April 4, 2008

China to give $287 mln in aid

China will provide $287 million in aid to Malawi during the next five years, a far cry from the $6 billion that had been touted when the two countries formally established diplomatic relations late in 2007. President Bingu wa Mutharika has announced the funding after returning from a state visit to China, praising Beijing for providing what he described as one of the largest aid packages received by the nation. "Malawi also plans to deepen trade and investment ties with China as part of a larger strategy to diversify our agriculture-dominated economy," he told a news conference in Lilongwe.

Malawi, which was one of the last countries in Africa with diplomatic ties with Taiwan, cut relations with Taipei in late December and established links with China. China's government and its state-controlled companies have so far invested billions of dollars in Africa in a bid to tap natural resources for the Asian giant's growing economy and build Beijing's political influence in the developing world.

Malawi will use some of the Chinese funding to build a highway linking it with neighbouring Zambia and finish the construction of a government building in Lilongwe that was started by the Taiwanese. China and Malawi have also signed an agreement allowing Malawian exports access to the Asian nation on a preferential tariff basis.

In the meantime, the International Monetary Fund (IMF) has announced that Malawi's real economic growth will remain above seven percent in 2008, boosted by high tobacco prices, aid inflows and fiscal discipline. In a statement released at the end of a final review of a so-called Poverty Reduction and Growth Facility (PRGF), the IMF said Malawi's economic performance had encouraged it to discuss a new programme for the southern African country.

IMF resident representative Maitland McFarlan said a new IMF programme under discussion with Malawi would aim to improve macroeconomic stability, sustain growth and ease poverty. "The mission and authorities agreed that it will be important to further strengthen public financial and economic management and increase foreign exchange reserves to buttress Malawi's ability to withstand negative shocks that could otherwise derail growth and increase poverty," he said. Discussions on a new programme have advanced and will be discussed by the IMF's executive board in Washington in June. (rts)

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