The World Bank Board of Executive Directors yesterday approved an $80 million 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.
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.
“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 Honorable Goodall Gondwe, Malawi’s Minister of Finance, Economic Planning and Development. “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,” the Minister added.
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 policies and institutions—particularly in the agricultural sector—have often exacerbated the country’s vulnerability. 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.