World Bank and IMF consider debt relief

The International Monetary Fund (IMF) and World Bank boards will meet next month to consider proposals that debt relief for Malawi be approved under the Highly Indebted Poor Countries (HIPC) initiative, Reuters reported on Friday. Malawi could qualify for assistance of US $1.095 billion in debt relief in nominal terms, based on the export creteria under the HIPC initiative, according to IMF HIPC documents.

The IMF said that because of Malawi’s unsustainable debt burden, it would qualify for assistance under HIPC. “Malawi has established a track record of policy implementation under the ESAF (Enhanced Structural Adjustment Facility) completed in October 1999,” the IMF said. Malawi remains one of the poorest countries in the world - with a per capita income of just US $164, a life expectancy of 42 years and an infant mortality rate of 134 per thousand births. Malawi’s total external debt stands at about US $2.5 billion.

Donor countries said the government should put gains from debt relief towards improving schools, health centres, water, sanitation, roads and other poverty reduction programmes.
The World Bank said gains could also be used to reduce internal government debt, which could help cut inflation. Donors have previously voiced concern on corruption. But on Wednesday, British International Development Minister Clare Short praised Malawi’s commitment to combating graft, saying that President Bakili Muluzi had shown strong leadership by sacking senior ministers implicated in corruption.