The World Bank in Malawi

Located in Southern Africa, Malawi is landlocked, sharing its borders with Mozambique, Zambia and Tanzania. The country has an estimated population of 18.6 million (2019), which is expected to double by 2038.

Malawi remains one of the poorest countries in the world despite making significant economic and structural reforms to sustain economic growth. The economy is heavily dependent on agriculture, employing nearly 80% of the population, and it is vulnerable to external shocks, particularly climatic shocks.

The Malawi Growth and Development Strategy (MGDS), a series of five-year plans, guides the country’s development. The current MGDS III, Building a Productive, Competitive and Resilient Nation, will run through 2022 and focuses on education, energy, agriculture, health and tourism. In January 2021, the Government launched the Malawi 2063 Vision that aims at transforming Malawi into a wealthy and self-reliant industrialized ‘upper middle- income country.

Political Context

Malawi is a generally peaceful country and has had stable governments since independence in 1964. One-party rule ended in 1993; since then multi-party presidential and parliamentary elections have been held every five years.

Malawi’s sixth tripartite elections were conducted in May 2019. The presidential results were nullified in February 2020 by the Constitutional Court. Fresh presidential elections were held on June 23, 2020 where Lazarus Chakwera of the Malawi Congress Party and Saulos Chilima of the UTM Party were elected as president and vice president respectively after getting 58.6% of the votes. They won against Peter Mutharika of Democratic Progressive Party and United Democratic Front coalition, who received 39.4% of the votes. President Lazarus Chakwera and Vice President Saulos Chilima lead a coalition of nine political parties.

Economic Overview

Malawi’s economy has been heavily impacted by COVID-19 (coronavirus) pandemic. Growth is estimated at 1.0% for 2020, compared with earlier projections of 4.8%, but is projected to rebound in 2021 to 2.8%, although the nature of the recovery will depend on the evolution of the COVID-19 pandemic and government’s policy actions. The second wave of the pandemic has been more intense than the first. The COVID-19 vaccine is not expected to reach a significant portion of the population until at least mid-2022. As such, stronger social distancing policies and behavior are expected to weigh on economic activity and suppress domestic demand.

The COVID-19 crisis is increasing poverty, particularly in urban areas, where the services and industry sectors have been hit hard. A weak rebound is expected in the services and industry sectors in 2021 while international tourism is unlikely to return to previous levels in the short term. The pandemic is also disproportionally affecting human capital investment in poor households, reducing future intergenerational income mobility.

Given a widening fiscal deficit, the stock of public debt has continued to increase, largely driven by high cost domestic debt. The fiscal deficit is widening due to a slowdown in revenue collection due to the effects of the COVID-19 pandemic combined with increasing spending pressures including from response to the pandemic, debt service costs and unbudgeted arrears. Malawi is at high risk of overall debt distress and moderate risk of external debt distress, with limited space to absorb shocks.

Social Context

Malawi has made progress in building its human capital—the knowledge, skills and health that people accumulate over their lives—in recent years. Life expectancy at birth is 63.7 years (2018 Population and Housing Census). The total fertility rate in 2015/16 was 4.4 children per woman down from 6.7 in 1992. Self-reported literacy (reading and writing in any language) for population aged 15 years and above is 83.0 for males and 68.8 for females (IHS5).

However, poverty and inequality remain stubbornly high. The latest poverty figures show the national poverty rate increased slightly from 50.7% in 2010 to 51.5% in 2016, but extreme national poverty decreased from 24.5% in 2010/11 to 20.1 percent in 2016/17. Poverty is driven by low productivity in the agriculture sector, limited opportunities in non-farm activities, volatile economic growth, rapid population growth, and limited coverage of safety net programs and targeting challenges.

Development Challenges

Malawi’s development challenges are multi-pronged, including vulnerability to external shocks such as weather and health. The COVID-19 pandemic has further negatively impacted economic growth and livelihood. Other challenges include rapid population growth and environmental degradation. Energy shortages still stand out, with about 11.4% of the population having access to electricity. Infrastructure development, the manufacturing base, and adoption of new technology are low, and corruption levels remain high with Transparency International ranking Malawi at 129/180 economies in 2020.

Last Updated: Mar 18, 2021

World Bank Engagement in Malawi

The World Bank Group Malawi Country Partnership Framework (CPF) FY21-25 is currently under preparation.

While incorporating lessons from the previous strategy, the draft CPF (FY21-25) focuses three areas of bolstering foundations for growth and accountability, promoting private sector led jobs, and strengthening human capital development, with digital development and women empowerment as cross cutting themes. The CPF is guided by government priorities outlined in the Third Malawi Growth and Development Strategy (2017-2022) and the Malawi vision 2063.

As of February 2021, the World Bank’s portfolio consists of 22 International Development Association lending operations for a total of $1.76 billion in commitments, of which four (worth $140 million), are regional projects. These are complemented by $136.61 million in Trust Funds. The portfolio includes financing for programs in agriculture and food, urban resilience and land, social protection and jobs, governance, basic service delivery (including health, education, and water and sanitation), as well as support in the energy, transportation, digital development, trade logistics, finance and competitiveness sectors.

