Abstract
November 7, 2019
Contents
November 7, 2019
Prepared By
The African Department (In Consultation with Other Departments, the World Bank, and the African Development Bank)
Contents
RELATIONS WITH THE FUND
JOINT MANAGERIAL ACTION PLAN
RELATIONS WITH THE AFRICAN DEVELOPMENT BANK
Relations with the Fund
(As of August 31, 2019)
Membership Status
Joined: July 19, 1965; Article VIII
General Resources Account:
| SDR Million | %Quota | |
|---|---|---|
| Quota | 138.80 | 100.00 |
| Fund holdings of currency (exchange rate) | 136.36 | 98.24 |
| Reserve tranche position | 2.44 | 1.76 |
| SDR Million | %Quota | |
|---|---|---|
| Quota | 138.80 | 100.00 |
| Fund holdings of currency (exchange rate) | 136.36 | 98.24 |
| Reserve tranche position | 2.44 | 1.76 |
SDR Department:
| SDR Million | %Allocation | |
|---|---|---|
| Net cumulative allocation | 66.37 | 100.00 |
| Holdings | 2.82 | 4.25 |
| SDR Million | %Allocation | |
|---|---|---|
| Net cumulative allocation | 66.37 | 100.00 |
| Holdings | 2.82 | 4.25 |
Outstanding Purchases and Loans:
| SDR Million | %Quota | |
|---|---|---|
| ECF Arrangements | 150.86 | 108.69 |
| SDR Million | %Quota | |
|---|---|---|
| ECF Arrangements | 150.86 | 108.69 |
Latest Financial Arrangements:
| Type | Date of Arrangement | Expiration Date | Amount Approved (SDR Million) | Amount Drawn (SDR Million) |
|---|---|---|---|---|
| ECF | 04/30/2018 | 04/29/2021 | 78.08 | 22.30 |
| ECF | 07/23/2012 | 06/29/2017 | 138.80 | 138.80 |
| ECF | 02/19/2010 | 07/22/2012 | 52.05 | 13.88 |
Overdue Obligations and Projected Payments to Fund1
(SDR Million; based on existing use of resources and present holdings of SDRs):
When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.
| Forthcoming | |||||
|---|---|---|---|---|---|
| 2019 | 2020 | 2021 | 2022 | 2023 | |
| Principal | 3.30 | 13.80 | 18.44 | 25.81 | 22.37 |
| Charges/Interest | 0.15 | 0.59 | 0.59 | 0.59 | 0.59 |
| Total | 3.44 | 14.38 | 19.02 | 26.40 | 22.95 |
When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.
| Forthcoming | |||||
|---|---|---|---|---|---|
| 2019 | 2020 | 2021 | 2022 | 2023 | |
| Principal | 3.30 | 13.80 | 18.44 | 25.81 | 22.37 |
| Charges/Interest | 0.15 | 0.59 | 0.59 | 0.59 | 0.59 |
| Total | 3.44 | 14.38 | 19.02 | 26.40 | 22.95 |
When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.
Assistance committed under the original framework is expressed in net present value (NPV) terms at the completion point, and assistance committed under the enhanced framework is expressed in NPV terms at the decision point. Hence these two amounts cannot be added.
Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned on the amount committed at the decision point but not disbursed during the interim period.
| Implementation of HIPC Initiative: | |||||
| Enhanced Framework | |||||
| Commitment of HIPC assistance | |||||
| Decision point date | December 2000 | ||||
| Assistance committed by all creditors (US$ Million)1 | 1,057.00 | ||||
| Of which: IMF assistance (US$ million) | 45.27 | ||||
| (SDR equivalent in millions) | 33.37 | ||||
| Completion point date | Aug 2006 | ||||
| Disbursement of IMF assistance (SDR Million) | |||||
| Assistance disbursed to the member | 33.37 | ||||
| Interim assistance | 11.57 | ||||
| Completion point balance | 21.80 | ||||
| Additional disbursement of interest income2 | 3.82 | ||||
| Total disbursements | 37.19 | ||||
Assistance committed under the original framework is expressed in net present value (NPV) terms at the completion point, and assistance committed under the enhanced framework is expressed in NPV terms at the decision point. Hence these two amounts cannot be added.
Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned on the amount committed at the decision point but not disbursed during the interim period.
| Implementation of HIPC Initiative: | |||||
| Enhanced Framework | |||||
| Commitment of HIPC assistance | |||||
| Decision point date | December 2000 | ||||
| Assistance committed by all creditors (US$ Million)1 | 1,057.00 | ||||
| Of which: IMF assistance (US$ million) | 45.27 | ||||
| (SDR equivalent in millions) | 33.37 | ||||
| Completion point date | Aug 2006 | ||||
| Disbursement of IMF assistance (SDR Million) | |||||
| Assistance disbursed to the member | 33.37 | ||||
| Interim assistance | 11.57 | ||||
| Completion point balance | 21.80 | ||||
| Additional disbursement of interest income2 | 3.82 | ||||
| Total disbursements | 37.19 | ||||
Assistance committed under the original framework is expressed in net present value (NPV) terms at the completion point, and assistance committed under the enhanced framework is expressed in NPV terms at the decision point. Hence these two amounts cannot be added.
Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned on the amount committed at the decision point but not disbursed during the interim period.
The MDRI provides 100 percent debt relief to eligible member countries that qualified for the assistance. Grant assistance from the MDRI Trust and HIPC resources provide debt relief to cover the full stock of debt owed to the Fund as of end-2004 that remains outstanding at the time the member qualifies for such debt relief.
| Implementation of Multilateral Debt Relief Initiative (MDRI): | ||
| MDRI-eligible debt (SDR Million)1 | 37.87 | |
| Financed by: MDRI Trust | 14.53 | |
| Remaining HIPC resources | 23.34 | |
| Debt Relief by Facility (SDR Million) | ||||||
| Eligible Debt | ||||||
| Delivery | GRA | PRGF | Total Date | |||
| December 2006 | N/A | 7.91 | 7.91 | |||
| September 2006 | 10.84 | 19.12 | 29.96 | |||
The MDRI provides 100 percent debt relief to eligible member countries that qualified for the assistance. Grant assistance from the MDRI Trust and HIPC resources provide debt relief to cover the full stock of debt owed to the Fund as of end-2004 that remains outstanding at the time the member qualifies for such debt relief.
| Implementation of Multilateral Debt Relief Initiative (MDRI): | ||
| MDRI-eligible debt (SDR Million)1 | 37.87 | |
| Financed by: MDRI Trust | 14.53 | |
| Remaining HIPC resources | 23.34 | |
| Debt Relief by Facility (SDR Million) | ||||||
| Eligible Debt | ||||||
| Delivery | GRA | PRGF | Total Date | |||
| December 2006 | N/A | 7.91 | 7.91 | |||
| September 2006 | 10.84 | 19.12 | 29.96 | |||
The MDRI provides 100 percent debt relief to eligible member countries that qualified for the assistance. Grant assistance from the MDRI Trust and HIPC resources provide debt relief to cover the full stock of debt owed to the Fund as of end-2004 that remains outstanding at the time the member qualifies for such debt relief.
Implementation of Catastrophe Containment and Relief (CCR): Not Applicable.
Safeguards Assessments:
The 2018 update assessment found that the financial reporting and audit mechanisms continue to adhere to international practices, as noted during the 2016 monitoring visit. However, the RBM’s governance arrangements and autonomy continued to be undermined by weak legal provisions, significant credit to the government, and the presence of government officials on the Board and audit committee. Further, risks in the area of foreign reserves management remain elevated due to limits that are inconsistent with leading practices and lapses in oversight.
Implementation of recommendations from the July 2018 updated safeguards assessment has been slower than the timeline envisaged in the assessment. The assessment recommended legal amendments to strengthen the RBM’s governance and autonomy which were enacted in 2019 and will be further enhanced with the elimination of the conversion of cash advances into securities as well as, following legal review, legislation needed to eliminate any ambiguity in this regard. Limited progress has been made in addressing concerns over the RBM’s reserve management practices, though the authorities have informed staff that steps are being initiated with support from the World Bank. A recent lapse in the RBM’s banking for the government suggests a deterioration in controls which the RBM is taking steps to address. An emergency liquidity assistance (ELA) framework is being developed. Staff is continuing to engage with the authorities on these issues.
