WASHINGTON, May 28, 2009 – The World Bank Board of Executive Directors today approved a US$30 million grant to the Malawi Government for general budget support. The grant has been provided in recognition of the policy and institutional reforms that Malawi has undertaken to improve the functioning of agricultural markets, the business climate, social protection, and economic governance.
“Instead of being complacent about the high economic growth rates registered in recent years, the Government continues to undertake reforms in order to sustain these gains and further reduce poverty in Malawi,” said Timothy Gilbo, the Bank’s Country Manager. “This ongoing commitment to the reform agenda will enhance the country’s competitiveness in attracting additional foreign assistance and greater amounts of private investment,” he added.
The approved financing, to be provided through the Second Poverty Reduction Support Grant (PRSG II), is the second in a series of three annual development policy lending operations supporting a reform program for the implementation of the Malawi Growth and Development Strategy (MGDS). Malawi received the first PRSG from the World Bank during the 2007/08 fiscal year amounting to $20 million.
Among the reforms on improving the functioning of agricultural markets, the Government has established the Malawi Agricultural Warehousing and Trading Company (MAWTCO) that will help deepen input and output markets through the leasing of warehousing space to agricultural traders. Improvements in the way markets function will help consolidate the gains made from increased productivity as a result of the input subsidy program. In particular, increased competition in agricultural markets will ensure that poorer households can readily access food at reasonable prices and farmers can earn reasonable returns for their produce.
In the area of social protection, the PRSG II recognises reforms that improve the targeting of the input subsidy program to ensure that the program benefits the poor. The Government introduced improved guidelines for targeting beneficiaries of the program during the 2008/09 agricultural season.
Another key area of reform recognised is that relating to enhancements in the business climate. Through improved efficiency of the Commercial Court, which was established in 2007, the time it takes to settle commercial disputes has declined significantly. The average time it takes to settle commercial disputes has declined to 120 days in 2009, down from 337 days in 2007.
In the area of economic governance, Government has undertaken several actions that have formed the basis for the provision of general budget support under PRSG II. These include a review of the payroll management system, a personnel audit of the whole civil service that helped flush out ghost workers. The Government also finalised a debt management policy.
“Having reached the Heavily Indebted Poor Countries (HIPC) completion point in 2006, which resulted in a significant proportion of Malawi’s external debt being written off, the development of a debt management policy is a critical step towards ensuring that Malawi’s debt levels remain sustainable,” said Khwima Nthara, Task Team Leader for the PRSG.