Malawi is a poor country that ranks 171 on the 2011 United Nations (UN) Human Development Index, with per capita income at around US$340. The population is highly rural and largely dependent on rainfed agriculture, rendering it vulnerable to drought and other weather shocks. Poverty reduction and food security therefore remain top priorities for the government. Despite progress in reducing chronic malnutrition, increasing immunization for children less than one year old for measles, and reducing HIV/AIDS prevalence among adults to 10 percent at the end of 2011, maternal mortality rates remain high. Education indicators are also weak, as reflected by low enrollment, high dropout rates, overcrowded classrooms, and high pupil-to-trained teacher ratios. Malawi is likely to meet five of the eight Millennium Development Goals (MDGs) targets. The three goals that are unlikely to be achieved are education, gender, and malnutrition.
Due to recent economic and democratic governance issues, Malawi is unlikely to maintain its economic performance with a gross domestic product (GDP) growth rate that averaged 6 percent since 2006. Since 2009, the country has been dogged by acute shortages of fuel, forex and energy, which are crippling economic activities and ultimately affecting livelihoods. An overvalued local currency is also at the center of Malawi’s problems. An International Monetary Fund (IMF) program that went off track early in 2011 and poor governance have led to most major development partners suspending budget support. The sustainability of economic growth and poverty reduction therefore depends on resolving the economic and democratic governance issues, and maintaining prudent macroeconomic policies and economic diversification.
IDA has been Malawi’s partner in development for 46 years now. Since 2007, IDA has focused its support on priorities identified in the medium-term Malawi Growth and Development Strategy (MGDS). The first MGDS continued to 2011 and the government is finalizing the successor MGDSII on which IDA will base its fifth Country Assistance Strategy (fiscal years (FY)12-FY16). IDA has been selective in providing its support by concentrating on sectors in which it has a comparative advantage, while limiting its engagement in sectors where other development partners are better positioned to lead.
In line with the MGDS priorities, the IDA program has supported agriculture and food security, infrastructure development, combating HIV/AIDS, and governance and public sector management, using a combination of lending, analytical work, and technical assistance instruments. The program has supported both micro-level community-driven development activities as well as macro-level institutional and policy reforms in central government. Projects such as the Malawi Social Action Fund and Community-Based Rural Land Development have been highly successful in economically empowering households and mitigating household-level risks and vulnerabilities among the rural population. Because of its private sector focused MGDS, IDA has also supported the development of businesses through technical assistance projects that facilitate a better business environment such as the Business Environment Strengthening Technical Assistance Project. IDA has also carried out analytical work to inform policy formulation as the country tries to diversify its sources of growth, for example the Mining Review. IDA has successfully collaborated with other development partners to address the serious challenges in the education sector. For example, between 2010-2014 pooled partner funding for basic education will amount to approximately US$256 million, to which IDA is contributing US$50million through the Improve Education Quality Project in Malawi. All donors are supporting the National Education Sector Plan 2008-17 (long-term).
Through a range of programs in the fourth Country Assistance Strategy supporting agriculture, infrastructure, private sector development, HIV/AIDS and nutrition, and public sector management, the following results were achieved:
- The country’s four major irrigation schemes were rehabilitated and are fully functional, and more than 3,000 ha are benefitting from small- and medium-scale irrigation schemes, increasing rice and maize yields by a minimum of 30 percent. Buoyed by the Farm Input Subsidy Program, the majority of households were food secure in the last two years.
- Fifteen thousand people were resettled from densely populated areas, enabling them to double or triple their food production capacity. From this resettlement program, the government has drawn lessons to inform its land reform program.
- Micro-weather insurance schemes initiated with IDA support are expanding on commercial terms with growing interest from the banks and the Insurance Association of Malawi.
HIV/AIDS and nutrition
- The number of people living with HIV/AIDS and receiving anti-retroviral treatment improved from approximately 57,000 in 2006 to close to 200,000 in 2010, exceeding original targets. Malawi’s HIV adult prevalence rate decreased to 10 percent by the end of 2011. Access to treatment has also contributed to improving life expectancy to 52 years from 38 years in 2005.
- Chronic malnutrition is now at 36 percent compared to about 49 percent in 2005.
Environment for doing business
- Access to commercial justice improved with the establishment of the High Court Commercial Division in 2007. The time to settle commercial disputes decreased to 98 days in 2011 from 337 in 2006.
- The time to register a business decreased from 88 days in 2010 to 49 days in 2011.
- Facilitation of the Public-Private Sector Dialogue Forum under the Malawi Confederated Chambers of Commerce and Industry to promote dialogue between government and the private sector on issues relating to improving the business climate in Malawi.
Improvements in government expenditure management
- Progress on capacity development in internal audit with all ministries now having internal audit units, and at least 60 percent of the ministries have fully functional audit committees.
- Government has cleared the backlog of audits and is now current with the audit of the 2009/10 financial statement.