Exchange Arrangements:
In May 2012, the government liberalized the foreign exchange regime, devalued the kwacha by about 33 percent, and adopted a de jure floating exchange rate regime. Since May 2012, the RBM has not set a target rate and allowed substantial volatility in the exchange rate. However, the U.S. dollar exchange rates showed remarkable stability between October 2016 and April 2019, at a rate of around MK 730/US$. Accordingly, the de facto exchange rate arrangement was classified as “stabilized” and this classification would change should the substantial volatility exhibited since April 2019 persist. Inflows of foreign exchange have allowed for a strong increase in international reserves. The exchange regime is free of restrictions and multiple currency practices.
Article IV Consultation:
The Executive Board concluded the last Article IV consultation with Malawi on April 30, 2018.
Financial Sector Assessment Program (FSAP), Reports on Observance of Standards and Codes (ROSCs), and Offshore Financial Center (OFC) Assessments:
A joint team of the World Bank and the International Monetary Fund visited Malawi under the FSAP program during two missions in July and December 2007. The Financial System Stability Assessment (FSSA) was issued in June 2008 (SM/08/198). An FSAP development module was conducted in mid-2017.
Corporate Governance and Accounting and Auditing ROSC missions visited Malawi in February and June 2007.
An update on the FAD mission on the fiscal transparency module was issued in March 2007. A ROSC on the data module, based on a September 2003 mission, was published in October 2004.
Technical Assistance: (January 2015—September 2019)
| Date of Delivery | Department | Ministry/Agency | Purpose/Topic | Modality |
|---|---|---|---|---|
| 08/19 | MCM | RBM | Cyber risk supervision | Mission |
| 07/19 | MCM | RBM | National payment system | Mission |
| 07/19 | FAD | MOF/RBM/NSO | Macro-fiscal forecasting | Mission |
| 07/19 | STA | NSO | Supply and use tables | Mission |
| 04/19 | MCM | RBM | Monetary policy operations | Mission |
| 04/19 | STA | NSO | External sector statistics | Mission |
| 04/19 | STA | NSO | National Accounts | Mission |
| 04/19 | STA | MOF | Government finance statistics | Mission |
| 03/19 | MCM | RBM | Local currency bond market | Mission |
| 02/19 | FAD | MOF | TSA/IFMIS | Mission |
| 02/19 | ICD | RBM | Forecasting and Policy Analysis System | Mission |
| 12/18 | FAD | MOF | Revenue administration | Mission |
| 12/18 | STA | MOF | Government finance statistics | Mission |
| 12/18 | FAD | MOF | Building effective taxpayer registers | Workshop |
| 11/18 | STA | NSO | National Accounts | Mission |
| 10/18 | FAD | MOF | PFM | Mission |
| 10/18 | FAD | MOF | Revenue administration | Mission |
| 10/18 | ICD | RBM | Policy analysis and forecasting | Mission |
| 10/18 | MCM | RBM | Insurance Supervision and Regulation | Mission |
| 09/18 | FAD | MOF | Revenue administration | Workshop |
| 08/18 | FAD | MOF | Macro-fiscal forecasting | Mission |
| 08/18 | FAD | MOF | PFM/ IFMIS | Mission |
| 06/18 | STA | MOF | Government finance statistics | Workshop |
| 06/18 | MCM | MOF/RBM | Developing Local Securities Market | Mission |
| 06/18 | FIN/LEG | RBM | Central Bank law | Mission |
| 06/18 | FAD | MOF | PFM/Budget Execution and Controls | Mission |
| 06/18 | FAD | MOF | Strengthening oversight of SOEs | Mission |
| 05/18 | STA | NSO | National accounts | Mission |
| 04/18 | FAD | MOF | Public Investment Management | Mission |
| 03/18 | STA | NSO | National Accounts | Mission |
| 03/18 | STA | RBM | Monetary and financial statistics | Mission |
| 03/18 | STA | MOF | Government finance statistics | Mission |
| 03/18 | FIN/LEG | RBM | Safeguards Assessment Mission | Mission |
