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THE IMF, WORLD BANK AND POVERTY REDUCTION IN MALAWI
By
Mavuto Bamusi
Deputy Coordinator, Malawi Economic Justice Network (MEJN)
6th February 2004
Dublin, Ireland
IMF SUPPORT SCRUTINISED
PRGF CONDITIONS AND POVERTY REDUCTION
HIPC AND POVERTY REDUCTION
POLICY ADVICE AND FOOD SECURITY
PRGF OFF-TRACK
Since 2001, Malawi has been off-track
No budgetary support for 2 solid fiscal years
Bilateral donors also froze budgetary support
About US$80m locked
EFFECTS ON POVERTY REDUCTION
Malawi PRSP assumes over 40% of resource envelope from donors
This includes budget and project support
Since PRSP relies on donor inflows, the strategy had few resources for
implementation
Govt. focused implementation on Priority Poverty Expenditures (PPEs) only
EFFECTS ON DOMESTIC DEBT
Govt. resorted to domestic borrowing
Heavy borrowing caused high interest rates of 46%
This made credit too expensive for average Malawians to allow them participate
in PRS activities
Raised the domestic debt to all-time-high of US$500m (Equivalent of annual
budget)
Servicing of debt at expense of PRSP activities and PPEs
HIPC AND POVERTY REDUCTION
HIPC is one of issues under PRGF
Low levels of debt relief under HIPC
Out of US$2.8b external debt stock, only US$1b is scheduled for relief
over 20 year period, and upon satisfying CONDITIONS
1st and 2nd years of PRSP implementation accessed only about US$32m and
US$53m
HIPC resources too low for poverty reduction
ANTI-POVERTY REDUCTION CONDITIONS AND POLICIES
Malawi should fully liberalize socioeconomic sector
Encouraging private sector participation without assessing the capacity
needs
Parastatal reform (privatization) that is undermining the social roles
essential for poverty reduction
Promoting the need to meet macroeconomic targets without giving the approach
the social attention
Reduce the grain reserves (cause for hunger and deaths in 2002. Bad advice!)
THE CASE OF AGRICULTURAL REFORM
ADMARC is a parastatal central to food security
Lined up for privatization and closure of remote markets (socially very
important)
Civil society pressure forced change of terminology to “Commercialization”
and later “Restructuring”.
The World Bank pressurized Govt. to repeal the ADMARC Act
New ADMARC registered before parliament’s approval (Procedural impropriety!)
World Bank conducts a PSIA without following procedures (Not Consultative!)
IF THE BRETTON WOODS CAN LISTEN
Ensure support to PRSP not conditioned by the faulty PRGF
In fact, reconstruct the PRGF and let the process be open as was with
the PRSP
Advise bilateral donors to implement projects identified in the PRSP
Support the PRSP through NGOs
Overhaul country assistance strategies not to be based on full liberalization
(Stop selling companies at the expense of the poor!)
TO THE IRISH GOVERNMENT
Flex your muscles to encourage the Bretton Woods’ policies to be
realistic in line with the aspirations of the poor Malawians
Advise the IFIs not to make full liberalization as a conditionality (It
is killing the poor Malawians!)
Do not align budgetary support to the conditions in the PRGF and PRSC
unless these reflect the aspirations of the local Malawians
Build capacity of Government, parliament and civil society around the
PRSP
END OF PRESENTATION
POVERTY REDUCTION IN MALAWI WILL CONTINUE TO BE A JOKE IF THE BRETTON
WOODS INSTITUTIONS MAINTAIN THE PRESENT POLICY REGIME. THEY MUST CHANGE!
THEY MUST TAKE INTO ACCOUNT THE VOICES OF THE POOR
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