- Comprehensiveness and transparency of the budget. Government has made progress towards improving the linkage between the MGDS and the budget. Since 2008/09, government introduced an output-based budget framework where ministries, departments and agencies are now required to prepare budgets according to MGDS priorities. Further, the presentation and structure of the budget, together with the associated chart of accounts, have been improved to become compliant with international fiscal reporting standards.
As of December 31, 2011, the IDA lending portfolio in Malawi consists of 11 active projects with total commitments of US$631.57 million in various sectors including agriculture, energy, education, HIV/AIDS, infrastructure, mining, finance, and water. Of the 11, two are technical assistance projects (TA)–Financial Sector and Mining. All projects are aligned with the priorities of the government’s poverty reduction strategy, and most of them will run through to 2015-16. Since 2007, IDA’s largest commitment of US$169 million is in the water sector.
Various funding mechanisms are followed. In agriculture and education there is a Sector-Wide Approach (SWAp), while another SWAp is under preparation for water. For HIV, there are pooled resources managed by the Malawi National AIDS Commission, and IDA’s total commitment to HIV is US$65 million. Three other projects are cofinanced: Mining (with the European Union), Financial Sector (with the United States Agency for International Development and the UK’s Department for International Development (DFID)), and Business Environment Strengthening (with the European Union). Malawi also has two Global Environment Facility (GEF) projects in the environment and conservation sector, namely the Nyika Transfrontier Conservation Area Project between Zambia and Malawi (US$2.5 million) and an agriculture development project (US$5.8 million). Malawi is also part of the multi-country Regional Communications Infrastructure Program to assist Eastern and Southern African countries connect to the global broadband infrastructure. Malawi’s commitment for this project is US$20 million. Malawi’s trust fund portfolio has a value of US$16.7 million with 16 trust funds. Since 1966, the World Bank Group has committed about US$2.6 billion to Malawi supporting over 120 operations. Of the five World Bank Group agencies, IDA has the most operations followed by the International Finance Corporation (IFC).
The Bank, in close partnership with the government and other development partners, is committed to the Paris Declaration for Aid Effectiveness and the Accra Agenda for Action. The MGDS framework provides the basis for the alignment of donor support, ensuring that results address Malawi’s problems. Both donors and government are mutually accountable to the people of Malawi in ensuring plans and financial contributions are more focused on poverty issues. The Bank has maintained a close partnership with other donors. For example, the Bank houses a joint World Bank (WB)/African Development Bank (AfDB) Infrastructure Unit, which became operational in 2011 to share expertise in infrastructure projects. The adoption of jointly implemented programs should decrease transaction costs for all parties.
The Bank is moving toward more programmatic lending arrangements with other partners. The Bank participates in a pooled funding arrangement for HIV/AIDS and manages pooled funds for education with the Global Partnership for Education. IDA is a lead player in the education and agriculture SWAps, and is participating in the establishment of a water SWAp through the WB/AfDB Infrastructure Unit. IDA also provides budget support within the framework of the Common Approach to Budget Support (CABS), a group of donors that have a joint approach to the provision of budgetary support to the government. The CABS group includes the AfDB, European Union (EU), Germany, Norway, the UK DFID, and the World Bank (WB).
Toward the Future
The priority areas outlined in the fourth CAS (2007-11) remained the appropriate focus of IDA resources and will remain so in the new CAS (2012-16). Although good results were obtained in smallholder agriculture, more remains to be done to put agriculture in Malawi on a commercial footing. Electricity supply continues to be a major problem affecting industrial and domestic users. IDA will therefore invest in the rehabilitation and expansion of the current distribution and transmission system, and identify new generation sources. More investments will also be made in water and education where more than US$100 million has been committed for each of the sectors. Education is key for Malawi because of the poor indicators and the country needs more support since it is unlikely to meet the MDGs on universal primary education. Malawi is also unlikely to meet the gender MDG. The gender focus of the IDA program will be addressed more explicitly in the fifth CAS, this is also in line with the World Bank’s strategy for Africa (2011). The operations and analytical work will appropriately incorporate gender issues. Examples of such interventions include education projects that promote equal enrollment and retention of boys and girls in school and project activities that aim to increase the number of women with access to land and financial services.
In the fourth CAS, IDA implemented a number of projects that have helped poor households improve their livelihoods and move out of poverty. Some beneficiaries received skills and services that have continued to grow and help them prosper. Mrs Rozina Tafatatha of Mbabvi in Lilongwe District assisted by her husband Llyod has benefited from the Community Investment and Savings Program (COMSIP) introduced under the Malawi Social Action Fund. “Six years ago I was one of the very poor people in my village. But now I walk tall in the community as I own a restaurant, a grocery shop, and a bakery. I am the main supplier of bakery products in this whole area. All this is due to the savings and loans I got from COMSIP. I am now so independent and can provide my family with everything. It’s wonderful I tell you.”