Norway releases balance of payments aid

Donors have started rewarding President Bingu wa Mutharika's efforts to tackle corruption and restore fiscal discipline in Malawi. The World Bank recently announced it had disbursed US $25 million to Malawi in support of the country's Poverty Reduction Strategy Paper (PRSP), and this week Norway said it was releasing Norwegian Kroner 20 million (about US $3 million) in balance of payments support to Malawi. In 2001 the International Monetary Fund barred budgetary support for Malawi as a result of government overspending, prompting major Western donors to follow suit and withhold their funding. Malawi relies heavily on balance of payments support from donors, which accounts for up to 80 percent of the country's development budget. In a statement released on 10 September, the World Bank said it had released the US $25 million to Malawi "on the basis of an encouraging three-month track record, and the recently presented budget for the current fiscal year - which is in line with the macroeconomic programme that was agreed with international finance institutions". The disbursement was the first tranche of the Fiscal Management and Accelerating Growth Programme in support of Malawi's PRSP, which aims to sustain pro-poor growth, develop human capital, improve the quality of life of the most vulnerable and promote good governance. World Bank Vice President for Africa, Callisto Madavo, was quoted as saying at the time that "the Bank welcomes the progress and achievements of the new government of Malawi to bring economic performance back on track, and tackle governance issues head-on". Norwegian Ambassador Gunnar Foreland confirmed on Wednesday that "we have disbursed Norwegian Kroner 20 million for budget support". "We feel that the new government has taken up the recommendation from donors and the international community [to tackle corruption and fiscal mismanagement]. This is a very positive start, and it has to be followed up. The donor community will also follow up in supporting the government to have better financial management, including scaling up the fight against corruption," Foreland told IRIN. The $3 million disbursement was the last tranche of Norway's "agreement with them [Malawi] for budget support" and was held back because of unfavourable IMF staff programme reports in 2001. Given the recent positive signals from the IMF staff monitoring programme ... and the loan from the World Bank", Foreland said, "we processed our recommendation to headquarters and it [release of the funds] was okayed".