Huge relief if debt cancelled

The children's ward at Malawi's Kamazu Central hospital is permanently packed. Anxious parents cradling children weak from malaria or malnutrition wait interminably for attention from harassed staff, hoping when their turn comes the right drugs will be available.

"I came here about four hours ago but there are so many people we have to be in the queue. I just wished we had an extension of this hospital with good facilities and more health workers," said Ivy Banda, clutching her frail-looking daughter who seemed to be suffering from malaria.

The referral hospital in the capital, Lilongwe, handles cases from surrounding districts and health centres. It is overstretched, understaffed, its equipment old; there is not much in the dispensary beyond paracetemol. Just like the other mothers, Banda is here only because she is poor and Kamazu hospital is free.

With few exploitable natural resources Malawi is one of the least developed countries in southern Africa. The bulk of its 12 million people are worse off now after 12-years of democracy than they were under the single-party rule of Hastings Kamazu Banda.

But there could be relief on the way. Finance Minister Goodall Gondwe is pinning his hopes on the phased cancellation of Malawi's US$643 million debt by donors as a reward for sticking with painful economic reforms under the highly-indebted poor country (HIPC) initiative.

Gondwe believes debt forgiveness "is crucial to the future management and growth of the economy", which would release millions for spending on poverty alleviation programmes instead of debt servicing.

"Having met the fiscal target set during the past year we are poised to reach the completion point under the HIPC debt relief initiative during the 2006/07 financial year. This will also lead to multilateral debt cancellation for Malawi that the country needs badly," said Gondwe.

A critical visit by an International Monetary Fund (IMF) mission in the next few months to assess economic progress will determine whether Malawi has reached "completion point", which would be ratified by the Fund's executive board at the end of the year. Although there are concerns over the size of the government's domestic debt and other performance indicators, analysts predict the country will get a green light from the mission.

According to Shenard Mazengera, advocacy manager of the development agency Oxfam, about 30 percent of Malawi's budget goes on domestic and foreign debt repayment. A phased cancellation would allow some of that to be channelled into social services, improving standards of health and education.

"As civil society our role is to see to it that government is delivering what it promised the people, to ensure that the people get the services they need," said Mazengera.