MALAWI: Focus on the fight against poverty

U N I T E D N A T I O N S
Office for the Coordination of Humanitarian Affairs (OCHA)
Integrated Regional Information Network (IRIN)

MALAWI: Focus on the fight against poverty

[This report does not necessarily reflect the views of the United Nations]

BLANTYRE, 26 April (IRIN) - Weighed down by a critical food shortage,
limited access to land, unemployment and poor education and health services,
Malawi is one of the world's poorest countries.

In a bid to win international financial backing to reverse its dismal
record, the government this week launched a Poverty Reduction Strategy Paper
(PRSP) - a first step to gain unqualified relief on its US $2.5 billion
foreign debt under the controversial Highly Indebted Poor Countries (HIPC)
initiative.

In setting out the PRSP, a blueprint expected to guide the country's
programme over the next one year, President Bakili Muluzi said poverty
reduction was the central focus of his government's economic policy. But he
cautioned that experience had shown that past development efforts had
achieved too little because the government and the donors had tried to do
too much. This time it was up to Malawians to help themselves.

Poverty in Malawi is widespread and severe. Based on 1998 Integrated
Household Survey (IHS) consumption data, 65.3 percent of the country's
10-million population - or roughly 6.3 million people - are poor. Their
consumption of basic needs (both food and non-food), is below the minimum
level estimated at US 13 cents per day in 1998, and it is believed that 2.8
million people live in dire poverty.

About 52 percent of the poor are female, and females head around 25 percent
of households. The literacy rate stands at 58 percent. Education attainment,
defined as completion of Standard 8, stands at only 11.2 percent of adults
aged 25 years and above, and only 6.2 percent for women. Life expectancy at
birth dropped from 43 years in 1996 to 39 years in 2000. Infant and
under-five mortality rates were estimated to be 104 and 189 deaths per 1,000
live births, respectively.

In 1998, Malawi paid out US 39 cents in debt service for every US $1
received in aid grants. According to the debt cancellation lobby group
Jubilee 2000, as a percentage of economic output, spending on debt service
was twice the amount spent on health. The bulk of Malawi's debt is owed to
the World Bank.

The long and winding road to achieving measurable poverty reduction will not
be easy, analysts warn. For a start, the government suffers from persistent
budget over expenditures. The president has often ignored calls to trim his
bloated cabinet of 39 ministers. Each cabinet minister drives the latest
Mercedes saloon or an expensive 4x4.

In 1994, one of the first actions of Muluzi's new government was to
introduce universal primary education and increase health and education
spending by 50 percent to US $148 million a year. "But under pressure from
the IMF and World Bank to curb government expenditure, the health and
education budget by 1999/2000 had been cut back to under US $100 million,"
Jubilee 2000 noted.

Although 24 countries world-wide have reached the decision point under the
HIPC initiative, only four countries - Bolivia, Mozambique, Tanzania and
Uganda - have qualified for unconditional debt relief since it was initiated
by the IMF and World Bank in 1996. The HIPC record has been criticised for
taking too long and not cancelling enough debt.

Preparing a comprehensive and fully participatory PRSP is one of the
conditions for a country to reach completion point. Malawi reached
completion point in December 2000 after an "interim" PRSP - that was
criticised for not properly involving civil society - and qualified for debt
relief of US $40 million. Having completed the PRSP, Malawi must
satisfactorily implement it under IMF and World Bank monitoring.

"At that stage Malawi will be eligible for up to and above US $80 million of
debt forgiveness annually for an accumulated 20 year-period. These will not
be new and additional extra funds but rather funds within the same national
budget released from debt servicing, and now available for development
work-related poverty reduction," said Finance Minister Friday Jumbe.

Jumbe, appointed finance minister two months ago, had earlier described the
government budget as "left with no meat but bare bones". He was quick to add
that the Malawi PRSP will not work if the international community did not
increase concessional aid aligned to national strategies, open up its
markets to developing country exports, and phase out trade-distorting
subsidies.

Jubilee 2000 argues that the debt relief granted to Malawi is not enough to
make the country's debt burden "sustainable" - the purpose of the HIPC
process. Debt is considered sustainable if the net present value is less
than 150 percent of export earnings. Malawi's debt will only fall below 150
percent of exports in 2007, "and that is based on very optimistic estimates
of growth in export earnings", the lobby group warned.

Malawi launches its war on poverty at a time when the country is facing a
severe food shortage. The government declared a state of disaster in
February, when over 500 people had reportedly died from hunger-related
diseases, and seven million had run out of food.

The country is also severely affected by the spread of HIV and AIDS.

"There are a host of other reasons why implementation of the PRSP will be
challenging. HIV/AIDS alone has the potential to seriously derail the wider
objectives of the PRSP and must be counted as a major risk ... perhaps the
major risk," observed Mike Wood, head of Britain's Department for
International Development (DFID) in Malawi.

[ENDS]

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