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World Bank contemplates budgetary support to Malawi

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One of Malawi’s key development partners, the World Bank, has said a meeting by its board of directors will, among other things, reflect on the possibility of resuming direct budgetary support to the country following the suspension of the same some three years ago.

Revelations of the plunder of public funds at Capital Hill compelled several development partners to suspend their director budgetary support in 2013 and the huge deficit of about 40 percent left government with an option of loans and grants, and sometimes squeezing the fiscal blueprint, to optimally finance it.

The bank’s Regional Vice- President for Africa, Makhtar Diop, and Minister of Finance, Goodall Gondwe, signed the Second Financing Agreements for the Malawi Social Action Fund (Masaf IV) Project amounting to 50.2 million Special Drawing Rights (SDR) which is an equivalent of $70 million (approximately K51 billion).

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The facility comprises a grant of $47.7 million (approximately K35 billion) and a loan of $22.3 million (approximately K16 billion).

Diop said there are several areas which the World Bank looks at when it considers whether it should support a country’s national budget including transparency and accountability in the flowing of public funds.

“The [International Monetary Fund (IMF)] has confirmed that the Malawi Government has a programme which is on track and we believe the government is making progress on macroeconomic stability.

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“The Government of Malawi is meeting the conditions needed to show that the macroeconomic situation is on track. It is also important to look at policies that are put in place to address some of the challenges that the country is facing,” said Diop.

He added that another thing which the World Bank looks at critically in terms of budget support is transparency and clarity in the flow of funds between different points in government.

“On this one, we believe progress is being made. We have seen that auditing is taking place. They are doing some reconciliations to ensure they find out where things went wrong,” Diop added.

During the signing ceremony, Gondwe reiterated that the impact of the humanitarian crisis, which is going to be partly addressed by the World Bank financing, is worrisome as far as the economy is concerned.

Apart from individual countries and institutions, members of the Common Approach to Budgetary Support (Cabs) announced in 2013 that they as a collective body had suspended their direct budgetary support following the plunder of funds which is now dubbed Cashgate.

Meanwhile, President Peter Mutharika has reiterated his appeal to the World Bank to consider approving the $80 million general budget support under the Malawi Resilience Development Policy Operations.

Mutharika made the appeal during a meeting that he had with Diop later in the afternoon at Kamuzu Palace.

“I am aware that substantial progress has been made in achieving the agreed prior actions, which shows my government’s commitment to reform in the areas of agriculture, trade and public finance management, among others,” Mutharika said.

He said his administration has prioritised the enhancement of the Integrated Finance Management and Information System functionality and compliance with the Public Finance Management Act.

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