| 03/18 | FAD | MOF | PFM/ Fiscal risk | Mission |
| 03/18 | FAD | MOF | Revenue Administration | Mission |
| 03/18 | ICD | RBM | Policy analysis and forecasting | Mission |
| 03/18 | STA | RBM | Monetary and financial statistics | Mission |
| 02/18 | FAD | MOF | PFM / Financial controls | Mission |
| 02/18 | STA | RBM | Monetary and financial statistics | Mission |
| 02/18 | FAD | MOF | Customs administration | Mission |
| 01/18 | STA | NSO | External sector statistics | Mission |
| 01/18 | STA | NSO | Price statistics | Mission |
| 12/17 | FAD | NSO | National accounts | Mission |
| 12/17 | FAD | MOF | Budgeting | Mission |
| 12/17 | FAD | MOF | Tax administration | Workshop |
| 11/17 | STA | MOF | Government finance statistics | Workshop |
| 11/17 | MCM | RBM | Financial sector regulation | Mission |
| 11/17 | MCM | RBM | Banking supervision | Mission |
| 11/17 | STA | NSO | National account statistics | Mission |
| 11/17 | FAD | MOF | Debt management system | Mission |
| 11/17 | MCM / WB | RBM / MOF | Debt management strategy | Mission |
| 10/17 | STA | MOF | Government Financial Statistics | Mission |
| 09/17 | STA | NSO | Price Statistics | Mission |
| 09/17 | ICD | RBM | Policy analysis and forecasting | Mission |
| 08/17 | FAD | MOF / MOF / NSO | Macroeconomic forecasting | Mission |
| 08/17 | ICD | RBM | Policy analysis and forecasting | Mission |
| 08/17 | FAD | MOF | Public financial management | Mission |
| 07/17 | MCM | RBM | Forex operations and repo market | Mission |
| 05/17 | ICD / MCM | RBM | Forecasting / Policy Analysis System | Mission |
| 05/17 | FAD | MOF | Customs administration | Mission |
| 05/17 | FAD | MOF | Cash management and TSA | Mission |
| 04/17 | STA | RBM | Financial soundness indicators | Mission |
| 04/17 | FAD | MOF | Compliance risk analysis | Mission |
| 04/17 | FAD | MOF | Cash management | Mission |
| 03/17 | MCM | RBM | Financial market infrastructure | Workshop |
| 01/17 | MCM | RBM | Bank supervisory framework | Mission |
| 01/17 | ICD / MCM | RBM | Monetary policy framework | Mission |
| 11/16 | FAD | MOF | Taxpayer register | Mission |
| 10/16 | FAD | MOF | Risk management in customs | Mission |
| 10/16 | ICD / MCM | RBM | Forecasting / Policy Analysis System | Training |
| 09/16 | STA | RBM | General Data Dissemination System | Mission |
| 09/16 | FAD | MOF | PFM / Financial controls | Mission |
| 08/16 | STA | NSO | Consumer price Framework | Mission |
| 07/16 | ICD | MOF | Government financial statistics | Training |
| 06/16 | STA | NSO | National accounts statistics | Mission |
| 06/16 | LEG | RBM | Bank resolution | Workshop |
| 05/16 | MCM/ICD | RBM | Monetary policy framework | Mission |
| 04/16 | FAD | MOF | PFM | Mission |
| 04/16 | MCM | RBM | Basel framework | Mission |
| 04/16 | STA | NSO | National accounts statistics | Mission |
| 03/16 | MCM | RBM | IT risk | Mission |
| 02/16 | LEG | RBM | Safeguard assessment | Mission |
| 02/16 | MCM | RBM | Foreign exchange interventions | Mission |
| 01/16 | LEG | RBM | AML/CFT supervision | Mission |
| 01/16 | FAD | MOF | Tax reform | Mission |
| 11/15 | MCM | RBM | Interbank money market | Mission |
| 11/15 | FAD | MOF | Fiscal reporting | Mission |
| 10/15 | MCM | RBM | Repo market and forex swaps | Workshop |
| 10/15 | STA | NSO | National accounts statistics | Mission |
| 09/15 | FAD | MOF | Pension reform proposals | Mission |
| 09/15 | FAD | MOF | Expenditure control, bank reconciliation, and fiscal reporting | Mission |
| 07/15 | FAD | MOF | Cash planning and management | Mission |
| 06/15 | STA | NSO | Price Statistics | Mission |
| 05/15 | FAD | RBM | TADAT Pilot Assessment | Mission |
| 04/15 | FAD | MOF | Implementing priority PFM reforms II | Mission |
