April 16, 2004

World Bank grant for land reform

Malawi is to be granted a US $50 million World Bank credit to support fiscal reforms, as well as a ground-breaking grant of a further US $27 million for land reform. The Bank has announced that the $50 million would be accessed as an International Development Association (IDA) loan, with a commitment fee of 0.5 percent, a service charge of 0.75 percent, and a maturity of 40 years, including a 10-year period of grace. "The Fiscal Management and Accelerating Growth (FMAG) project aims to deepen the implementation of structural reforms and lay a basis for generating growth in the country. It will support the government's economic growth and poverty reduction agenda, and provide the balance of payment support needed to finance the fiscal framework and reduce the growth of domestic debt," the Bank said in a statement.

Recent food shortages combined with low economic growth had negatively affected the government's poverty reduction agenda. "The FMAG credit will support the government's overall development strategy and help to sustain growth in the country," the Bank noted. The proposed credit would also support a set of specific structural reforms in fiscal management, agriculture and HIV/AIDS projects.

"Reforms in fiscal management will help strengthen the government's capacity to meet macroeconomic stabilisation targets, protect pro-poor expenditures, and improve the delivery of social services through accelerating fiscal decentralisation. The statements of expenses reforms will help reduce the burden on the budget and improve the delivery of key infrastructure services," the Bank's statement furthermore explained. The project would also contribute to growth by increasing the returns to smallholder farmers, and support land policy reforms that would increase access to land and ensure it was used more equitably.

A national HIV/AIDS commission would help channel resources and strengthen institutions to mitigate the health and social impact of the pandemic.

"The project will use the already existing financial management mechanisms of the Malawi Social Action Fund, to enable local government structures to empower rural communities to identify beneficiaries and establish new farms on under-utilised lands," the Bank said.

"These mechanisms will reduce rural tensions, minimise the incidence of encroachment on either private lands or protected public areas, and encourage productive investments on the newly established farms," the Bank's land reform and policy coordinator for Africa, Rogier van den Brink, was quoted as saying. "This will be the first time in Africa that Bank resources will be used to pay for the purchase of land. The success of this pilot could have important regional implications."

It is estimated that by the end of the project, some 15.000 poor rural families in four pilot districts in the southern part of Malawi would have increased their income.

"The project will also provide secure land titles to the beneficiaries, under the property rights regime they desire," the Bank explained. Inadequate access to land has been identified as one of the critical factors contributing to poverty and rural tensions in Malawi.

"The redistribution of unused lands to the poor, and other activities under the project will make a direct contribution to increasing economic growth and reducing poverty," the Bank concluded. (IRIN / World Bank, Washington DC)

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