Anti-Bakili Muluzi / MALAWI POLITICS TODAY

Malawi gets World Bank K2.9bn grant
BY DICKSON KASHOTI
08:00:11 - 16 November 2007

The World Bank has given Malawi a grant of K2.9 billion (US$20 million) following the country's successful implementation of macro-economic programmes.

The money would be used for poverty reduction projects.

World Bank Country Manager Timothy Gilbo told the press during a signing ceremony of the grant in Lilongwe Thursday that this was the first in a series of three annual US$120 million poverty reduction support credit (PRSC) agreement with the bank to be provided to Malawi through the International Development Association (IDA).

The bank is expected to give Malawi up to US$360 million in credit in the next four years and Gilbo said although the PRSC is a family of credit, Malawi’s PRSC-1 is a grant.

Gilbo said the PRSC programme would be IDA’s instrument for provision of budget support to Malawi within the Common Approach to Budget Support (CABS) framework.

He added that it would support the government of Malawi’s efforts to undertake the policy and institutional reforms necessary for successful implementation of the Malawi Growth and Development Strategy (MGDS).

“The PRSC series is a central pillar of the bank’s efforts to support implementation of the MGDS... we are very pleased to have approved our first grant within the framework of the CABS,” he said.

Gilbo said this was the first time the World Bank was giving a PRSC to Malawi, adding this would not go through Parliament for approval because it was a grant and not credit.

He said the PRSC programme was expected to bridge a financing gap in MGDS implementation, consolidate policy and institutional reforms in the macroeconomic gains that Malawi has registered over the last three years and contribute to improving aid effectiveness by being part of a harmonised approach to budget support.

It would also impact on agricultural incomes, employment generation in the private sector and public service delivery’s contribution towards achievement of the Millennium Development Goals (MDGs).

Gilbo said Malawi has received the grant because of its significant progress in restoring macro-economic stability, adding Malawi has successfully concluded three reviews of the IMF supported Poverty Reduction Growth Facility (PRGF) and is about to conclude fourth and fifth reviews.

He said due to continuing strong fiscal management, domestic borrowing by the government has declined from 25 percent of GDP to 12.4 percent of the GDP as at end June, 2007, inflation declined to 7.1 percent in September while real GDP growth was 7.9 percent in 2006 and is projected at 7.5 percent in 2007.

Gilbo, however, said reforms to reduce the cost of doing business have been slow, observing that Malawi dropped from 110th in 2006 to 127th in 2007 on the ease of doing business rankings.

Minister of Finance Goodall Gondwe thanked World Bank for the grant, which he signed on behalf of the government of Malawi.

Gondwe said the grant would support efforts by government in the functioning of agricultural markets with a focus on establishment of additional auction floors for agricultural products and putting in place a better targeted and more private sector inclusive system of providing fertilisers and seeds to farmers.

He also said it would help in economic governance with a focus on reforms that improve payroll management and external accountability of the government of Malawi.

“The specific reforms to be undertaken have been classified as follows; agriculture and land reforms, private sector development reforms, social protections reforms and public sector and finance management reforms,” he said.

Gondwe said World Bank has been a very consistent development partner for Malawi since 1966 in terms of project, programme, relief and other development support but has, however, been an observer as far as budget support is concerned.
“The decision by the bank to join the CABS group through provision of financial resources is a very welcome one not only because of the financial resources but more so because the bank is an ‘opinion leader’ as far as the donor community is concerned,” he said.