| 04/15 | STA | NSO | National Accounts Statistics | Mission |
| 03/15 | LEG | RBM | Helping draft Banking law amendments | Mission |
| 03/15 | STA | MOF | Government Finance Statistics | Mission |
| 02/15 | STA | NSO | Balance of Payments Statistics | Mission |
| 02/15 | STA | NSO | National Accounts Statistics Harmonization | Workshop |
| 02/15 | MCM | RBM | Advice on the Implementation of ICAAP/SREP supervisory framework. | Mission |
| 01/15 | FAD | MOF | Action plan for implementing priority PFM reforms | Mission |
Joint Managerial Action Plan
(As of September 19, 2019)
| Title | Products | Provisional Timing of Missions | Expected Delivery Date |
|---|---|---|---|
| A. Mutual Information on Relevant Work Programs | |||
| World Bank work program in the next 12 months | Analytical and Advisory Activities: | ||
| 1. Malawi Service Delivery Indicators | Oct 28 – Nov 1, 2019 Nov 25 – 29, 2019 | December 2019 | |
| 2. Malawi National Electrification Program | October 2019 | ||
| 3. Impact Evaluation of Emergency Response and Post-Crash Care in Malawi and Tanzania | December 2020 | ||
| 4. Malawi Mainstreaming Governance and Citizen Engagement | January 2021 | ||
| 5. Mobilizing Long-Term Finance for Infrastructure | Oct 28 – Nov 1, 2019 | December 2019 | |
| 6. Malawi MAPS Follow Up | September 2019 | ||
| 7. Malawi Public Expenditure Review (PER) | Oct 14 – 18, 2019 | June 2020 | |
| 8. Malawi Economic Monitor 2019–20 | June 2020 | ||
| 9. Malawi: Strengthening National Capacity for a Shock-Responsive Monitoring System | June 2020 | ||
| 10. Mw-Digital Moonshot and Opportunities in the Digital Economy | Sept 30 – Oct 4, 2019 | September 2020 | |
| Lending: | |||
| 1. Mozambique Malawi Regional Interconnector Project | Oct 2 – 9, 2019 | September 2019 | |
| 2. Platform for National Social Protection Project | Oct 23 – 25, 2019 | December 2019 | |
| 3. Malawi Resilient Productive Landscapes | Sept 30 – Oct 8, 2019 | February 2020 | |
| 4. Financial Inclusion and Entrepreneurship Scaling Project | Dec 2 – 6, 2019 | February 2020 | |
| 5. Governance to Enable Service Delivery | Sept 30 – Oct 10, 019; Nov 4 – 14, 2019 | March 2020 | |
| 6. Mpatamanga Hydro Power Project | Oct 2 – 9, 2019 | June 2020 | |
| 7. Inclusive Access for Rural Transformation | October 2020 | ||
| 8. Nacala Corridor Trade Project | Oct 21 – Nov 12, 2019 | December 2020 | |
| B. Requests for Work Program Inputs | |||
| IMF request to World Bank | 1. Updates on WB support to Malawi | Continuous | |
| World Bank request to IMF | 1. Regular updates and exchange of views on medium-term macroeconomic and fiscal projections including sharing detailed excel tables on Real, Monetary, Fiscal and External Sectors | Continuous | |
| C. Agreement on Joint Products and Missions | |||
| Joint products in next 12 months | 1. Debt Sustainability Analysis (update) | November, 2019 | |
| Title | Products | Provisional Timing of Missions | Expected Delivery Date |
|---|---|---|---|
| A. Mutual Information on Relevant Work Programs | |||
| World Bank work program in the next 12 months | Analytical and Advisory Activities: | ||
| 1. Malawi Service Delivery Indicators | Oct 28 – Nov 1, 2019 Nov 25 – 29, 2019 | December 2019 | |
| 2. Malawi National Electrification Program | October 2019 | ||
| 3. Impact Evaluation of Emergency Response and Post-Crash Care in Malawi and Tanzania | December 2020 | ||
| 4. Malawi Mainstreaming Governance and Citizen Engagement | January 2021 | ||
| 5. Mobilizing Long-Term Finance for Infrastructure | Oct 28 – Nov 1, 2019 | December 2019 | |
| 6. Malawi MAPS Follow Up | September 2019 | ||
| 7. Malawi Public Expenditure Review (PER) | Oct 14 – 18, 2019 | June 2020 | |
| 8. Malawi Economic Monitor 2019–20 | June 2020 | ||
