Tunis, 6 March 2009 – The Board of Directors of the African Development Fund (ADF), the concessionary arm of the African Development Bank (AfDB) Group, has approved a grant of 10 million Units of Account (UA*), equivalent to US$14.67 million to finance Malawi’s poverty reduction and public financial management reform programs.
The grant will support key reform measures aimed at enhancing the budget process, audit and procurement functions in order to improve transparency and accountability in the use of public resources.
It is designed to ensure that sound public finance management for the efficient use of public resources and create fiscal space for enhanced social services delivery, thus contributing to the achievement of Malawi’s Growth and Development Strategy (MGD) objectives, the country’s poverty reduction strategy for period 2006-2011.
The support will reinforce the social dimension of the Bank’s overall portfolio in Malawi by supporting higher pro-poor expenditure. In particular, it will reinforce other poverty-focused Bank-funded operations in the social and agriculture sectors.
The programme’s direct beneficiaries are Malawi’s key public financial management institutions responsible for fiduciary control and service delivery. In addition, the population of Malawi will benefit from better public financial management, and increased budgetary allocation for social services delivery.
The overall projected government revenue for fiscal year 2008-2009 amounts to MK207.61 billion, equivalent to US$1,473.03 million while expenditure and net lending is projected at MK231.08 billion (equivalent to US$1,639.60 million), leaving overall budget deficit (including grants) of MK23.48 billion (equivalent to US$166.57 million). Projected foreign financing, including through Common Approach to Budget Support (CABS), amounts to US$172.27 million. The CABS Group comprising the AfDB, the UK Department for International Development (DFID), the European Commission, Norway and the World Bank, will contribute US$158.01 million.
At the end of December 2008, the Bank Group’s total active commitments (net of cancellations) in Malawi amounted to UA 162.3 million for 13 operations. UA 67.9 million has been disbursed, representing a disbursement rate of 41.8% of the active portfolio. The social sector accounted for the largest share of total commitments (42%) followed by agriculture (27%), water and sanitation (22%) and multi-sector (9%).
This is the second budget support to Malawi. The country’s economic performance is generally strong, and during the past three years has recorded an impressive economic growth rate averaging 7%, which is one of the highest in Africa.
*1 UA = US$ 1.46736= MWK 206.134 as at 06/03/2009