World Bank Supports Fiscal Reforms And Rural Land Development In Malawi

Washington,  April 14, 2004 – The World Bank’s Board of Directors yesterday  approved an IDA Credit of US$50 million* to support the implementation of fiscal reforms, and a US$27 million grant to develop a community-based and market-assisted rural land reform project in Malawi.

The Fiscal Management and Accelerating Growth (FMAG) project aims to deepen the implementation of structural reforms and lay a basis for generating growth in the country.  It will support the Government’s economic growth and poverty reduction agenda, and provide the balance of payment support needed to finance the fiscal framework and reduce the growth of domestic debt.

The proposed credit will support a set of specific structural reforms in the following areas: fiscal management, statements of expenses reforms, agriculture and HIV/AIDS projects.

Reforms in fiscal management will help strengthen the Government’s capacity to meet macroeconomic stabilization targets, protect pro-poor expenditures, and improve the delivery of social services through accelerating fiscal decentralization.  The statements of expenses reforms will help reduce the burden on the budget and improve the delivery of key infrastructure services.

The project will contribute to growth by increasing the returns to small-holder farmers.  It will also support land policy reforms which will increase access to land and ensure it is used  more equitably.

The creation of a national HIV/AIDS commission will help channel resources and strengthen institutions for mitigating the health and social impact of the pandemic in the country.

“On the whole, the project is designed to improve the incentives and the institutional structure to lay the basis for growth as well as provide resources that are crucial for achieving macroeconomic stabilization in Malawi”, said Sudhir Chitale, World Bank Task Team Leader for the project.

Low economic growth performance combined with the recent food shortages in Malawi have negatively impacted on the Government’s poverty reduction agenda.  The FMAG credit will support the Government’s overall development strategy and help to sustain growth in the country.

The Community-based Rural Land Development grant will provide access to resources for land acquisition and farm development to poor beneficiary families, and build capacity at the community, district and national levels to implement a community-driven and market-assisted approach to land reform.

The project will use the already existing financial management  mechanisms of the Malawi Social Action Fund to enable local government structures to empower rural communities  to identify beneficiaries and establish new farms on underutilized lands.

  “These mechanisms will reduce rural tensions, minimize the incidence of encroachment on either private lands or protected public areas, and encourage productive investments on the newly established farms,” said Rogier van den Brink, World Bank Task Team Leader for the project and Land Reform and Land Policy Coordinator for Africa. “This will be the first time in Africa that Bank resources will be used to pay for the purchase of land. The success of this pilot could have important regional implications.”

By the end of the project, some 15,000 poor rural families would have increased their incomes in four pilot districts in the southern part of Malawi through the implementation of a decentralized, community-based and voluntary approach to land reform.

The project will also provide secure land titles to the beneficiaries under the property rights regime they desire.

Inadequate access to land has been identified as one of the critical factors contributing to poverty and rural tensions in Malawi.  The redistribution of unused lands to the poor and other activities under the project will make a direct contribution to increasing economic growth and reducing poverty.

* The credit is on standard International Development Association (IDA) terms, with a commitment fee of 0.5%, a service charge of 0.75%, and a maturity of 40 years, including a 10-year period of grace.

For more information on the World Bank’s work in Malawi visit: http://www.worldbank.org/afr/mw/