| 9. Malawi: Strengthening National Capacity for a Shock-Responsive Monitoring System | June 2020 | ||
| 10. Mw-Digital Moonshot and Opportunities in the Digital Economy | Sept 30 – Oct 4, 2019 | September 2020 | |
| Lending: | |||
| 1. Mozambique Malawi Regional Interconnector Project | Oct 2 – 9, 2019 | September 2019 | |
| 2. Platform for National Social Protection Project | Oct 23 – 25, 2019 | December 2019 | |
| 3. Malawi Resilient Productive Landscapes | Sept 30 – Oct 8, 2019 | February 2020 | |
| 4. Financial Inclusion and Entrepreneurship Scaling Project | Dec 2 – 6, 2019 | February 2020 | |
| 5. Governance to Enable Service Delivery | Sept 30 – Oct 10, 019; Nov 4 – 14, 2019 | March 2020 | |
| 6. Mpatamanga Hydro Power Project | Oct 2 – 9, 2019 | June 2020 | |
| 7. Inclusive Access for Rural Transformation | October 2020 | ||
| 8. Nacala Corridor Trade Project | Oct 21 – Nov 12, 2019 | December 2020 | |
| B. Requests for Work Program Inputs | |||
| IMF request to World Bank | 1. Updates on WB support to Malawi | Continuous | |
| World Bank request to IMF | 1. Regular updates and exchange of views on medium-term macroeconomic and fiscal projections including sharing detailed excel tables on Real, Monetary, Fiscal and External Sectors | Continuous | |
| C. Agreement on Joint Products and Missions | |||
| Joint products in next 12 months | 1. Debt Sustainability Analysis (update) | November, 2019 | |
Relations with the African Development Bank
(As of September 2019)
The African Development Bank (AfDB) operations in Malawi date back to 1969. The AfDB Group Malawi Country Office was opened in 2007. As of September 20, 2019, the AfDB had provided significant and diversified support to Malawi, with cumulative commitments worth UA 967 million (about US$1.4 billion) to finance 113 operations, including thirteen studies and two lines of credit.
The AfDB’ s Malawi Country Strategy Paper (CSP) covering the period 2018–2022 is fully aligned with the third Malawi Growth and Development Strategy (MGDS III, 2017–22) and the AfDB’s corporate priorities in the Long-Term Strategy (LTS, 2013–22) and High 5 priorities.
The current CSP 2018–2022, aims to support the foundations of private sector led growth by investing in infrastructure and promoting diversification and transformation agenda. In this regard, the CSP covers two pillars. Pillar I: Investing in infrastructure development through energy and transport; and Pillar II: Investing in economic transformation by strengthening agriculture value addition and developing water infrastructure.
The strategic objective of pillar 1 is to improve competitiveness and efficiency of private and public sector, by extending infrastructure, limiting bottlenecks, and reducing investment constraints that increase business transaction costs. The outcomes to this pillar include improved connectivity to local and regional markets, reduced transport cost, increased private sector investment in energy and transport. Similarly, the strategic objective of pillar 2 is to boost economic diversification and build resilience by reducing cost of market entry, underpinning the creation of firms and jobs that contribute to the broadening the tax base and enhancing macro-stability. The outcomes for pillar 2 include increased productivity and production, increased market development and diversification, empowered local communities and improved health and wellness.
Given the rapidly growing population, it is critical that the economy starts creating more economic opportunities that would generate increased revenues for the government to efficiently and effectively provide required social services and public goods while ensuring a dynamic and growing private sector.
