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1 2007 International Monetary Fund February 2007 IMF Country Report No. 07/55 [Month, Day], 2001 [Month, Day], 2001 Malawi: Poverty Reduction Strategy Paper Growth and Development Strategy Poverty Reduction Strategy Papers (PRSPs) are prepared by member countries in broad consultation with stakeholders and development partners, including the staffs of the World Bank and the IMF. Updated every three years with annual progress reports, they describe the country's macroeconomic, structural, and social policies in support of growth and poverty reduction, as well as associated external financing needs and major sources of financing. This country document for Malawi, is being made available on the IMF website by agreement with the member country as a service to users of the IMF website. To assist the IMF in evaluating the publication policy, reader comments are invited and may be sent by to publicationpolicy@imf.org. Copies of this report are available to the public from International Monetary Fund Publication Services th Street, N.W. Washington, D.C Telephone: (202) Telefax: (202) publications@imf.org Internet: Price: $18.00 a copy International Monetary Fund Washington, D.C.

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4 DR BINGU WA MUTHARIKA HIS EXCELLENCY THE STATE PRESIDENT OF THE REPUBLIC OF MALAWI The overall objective of the Malawi Growth and Development Strategy is to reduce poverty through sustained economic growth and infrastructure development.

5 Presidential Statement The Malawi Growth and Development Strategy (MGDS) is the overarching operational medium-term strategy for Malawi designed to attain the nation s Vision The main thrust of the MGDS is to create wealth through sustainable economic growth and infrastructure development as a means of achieving poverty reduction. This is expected to transform the country from being a predominantly importing and consuming economy to a predominantly manufacturing and exporting economy. The MGDS represents a policy shift from social consumption to sustainable economic growth and infrastructure development. To ascertain immediate economic benefits for the people of Malawi arising from this strategic shift, the MGDS will in the next five years place emphasis on six key priority areas of agriculture and food security; irrigation and water development; transport infrastructure development; energy generation and supply; integrated rural development; and prevention and management of nutrition disorders, and HIV/AIDS. These six key priority areas are also expected to accelerate the attainment of the Millennium Development Goals (MDGs) in the areas of health, education, gender, environment, and governance. The integrated rural development in particular will among other things entail the establishment of rural growth centres. This is expected to rejuvenate the rural economies and transform them into potential engines for economic growth that translate to increased redistribution of wealth countrywide. The MGDS builds on the Malawi Economic Growth Strategy (MEGS) that emphasized the need to create a conducive environment for private sector investment to stimulate production of goods and services hence creating employment opportunities. The MGDS also incorporates lessons learnt from the implementation of the Malawi Poverty Reduction Strategy.These have informed the choice of MGDS interventions, the six key priority areas, and the other important MDGs related social focus areas. Government will spearhead the implementation of the MGDS. However, the strategy calls for active participation of all stakeholders in the implementation process. Politicalwill, change of mindset, and cooperation among the stakeholders will be paramount for the successful implementation of the strategy. While Government will ensure the creation of an enabling environment for private sector participation, all Malawians are urged to aggressively take up the challenge to invest and spearhead industrial development to create wealth and employment. It is my sincere hope that the cooperation that prevailed during the development of the MGDS will continue in its implementation in order to make Malawi a better nation for our people. May God bless our country, Malawi.

