Anti-Bakili Muluzi / MALAWI POLITICS TODAY

Malawi 06/07 budget ups agriculture, water funding

Fri Jun 16, 2006 6:26 PM GMT

By Mabvuto Banda

LILONGWE (Reuters) - Malawi's Finance Minister Goodall Gondwe on Friday unveiled the budget for 2006/2007, sharply raising the amount of money allocated for agricultural and irrigation programs in the drought-stricken African nation.

"Never again shall we become so hopeless and force to beg for food," Gondwe said as he announced the increases for the ministries of agriculture and water and irrigation, both considered crucial to fighting hunger in Malawi.

Almost half of Malawi's 12 million people were in need of food relief last year following a drought.

The new budget raises the agriculture ministry's allocation to $43 million from $14 million and the water and irrigation ministry's funding to $14 million from $6 million, Gondwe announced.

He also pledged to continue the fertilizer and maize subsidy that is believed to have improved agriculture production.

The budget is seen as key for Malawi's ability to qualify for debt relief and resolve its chronic food shortages.

The International Monetary Fund (IMF) board meets later this month to decide whether the impoverished southern African nation qualifies for debt relief. Gondwe has said it will only occur if legislators pass the budget.

"This is not only the responsibility of the IMF board and our executive, but it is also a responsibility of this parliament to pass the budget because it anchors the Poverty Reduction and Growth Facility (PGRF) with the Fund, which is crucial to multilateral debt relief," he said in a speech.

The proposed budget also aims to reduce spending to 28.7 percent of Gross Domestic Product (GDP) in 2006/07 from 32.2 percent in 2005/06, while repaying domestic debt.

Gondwe, a former World Bank economist, forecast a drop in inflation to 10.4 percent by December 2006 from over 15 percent last year. Inflation has been on a downward trend in Malawi, hitting 16.1 percent in April following 16.6 percent in March.

He projected the economy would expand by 8.4 percent from a sluggish 2.1 percent last year on account of the anticipated bumper harvest, which was helped by good rains and the introduction of the fertilizer and maize subsidy.