Crosscutting themes are mainstreamed into the CSP and are an integral part of lending and non-lending operations. Environment and climate change, skills and training especially amongst the youth, and economic and financial governance will be central cross-cutting areas in operations selected for support.
Since the CSP approval in October 2018, the AfDB has approved USD 113 million for 6 operations in the water, agriculture, and roads sectors in line with the CSP priorities. About 91% of the approved resources were secured from the African Development Fund; while the remaining balance came from Nigerian Trust Fund, Global Environmental Facility and Special Relief Fund. The recently approved projects includes: (i) Nkhata Bay Town Water Supply and Sanitation Project (USD 15 million) in October 2018; Shire Valley Transformation Programme (USD 35 million) in December 2018; (iii) Additional Financing to Sustainable Rural Water and Sanitation Infrastructure Project (USD 2.5million) in May 2019; (iv) Post Cyclone IDAI Emergency Recovery for Malawi (USD 22.5 million) in June 2019; and (v) the Multinational Nacala (Nsipe-Liwonde Rehabilitation) Road Project (USD 37 million) in June 2019. In April 2019, the AfDB has also approved an Emergency Relief Assistance to the tune of USD 1.5 million (USD 1 million to Mozambique and USD 250,000 each to Malawi and Zimbabwe). The grant resources aimed to contribute to Government efforts in meeting the urgent and immediate needs of the households affected by Cyclone IDAI.
Through a strong partnership with the EU, the AfDB has managed to secure 18 million Euros (grant) on 25th February 2019 to co-finance the Multinational Nacala Road Corridor Development Project Phase V. In support of the Nkhata Bay Town Water Supply and Sanitation Project, the AfDB is administering OPEC Fund for International Development (OFID) USD 12 million loan.
The other planned project in the year is the Sustainable Fisheries and Aquaculture Development and Watershed Management Project (USD 13 million) planned to be approved in early October.
These interventions aim at strengthening economic transformation by enhancing agriculture value chains, increasing mechanization, increasing access to finance, improving market linkages and supporting crop diversification. These will underpin new income opportunities for emerging commercial farmers while strengthening linkages to small-scale farmers with increased focus on women and youth. Small industry development will be supported through agro-processing and light industrialization that will contribute to expand the economy and create jobs. The interventions in the water sector are expected to increase capacity of water reservoirs, small dams harvesting schemes, and improve access to potable water to free up time in rural areas especially for women: to allow them focus on other social economic activities. The interventions will support water resource management in key water basins such as Songwe River and Lake Malawi that impact on other sectors, such as energy, agriculture, tourism and fisheries.
In the recent past, the AfDB has also provided Malawi with quick disbursing budget support. Following Government’s re-engagement with the IMF and the approval of the US$157 million Extended Credit Facility (ECF) arrangement in July 2012, the AfDB approved an ADF Grant for Crisis Response Budget Support operation, for US$40 million. The AfDB designed the Restoration of Fiscal Stability and Social Protection (RFSSP) program whose objective was to contribute to restoring fiscal stability and enhancing public finance management, as well as support social protection measures to mitigate the adverse social impact of the devaluation of the kwacha and the increases in fuel and electricity prices. To support this agenda, the RFSSP had two components to strengthen: PFM transparency and accountability, and social protection systems.
In 2015, the African Development Fund Board approved a grant of US$30 million for the Protection of Basic Services Program (PBS). This ring-fenced Sector Budget Support was designed to protect critical expenditures in health and education, and improve accountability following suspension of general budget support. The grant was disbursed in one tranche in July 2015. The Food Crisis Response Budgetary Support followed the PBS operation in 2016. The AfDB will continue to coordinate closely with the IMF in the design of its future budget support operations to ensure its programs are underpinned by sound macro-economic policies.
