Poverty alleviation programmes underfunded, says IMF

Malawi's poverty reduction programme is being affected by inadequate funding, a lack of human capacity and a weak economy, notes an International Monetary Fund (IMF) progress report. "Limited funding will remain a key challenge" to implementation of the Poverty Reduction Strategy Paper (PRSP) said the IMF, which suggested that the available money should be channelled into activities with a "direct impact in stimulating economic growth and poverty reduction". PRSPs are prepared by member states, along with input from the World Bank and IMF, and describe the country's macroeconomic, structural and social policies and programmes to promote broad-based growth and reduce poverty. According to the report, which reviews Malawi's annual progress in implementing the PRSP and is updated every three years, HIV/AIDS has been one of the major challenges. The disease was undermining human capacity in most sectors, causing a "critical shortage of the necessary skills for proper implementation". The IMF recommended that antiretrovirals be made available to all civil servants by 2005/06 to address the problem. High inflation, sluggish growth and continued depreciation of the local currency have also had a negative effect on the implementation of poverty reduction programmes. Although the government had increased spending, it had failed to channel more funds into these programmes, the IMF commented. The report suggested that the government reduce interest rates and improve access to credit and trade finance, allowing Malawi to achieve an average growth rate of 5.5 percent for the next three years, with inflation at 9.7 percent by the end of 2006 and dropping to 7 percent by the end of 2008. These inflation targets could be reached, the IMF reasoned, provided the government pursued prudent monetary policies and the effects of the drought were mitigated by the use of irrigation during the winter cropping season. However, some observers said it would be difficult to assess the effect of this on agricultural production. "Irrigation is not exploited to the fullest in Malawi ... I am not certain that it can solve the problems," Oxfam country programme manager Mary Nyang'wa told IRIN. Rafiq Hajat of the Institute of Policy Interaction noted, "People must own the irrigation schemes - they should not feel that the irrigation project belongs to government." The agricultural sector provided 63.7 percent of the total income of the rural poor, accounted for 36 percent of GDP, 87 percent of total employment, and supplied at least 65 percent of the manufacturing sector's raw material requirements. Improvements in this sector were critical to eradicating poverty in Malawi, the Fund pointed out. The IMF recommended fertiliser subsidies, crop and livestock diversification, and increasing levels of financing for irrigation.