food secure. Income redistribution, however, is a difficult problem that can only be solved
through political will.