The World Bank is providing support to improve resource mobilization, budget execution, and transparency of public finances to assist the achievement of results under the Malawi Public Finance Management (PFM) Strategy 2023-2028.
The new $80 million IDA grant complements the International Monetary Fund (IMF) Extended Credit Facility (ECF) arrangement and World Bank Development Policy Financing (DPO), both approved in late 2023. As a Program for Results (PforR), the funds will be unlocked upon achieving indicators such as an increase in domestic value-added tax (VAT) revenue collection, decreases in variance between approved budget and expenditure outturn, and an increase of contract data accessible by citizens.
The Government of Malawi recently launched the Malawi PFM Strategy 2023-2028 with objectives of attaining sound financial management and discipline in public service delivery for sustainable development, restoring credibility and confidence in government systems, and creating an enabling environment for more effective development performance.
The five-year Malawi Fiscal Governance Program for Results will co-finance the implementation of the PFM Strategy. The successful achievement of targeted results will unlock additional financing for the government and help to increase trust while strengthening controls for spending through government systems.
“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 Program for Results, therefore, presents a new and innovative financing instrument that will enable the government to unlock additional resources in a more predictable manner over the next five years, while also serving as a platform for harmonized planning, coordination, and utilization of resources for service delivery,” says Nathan Belete, World Bank Country Director for Malawi, Zambia, Zimbabwe, and Tanzania.
The operation will provide support for strategic activities and fiscal incentives that will enhance the government’s capacity to progressively strengthen its fiscal governance. It builds on momentum from using results-based financing instruments which incentivize achieving results.
“The total expenditure required by our PFM Strategy is approximately $146 million and now, with this IDA financing of $80 million, we are slightly above 50 percent of the required resources,” said Simplex Chithyola Banda, M.P Minister of Finance and Economic Affairs. “I am very optimistic that with this we will create a solid foundation for our fiscal governance and sustain policy reforms throughout the span of the PFM Strategy implementation.”
The Ministry of Finance and Economic Affairs is leading program execution alongside other key implementing ministries, departments, agencies such as the Malawi Revenue Authority; Public Procurement & Disposal of Assets Authority; Accountant General; Department Registrar General; National Audit Office among others.