World Bank approves $137m budget support for Malawi

AFRICAN BUSINESS AND ECONOMYDecember 18, 2023 at 8:36 PM UTC

The World Bank has approved $137 million in budget support for Malawi, including an immediate disbursement of $80 million, as stated in an official statement by the bank.

According to the World Bank, this financial assistance is intended to aid the southern African nation in enhancing fiscal sustainability, fostering private sector-led growth, and building resilience to economic shocks. The initial disbursement of $80 million is accompanied by the provision of an additional $57 million in the event of a crisis.

Malawi is currently grappling with chronic foreign currency shortages, resulting in shortages of essential commodities such as fuel, medicines, and fertilizers. To address economic challenges, the country devalued its kwacha currency by 30% against the previous month's dollar. The World Bank's financial support aims to address these economic challenges and promote stability in Malawi.

Key Takeaways

The southern African country has devalued its currency twice to prop up dwindling foreign currency reserves pressured by rising commodity prices and declining revenue from tobacco exports. As it stands, the currency is now worth two-thirds less than it was at the start of the year. This year, Most sub-Saharan African currencies have weakened against the US dollar, fanning inflationary pressures across the continent as import prices surge. The depreciations and devaluations across the region were mostly driven by external factors. Lower risk appetite in global markets and interest rate hikes in the United States pushed investors away from the region towards safer and higher-paying US treasury bonds. This, together with a growth slowdown, leaves policymakers with difficult choices as they balance keeping inflation in check with a still-fragile recovery.

World Bank

Malawi

Budget

Loan

Forex

Kwacha