6 FOREWORD Malawi Growth and Development Strategy The Malawi Growth and Development Strategy (MGDS) represents a detailed articulation by the Government of Malawi of the strategy it intends to follow in achieving the goal set for us by His Excellency the State President, Dr Bingu Wa Mutharika of transforming Malawi from relative poverty into being a middle income industrial nation. It also represents an essential tool for the Government to assist in turning his vision into reality. The philosophy that underlies the MGDS is one of permanent poverty reduction through sustainable economic growth and infrastructure development. The key to translating that philosophy into a strategy that will deliver success is effective prioritization in the allocation of effort and resources. The MGDS identifies six key priority areas, which taken together will define the direction of Government economic policies over the coming five years. Progress in these priority areas will be critical in bringing about greater economic wellbeing for the people of Malawi. The MGDS also identifies five thematic areas in which progress must be made if our overall strategy is to be successful. These thematic components of the MGDS are sustainable economic growth, social protection, social development, infrastructure development, and improved governance. The importance of all these areas is fully reflected in the Strategy, which maintains a focus on accelerated and sustainable growth, while also outlining steps to ensure social development, good governance and environmental sustainability. Progress in all of these areas will increase prosperity, reduce poverty and assist in the achievement of the Millennium Development Goals. Beyond identifying key themes the strategy establishes priorities within the overall MGDS envelope. This prioritization reflects widespread consultations with stakeholders in the development process. While fully reflecting the contributions of cooperating partners the process of developing the MGDS and establishing the prioritization it contains has been led by Malawians based on our understanding of the issues we face. As such this is a document developed from within the nation for the purpose of achieving of the nation s aspirations. Implementation of the MGDS will take place through the Government Budget, in line with the Medium Term Expenditure Framework. Implementing the ambitious agenda outlined by the MGDS over the next 5 years, within the resource envelope that is available to us, represents a major and challenging task. Success can only be achieved if there is fully cooperation amongst all the various stakeholders with a part to play in implementing the strategy. Government will spearhead the implementation process, but stakeholders will have to compliment its efforts by aligning and harmonizing their own programmes and activities to bring these into line with the priorities the MGDS sets out. This will be a challenge for those stakeholders themselves, but I am confident that the same goodwill that has contributed to development of the strategy will assist in ensuring its effective implementation. Lastly, I would like to thank His Excellency the State President, Dr Bingu Wa Mutharika, for his vision, direction and commitment to transform this country for a better future. Goodall E. Gondwe, MP MINISTER OF FINANCE iv

7 ACKNOWLEDGEMENTS His Excellency the State President, Dr Bingu Wa Mutharika, and the Government of Malawi would like to accord special thanks to all those who worked tirelessly and contributed to the development of the Malawi Growth and Development Strategy. The process of developing this strategy involved all key stakeholders in Malawi. These include the three arms of Government: the Executive, Parliament, and Judiciary; and also involved the Private sector, Civil Society Organisations, Donors and Co-operating partners and the general public. Special acknowledgements are also extended to the Steering Committee and the Technical Working Group that worked for over a year to develop this strategy. v

8 ACRONYMS Malawi Growth and Development Strategy ACB ADMARC AIDS ART ARV CAMA CBO CDSS CISANET CM COMESA DA DEC DEMIS DfID DHS DISTMIS DPDMA ESCOM EU FAO FBO FDI FNSIS GDP GTZ GWAN HIPC HIV ICT IHS IMF IMR IQ ISO IT ITN IWRM JICA Km LA M&E MACRA MARDEF MAREP MASTA MBC Anti-Corruption Bureau Agricultural Development and Marketing Corporation Acquired Immune Deficiency Syndrome Anti-retroviral therapy Anti-retroviral Consumer Association of Malawi Community Based Organizations Community Day Secondary School Civil Society Agriculture Network Collaborative Management Common Market for Eastern and Southern Africa District Assembly Distance Education Centres District Education Management Information System Department for International Development Demographic and Health Survey Department of Information, Systems and Technology Management Systems Department of Poverty and Disaster Management Affairs Electricity Supply Corporation of Malawi European Union Food and Agricultural Organization Faith Based Organizations Foreign Direct Investment Food and Nutrition Security Information System Gross Domestic Product German Technical Co-operation Government Wide Area Network Highly Indebted Poor Country Human Immunodeficiency Virus Information, Communication and Technology Integrated Household Survey International Monetary Fund Infant Mortality Rate Intelligent Quotient International Standards Organization Information Technology Insecticide Bed Treated Net Integrated Water Resource Management Japanese International Cooperation Agency Kilometres Local Assembly Monitoring and Evaluation Malawi Communication Regulatory Authority Malawi Rural Development Fund Malawi Rural Electrification Programme Malawi Award for Scientific and Technological Achievement Malawi Broadcasting Corporation vi

