Africa > Malawi

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Ms. Annalisa Fedelino
,
Mr. Gerd Schwartz
, and
Marijn Verhoeven
This paper assesses whether the scaling up of aid and the resulting increase in government spending that is needed to meet the Millennium Development Goals (MDGs) would be hampered by wage bill ceilings that are often part of government programs supported by the IMF's Poverty Reduction and Growth Facility (PRGF). Based on country case studies for 2003-05, the paper suggests that, in the past, wage bill ceilings have not restricted the use of available donor funds. Yet the paper offers a number of suggestions for further enhancing the flexibility of wage bill conditionality in PRGF-supported programs to respond to higher aid flows that may result in the future.
Mr. Odd Per Brekk
and
Mr. Ronald P Hicks
This paper applies, through a case study on Malawi, a simple methodology indicating the first-round (i.e., price) effects of macroeconomic policies on real earnings of the poor. As the economic program in Malawi has not involved substantial exchange rate action or cuts in subsidies, the real incomes of the poor have been most clearly affected by the pricing policies of the agricultural parastatal and the overall anti-inflationary measures incorporated in the program; developments in minimum wages have also been important. The study suggests that, on balance, these various factors have led to an increase in real incomes of the poor over the program period.