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Friday, June 14, 2024

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    Donor inflows have been the order of the day under Chakwera administration; the most recent news related to the same is the release of US$80 million grant (approximately K139.1 billion) to the Government of Malawi by the World Bank through its development arm, the International Development Association (IDA).

    According to the communication from IDA Executive Director Floribert Ngaruko, the funds are aimed at improving the effectiveness of resource mobilization, budget execution and transparency of public finances in Malawi. He added that the operation will, among others, focus on improving public resource mobilization through increased value-added tax revenue collection and voluntary tax compliance; strengthening budget prioritization and execution by improving Public Investment and Management (with a climate-sensitive focus), enhancing procurement efficiency, and operationalizing IFMIS; and enhancing resource transparency and accountability across the Government of Malawi (GoM) with a focus on State Owned Enterprises, beneficial ownership transparency, and increased responsiveness to the public audit process.

    The Word Bank has also indicated that the grant complements the International Monetary Fund (IMF) Extended Credit Facility (ECF) arrangement and World Bank Development Policy Financing (DPO), both approved in late 2023.

    According to Nathan Belete, the World Bank Country Director for Malawi, Zambia, Zimbabwe, and Tanzania, low forex reserves and limited fiscal space have been major challenges for Malawi despite a new IMF program and the recent World Bank DPO series.

    “The Fiscal Governance Programme for Results, therefore, presents a new and innovative financing instrument that will enable the government to unlock additional resources more predictably over the next five years.

    “This will serve as a platform for harmonized planning, coordination, and utilization of resources for service delivery,” said Belete.

    Commenting on the exhilarating news, the Malawi Minister of Finance, Hon Simplex Chithyola Banda credited the World Bank support to Chakwera administration’s financial prudence on donors’ funds.

    He added that, with this IDA financing of $80 million, authorities are slightly above 50 percent of the required resources of approximately US$146 million.

    “I am very optimistic that, with this, we will create a solid foundation for our fiscal governance and sustain policy reforms throughout the Malawi Public Finance Management (PFM) Strategy implementation,” said Chithyola.

    The IMF’s approval of US$175 million four-year ECF directly triggered inflows from multiple donors including the World Bank, a move that has been described by several economists as a vote of confidence in the current state leadership.

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