9 MBS MCCCI MDGs MDHS MEGS MEJN MEPD MFI MGDS MIPA MIRTDC MIS MITS MK MLGRD MLHS MMNRE MMR MOA MOF MOH MOTPW MP MPRS MTEF MTPSD MW NABW NAC NAG NASFAM NDF NEEP NFRA NGO NRA NRC NRM NSO OPC OVC PA PAC PEM PFMA PLHA PMCT PPA PPP PRGF PS Malawi Bureau of Standards Malawi Confederation of Chambers of Commerce and Industry Millennium Development Goals Malawi Demographic and Health Survey Malawi Economic Growth Strategy Malawi Economic Justice Network Ministry of Economic Planning and Development Micro Finance Institutions Malawi Growth and Development Strategy Malawi Investment Promotion Agency Malawi Industrial Research and Technology Development Centre Management Information System Most Innovative Technology Stand Malawi Kwacha Ministry of Local Government and Rural Development Ministry of Lands, Housing and Surveys Ministry of Mining, Natural Resource and Energy Maternal Mortality Rate Ministry of Agriculture Ministry of Finance Ministry of Health Ministry of Transport and Public Works Member of Parliament Malawi Poverty Reduction Strategy Medium Term Expenditure Framework Ministry of Trade and Private Sector Development Mega watts National Association of Business Women National AIDS Commission National Action Group National Smallholder Farmers Association of Malawi Northern Dark Fired tobacco National Economic Empowerment Policy National Food Reserve Agency Non-Governmental Organizations National Roads Authority National Research Council Natural Resource Management National Statistical Office Office of the President and Cabinet Orphans and other Vulnerable Children Protected Area Problem Animal Control Protein Energy Malnutrition Public Finance and Management Act People Living with HIV and AIDS Preventive Mother to Child Transmission Public Procurement Act Public Private Partnerships Poverty Reduction and Growth Facility Principal Secretary vii

10 PSIP PVA PWP RBM SADC SAPP SGR SME SMP SNE SOCAM SSAJ SSM SWAp TA TB TEVET TWG UNDP UNFPA UNICEF US$ USAID VCT VIP WB WFP WHO Public Sector Investment Programme Poverty Vulnerability Assessment Public Works Programme Reserve Bank of Malawi Southern African Development Community Southern African Power Pool Strategic Grain Reserve Small and Medium Enterprises Staff Monitored Programme Special Needs Education Society for Charted Accountants of Malawi Safety, Security and Access to Justice Small Scale Miners Sector Wide Approach Traditional Authority Tuberculosis Technical, Entrepreneurial, Vocational Education and Training Technical Working Group United Nations Development Programme United Nations Population Fund Agency United Nations Children s Fund United States Dollar United States Agency for International Development Voluntary Counselling and Testing Ventilated Improved Pit Latrine World Bank World Food Programme World Health Organization TABLE OF CONTENTS viii

