World Bank resumes direct budget support
The World Bank has announced a resumption of direct budget support to the Malawi Government with a $137 million (about K232 billion) package to support local efforts to boost reforms and restore macro-economic stability.
The announcement comes after the World Bank board of executive directors approved the Malawi First Growth and Resilience Development Policy Operation with Catastrophe Deferred Drawdown Option (Cat-DDO). This is the first time since 2017 that the World Bank will be giving budget support to the country.
In an e-mailed statement, World Bank country director for Malawi, Tanzania, Zambia and Zimbabwe, Nathan Belete, said he was pleased the BrettonWoods institution can now provide direct budget support to complement an ongoing programme of reforms that are “tough but necessary to stabilise an acute macro-economic crisis”.
He said: “The bank will also continue to work closely with the authorities and all international partners to protect the poorest while pursuing a much-needed economic turnaround. Together, we must ensure this operation marks a turning point in the country’s economic fortunes.”
The package will comprise an immediate release of $80 million (K136 billion) to support reforms to enhance fiscal sustainability and transparency, stimulate private sector-led growth and increase resilience to exogenous shocks.
It will also includes a $57 million (about K96 billion) CAT-DDO that the government can trigger during a crisis.
Ministry of Finance and Economic Affairs officials were not readily available for comment as we went to press at 6pm yesterday.
But the World Bank statement quotes Minister of Finance and Economic Affairs Simplex Chithyola as having said the support was a significant milestone in Malawi’s ongoing reform journey.
He said: “It shows the increased confidence that the World Bank has in our ongoing efforts to reform the economy and become a self-reliant, industrialised upper middle-income country by 2063.”
Malawi has won favour with some sections of multilateral and bilateral donors after it implemented some reforms, including the 44 percent kwacha devaluation to re-align it with its market value and committing to debt restructuring to secure an Extended Credit Facility programme with the International Monetary Fund.
Since clinching the deal, the European Union announced plans to front-load about 60 million Euro before the end of the year to inject some forex in the local economy.
Donors such as the World Bank, the EU, Norway and the United Kingdom, under what was called the Common Approach to Budget Support, stopped providing direct budget support to Malawi in September 2013 following revelations of Cashgate, the plunder of public resources at Capital Hill through inflated invoices, payment for goods and services not rendered or delivered and fraud.
The development left Malawi with a 40 percent hole in the recurrent budget and about 80 percent in the development budget as the donors opted to channel resources in form of off-budget support through international non-governmental organisations.
