Finally there is a relief for President Peter Mutharika’s administration as the World Bank Board of Executive Directors has approved an $80 million (K58.7 billion at current exchange rate) credit to the Malawi Government for general budget support.
This is the first budget support financing approved by the World Bank for Malawi in four years after donors pulled out their support following Cashgate, a financial scandal involving looting, theft and corruption that happened at Capital Hill, the seat of government of Malawi.
The scandal was uncovered during the administration of President Joyce Banda, though it is believed to have begun prior to her taking office. Over K240 billion is believed to have been stolen through this uncalled for theft.
In a statement made available to Nyasa Times on Friday, the bank, indicates that the budget support operation, fully referred to as the Agricultural Support and Fiscal Management Development Policy Operation (DPO), is the first of a proposed series of two operations.
It aims to improve incentives for private sector participation in agricultural markets and to strengthen fiscal management through more effective expenditure controls and greater transparency.
The DPO supports a series of policy and institutional reforms that the Government of Malawi is undertaking in order to reduce distortions in, and improve the performance of the agricultural sector; and to restore basic public financial management and accountability systems.
Minister of Finance, Economic Planning and Development, Goodall Gondwe expressed his delight for the resumption of the budgetary support by country donors.
“The Malawi Government is committed to ‘breaking the cycle’ of vulnerability in Malawi, by making the necessary reforms that will lead to a more resilient and private sector-oriented agricultural sector, and by rebuilding integrity in our public financial management systems,” said Gondwe.
“We are grateful to the World Bank’s vote of confidence in these efforts, demonstrated by the approval of budget support, but we also recognize that there is a still a long way to go.”
World Bank says Malawi’s policies and institution particularly in the agricultural sector have often exacerbated the country’s vulnerability, and that the government has taken initial steps towards addressing vulnerability and this operation is to help boost those efforts.
“Agriculture remains central to the fortunes of Malawi which makes this DPO a potentially high return operation as it will support an emerging reform agenda while acting as a stabilizing measure for the economy,” said Laura Kullenberg, Country Manager for the World Bank in Malawi.
“The Government has taken some very important reform steps and it is critical to maintain momentum and deepen reforms going forward to move Malawi out of the cycle of vulnerability and onto a positive development path,” she added.
The $80million credit is from the International Development Association, the World Bank’s fund for the poorest.
The DPO is part of a broader World Bank response to the recent El Nino induced drought and food security crisis and brings the total support to recovery and resilience building efforts to $272.75 million. The DPO aims to catalyze some of the investment financing operations in the overall response by addressing some of the key binding constraints that have amplified Malawi’s vulnerability to climate induced shocks.
Malawi’s economy is said to be recovering with inflation rate dropping to 15.80% from 16.10% since January this year. The Inflation rate was at 21.50% in May, 2016 and rose to as high as 23.50% in July same year.
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