11 EXECUTIVE SUMMARY...XII THE MALAWI GROWTH AND DEVELOPMENT STRATEGY... XII MALAWI ECONOMIC GROWTH STRATEGY... XIII MALAWI POVERTY REDUCTION STRATEGY IMPLEMENTATION REVIEW... XIII MGDS RESOURCE ENVELOPE AND BUDGET FRAMEWORK... XIV KEY PRIORITY AREAS OF THE MGDS... XIV MALAWI GROWTH AND DEVELOPMENT STRATEGY FRAMEWORK... XIX MGDS IMPLEMENTATION,MONITORING AND EVALUATION...XXV INTRODUCTION OVERVIEW MAIN ASSUMPTIONS OF THE MGDS OUTLINE 2 BACKGROUND MALAWI POVERTY REDUCTION STRATEGY MALAWI ECONOMIC GROWTH STRATEGY MILLENNIUM DEVELOPMENT GOALS MALAWI GROWTH AND DEVELOPMENT STRATEGY FORMULATION PROCESS MALAWI GROWTH AND DEVELOPMENT STRATEGY FRAMEWORK POVERTY,SOCIAL PROFILES AND VULNERABILITY... 7 MACROECONOMIC FRAMEWORK MACROECONOMIC DEVELOPMENTS MEDIUM TERM MACROECONOMIC PROSPECTS Economic Growth Monetary Policy Objective Fiscal Policy Objective MGDS Budget Framework...11 KEY PRIORITY AREAS OF THE MGDS : OVERVIEW KEY PRIORITY AREAS Agriculture and Food Security Irrigation and Water Development Transport Infrastructure Development Energy Generation and Supply Integrated Rural Development Prevention and Management of Nutrition Disorders, HIV and AIDS...25 ix

12 MGDS THEMES THEME ONE:SUSTAINABLE ECONOMIC GROWTH Sub Theme One: Maximizing contribution to economic growth through potential growth sectors Sub Theme Two: Enabling Environment For Private Sector Development Sub Theme Three: Export Led Growth Sub Theme Four: Conservation of the natural resource base Sub Theme Five: Economic Empowerment SUB THEME SIX:LAND AND HOUSING THEME TWO: SOCIAL PROTECTION AND DISASTER RISK MANAGEMENT Sub Theme One: Protecting The Vulnerable : Sub Theme Two: Improving Disaster Risk Management THEME THREE: SOCIAL DEVELOPMENT Sub Theme One: Health and Population Sub Theme Two: Education Sub Theme Three: Gender THEME FOUR: INFRASTRUCTURE DEVELOPMENT Sub-Theme One: Air and Rail Transport SUB-THEME TWO:INFORMATION,COMMUNICATION AND TECHNOLOGIES THEME FIVE: IMPROVED GOVERNANCE Sub Theme One: Macroeconomic Growth Sub Theme Two: Public Policy Formulation, Fiscal Management, Public Sector Management and Corruption Sub Theme Three: Decentralization Sub Theme Four: Developing a Strong Justice System and Rule of Law Sub Theme Five: Security Sub Theme Six: Corporate Governance...67 IMPLEMENTATION, Implementation Modalities of the MGDS Prioritization and Costing of MGDS activities Roles of key stakeholders in the implementation of the MGDS Monitoring and Evaluation Needs Assessment...74 ANNEXES...78 ANNEX 1:SUMMARY OPERATIONAL MATRIX...79 ANNEX 1.1: KEY PRIORITY AREAS SUMMARY OPERATIONAL MATRIX...79 x

13 ANNEX 1.2: SUMMARY OPERATIONAL MATRIX BY THEMES...87 ANNEX 2: MGDS DETAILED MATRICES ANNEX 2.1: MGDS DETAILED MATRICES BY KEY PRIORITY AREAS ANNEX 3: MGDS ACTIVITY COSTING AND PRIORITIZATION ANNEX 3.1: DETAILED PRIORITIZATION AND COSTING BY KEY PRIORITY AREA ANNEX 3.2: PRIORITIZATION AND COSTING BY THEME ANNEX 4: MGDS NEEDS ASSESSMENT SUMMARY ANNEX 4.1: KEY PRIORITY AREAS HUMAN RESOURCE REQUIREMENTS ANNEX 4.2: KEY PRIORITY AREAS CAPITAL REQUIREMENTS ANNEX 4.3: OTHER FOCUS AREAS HUMAN RESOURCE REQUIREMENTS ANNEX 4.4: OTHER FOCUS AREAS CAPITAL REQUIREMENTS xi