Focus on the fight against poverty

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.