PRESS RELEASE May 31, 2018

Malawi: Realizing the Potential of Safety Nets to Break the Poverty Trap

LILONGWE, May 31, 2018—With Malawi’s poverty levels remaining persistently high at about 50 percent, the country needs to transform its social safety nets and adopt less donor-dependent programs to help break the cycle of poverty, says the Malawi Economic Monitor (MEM) released by the World Bank today.

Titled Realizing Safety Nets’ Potential, the seventh edition of the MEM observes that although the social safety net (SSN) sector in Malawi has all the components necessary to facilitate transformative change, the country requires critical shifts in policy, institutional, and investment priorities. The report suggests that the country should consider commitment to a national financing strategy that re-channels fiscal spending to a more effective mix of social protection programs. Malawi’s package of major social safety net programs includes social cash transfers, school meals, public works, and food for assets.

“Experience in other countries has shown the power of social cash transfers to effectively strengthen household resilience to shocks and promote a movement out of poverty through better earnings, livelihoods and schooling outcomes,” said Greg Toulmin, Country Manager for Malawi. “Evidence is now beginning to emerge that these transfers can work in Malawi too. Should such transfers be scaled up in Malawi, we expect to see about 40 percent of the ultra-poor reached with help.”

On financing SSN programs, the MEM proposes options to support the establishment of a more sustainable financing strategy in the sector. These include reallocating resources away from less effective poverty reduction initiatives, such as the fertilizer subsidy; redirecting humanitarian financing towards safety net initiatives; and exploring contingency financing mechanisms to make the SSN system more resilient and sensitive to shocks. In addition to financing, the MEM recommends that Government should stay the course of better targeting the poor, prioritize new directions in program design, and strengthen country systems to deliver SSN.

The MEM primarily provides an analysis of economic and structural development issues in the country. The seventh edition estimates GDP growth to moderate to 3.7 percent in 2018 from 4 percent in 2017, due to a decline in agricultural production. The FY2017/18 fiscal deficit is expected to widen to around 7.1 percent of GDP due to among other reasons lower revenues, securitization of arrears, and Government’s bailout of the Agricultural Development and Marketing Corporation. The country continues to be vulnerable to various repeated shocks. To break this cycle, the MEM proposes several actions including increased controls on expenditures, reforming agricultural market institutions to reduce the fiscal burden and market distortions, simplifying business regulations and addressing infrastructure constraints such as electricity.

Previous MEM editions published since 2015 are: Land for Inclusive Development,  Harnessing the Urban Economy, Emerging Stronger, Absorbing Shocks, Building Resilience.Adjusting in Turbulent Times,  and  Managing Fiscal Pressures.


PRESS RELEASE NO: 2018/136/AFR

Contacts

Lilongwe
Zeria Banda
+265 1 770 611
zbanda@worldbank.org
Washington
Ekaterina Svirina
+1 202 458 1042
esvirina@worldbank.org
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