COVID-19 Response

The government continues to undertake significant actions to address the health and economic impact of second wave of COVID-19 (coronavirus) guided by the COVID-19 Preparedness and Response Plan. Government plans to vaccinate almost 20% of the population with COVID-19 vaccine from March as the first phase of the vaccine rollout plan. Other ongoing mitigation measures include the expansion of social protection, fiscal and monetary measures, as well as steps to support the financial sector, medium and small enterprises, and the expansion of mobile money services. Immediate health response actions include detection, treatment and prevention, supported by two separate emergency budgetary reallocations totaling MWK 5.5 billion.

In April 2020, the World Bank approved a $7 million grant in immediate funding to support Malawi’s response to the pandemic under the Malawi COVID-19 Emergency Response and Health Systems Preparedness Project. In addition to the new operation, $30 million was made available from the Disaster Risk Management Development Policy Financing with a Catastrophe Deferred Drawdown Option (Cat-DDO) to strengthen the country’s response to the pandemic. Additional financing is currently under preparation to support the National Vaccine Deployment Plan (NVDP).

The President declared a state of national disaster to reinforce prevention measures relaxed in the first half of FY21 while carefully considering the trade-off losses to livelihoods. Containment measures such as curfews, mandatory wearing of masks, routine disinfection of public buildings and school closures are intended to flatten the epidemic curve while aiming at reducing the positivity rate.

International Finance Corporation (IFC)

IFC’s engagement in Malawi focuses on investment and advisory activities that help diversify the economy, develop the micro, small and medium enterprise sector, and improve access to finance.

Under the infrastructure and natural resources program, IFC is providing public-private partnership advisory services to the water, transport, and energy sectors. IFC supports private sector involvement in hydro-electric power projects identified as a priority in Malawi’s Integrated Resource Plan.

IFC is supporting value addition enterprises in the agribusiness sub-sector, diversification of Malawi’s exports, and is working with the government to help strengthen the warehouse receipts system.

In the financial sector, IFC provides advisory support to Malawi’s financial institutions with the aim of increasing access to finance for small and medium enterprises (SMEs), and to help improve the country’s collateral registry and credit reference systems.

Last Updated: Mar 18, 2021

The World Bank Group (WBG) continues to contribute to Malawi’s development performance in various sectors including energy, health, agriculture, education, infrastructure development, private sector development and emergency response. Below are examples of results achieved in some World Bank-supported sectors.

Linking farmers with markets through better roads

Farmers in 12 districts are benefiting from improved access to rural markets through the Second Agriculture Sector Wide Approach Support Programme (ASWAp-SP II). The World Bank-financed program is facilitating improvement of rural roads through labor intensive rehabilitation and upgrades, which provide cost-effective solutions to relatively low-trafficked roads, easing the burden of access to markets for the local farmers. The roads are further linking agricultural productive areas to markets so farmers are reached with farm inputs and easily able to take their produce to markets. The upgrading of a total of 74km and rehabilitation of 1118km is expected to link up communities to 143 markets. More than 14,500 people have been employed on the ongoing works, of which 56% are women.

Strengthening Safety Net Systems in Malawi Project- Fourth Malawi Social Action Fund (MASAF IV)

Now in its sixth year, the fourth Malawi Social Action Fund-Strengthening Safety Net Systems Project (MASAF IV) is focused on strengthening Malawi’s social safety net delivery systems and coordination across social protection programs.

By December 2019 MASAF IV supported the Malawi government to implement productive community driven public works (PPWP) that have built productive community assets and provided temporary employment for close to a million people, of which slightly over half were women, disbursing $57.4 million in wages.

The project further supported the Malawi government to implement social cash transfers in 11 out of 28 rural districts in Malawi, supporting close to 127,000 extremely poor, most vulnerable and labor-constrained households—including elderly, disabled, and sick citizens—with social cash transfers amounting to $24 million. The project has also supported the rolling out of Malawi’s social Unified Beneficiary Registry (UBR) in 12 out of 28 districts, facilitating the capturing of at least half of household population in these districts.

As of June 1, 2020, the successor to MASAF IV, the Social Support for Resilient Livelihoods Project (SSRLP) was declared effective and will continue supporting the government implement the Malawi National Social Support Program II.

Last Updated: Mar 18, 2021

The European Union, African Development Bank, United Nations agencies, bilateral donors such as FCDO, USAID, Germany, Norway, and China, the World Bank Group, and the International Monetary Fund are among Malawi’s key partners.

The government and its cooperating partners have a Development Cooperation Strategy (DCS 2014-2018) which is currently being updated. It guides development cooperation in the country. The DCS advocates inclusive partnerships, government leadership and country ownership of the national development agenda, and alignment around national systems and strategies. It also embraces focusing on results that matter to poor citizens and encourages partnerships among development actors based on mutual trust, transparency, and accountability.

Last Updated: Mar 18, 2021