The AfDB has been working with development partners in strengthening Malawi’s public finance management (PFM) systems. In support to the implementation of PFM reforms and in strengthening internal control systems following ‘cashgate’, the AfDB approved two PFM Institutional Support Projects (US$7 million), one of which closed in June in 2018 and the other expected to close in May 2019. Among others, the PFM support is focusing on tax administration reforms (upgrading of the Automated System for Customs Data—ASYCUDA, putting in place a Tax Appeals Tribunal legislative framework, review of the Customs and Excise Act, etc.); public procurement reforms; and strengthening financial management systems, including reviewing the PFM Act, Treasury Instructions, Treasury Funds Management Guidelines, undertaking an audit of Treasury Funds, and strengthening the Integrated Financial Management Information System (IFMIS) oversight, among others.
In terms of private sector support, the AfDB supported a number of private sector projects directly and indirectly through regional operations and private equity (PE) funds. The AfDB approved, in 2017, a USD 300 million long-term senior loan to finance the Nacala Rail and Port Project, which is a regional project. The loan included an allocation of USD 18.1536 million to Central African Railways Company Limited (CEAR) of Malawi. The project will provide Malawi with a more efficient access to a sea port and will therefore lead to a reduction in transportation costs for import and export trade. To complement the Nacala Rail and Port Project and the Nacala Roads Projects and in order to support inclusive growth along the Nacala Development Corridor in Malawi, the AfDB approved a USD 1 million Nacala Rail and Port Value Additional TA Project. The TA project will help local SMEs and farmers take advantage of the road and rail infrastructures by improving on the efficiency and competitiveness of their businesses. The AfDB also approved, in 2016, a soft commodity finance facility of USD 20 million (a regional project) to Meridan Consolidated Investment Limited. The funds approved will be used to purchase soft commodities (i.e. maize, groundnuts, pigeon peas, soya, sesame and beans) directly from small-scale farmers in Malawi, Mozambique and Zimbabwe. Meridan Consolidated Investment Limited is originally a Malawian company that has expanded its operations regionally.
The AfDB has also provided support for non-lending activities, including feasibility studies and analytic work, to inform the design of new operations and policy dialogue. In 2017, the AfDB prepared a feasibility study for Kholombidzo Hydro Power Project, which will provide a foundation for pipeline operations. In the same year, the AfDB financed the feasibility study for establishment of an Agriculture Cooperative AfDB. Based on the findings and recommendations of the feasibility study, the Government of Malawi recently launched the Malawi Agricultural and Industrial Investment Corporation Plc which is a government initiative to establish a development AfDB in the country but being led by the private sector.
In addition, the AfDB is supporting the Private Public Partnership Commission (PPPC) with a grant to build PPP negotiation capacity through a “hot line” arrangement, whereby the PPPC can tap into international legal services to advise on PPP transactions. The AfDB has provided technical assistance to the Malawi Postal Cooperation for the development of the E-Post Strategy and Action Plan. It is to be noted that the AfDB, in recent years, has undertaken a number of analytical studies, including Domestic Resource Mobilization Study for Malawi, and provided TA to the Reserve AfDB of Malawi to strengthen capacity in macro-economic forecasting; prepared a Public Expenditure Review with the World Bank and other development partners; and provided support for undertaking of the Expenditure Tracking Study for Malawi.
Looking forward, the AfDB plans to scale up its lending to the energy sector with a view to address power shortages. The pipeline of energy sector projects includes the Songwe River Basin Development Project, the Malawi-Zambia Power Inter-connector Project, and the Kholombidzo Hydro Power Project. The AfDB continues to engage with the World Bank and other partners for co-financing arrangements of its pipeline operations. In view of this, the AfDB is taking the lead in mobilizing donor resources and private finance for the Songwe Hydro Power Project, a multinational project with Tanzania. It will also promote private investment in the energy sector, through PPPs and the use of innovative financing instruments, such as Partial Risk Guarantees.
For the year beyond 2019, the AfDB also plans to support the Enhancing Competitiveness & Improving Access to Digital Project and the Multinational North-South Road Corridor Project (Salima – Dwangwa Road).
The AfDB shall in 2020 commence the mid-term review of the Country Strategy Paper (2018–2022), to take stock of achievement of results and aligned with Malawi’s new National Development Plan and the Bank’s Long Term Strategy, in particular, the “High Fives” priorities, which include “Light up and Power Africa”, “Feed Africa”, “Industrialize Africa”, “Integrate Africa” and “Improve the Quality of Life for the People of Africa”.