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PROGRAM INFORMATION DOCUMENT (PID) 
CONCEPT STAGE 
Report No.:  AB5518 
Operation Name 
Malawi:  Poverty Reduction Support Credit 3 
Region 
AFRICA 
Sector 
General industry and trade sector (20%);Other social services 
(20%);General finance sector (20%);Law and justice 
(20%);General public administration sector (20%) 
Project ID 
P117238 
Borrower(s) 
GOVERNMENT OF MALAWI 
Implementing Agency 
MINISTRY OF FINANCE 
Date PID Prepared 
February 26, 2010 
Estimated Date of 
Appraisal Authorization 
April 10, 2010 
Estimated Date of Board 
Approval 
May 27, 2010 
1.  Key development issues and rationale for Bank involvement 
 
Malawi has experienced strong economic performance over the past five years, owing largely to sound 
macroeconomic management and reforms on many important areas. The annual GDP growth in the last 
five years has averaged about 7 percent, compared to an average of 2 percent for 1999-2004. Improved 
macroeconomic management has also been reflected in good performance under the IMF programs 
since June 2004. A new three-year Extended Credit Facility (ECF) program was approved by the IMF 
Board on February 19, 2010. The enhanced food security and availability of inputs also has helped to 
foster diversification as households at the margin are producing more and more cash crops further 
increasing incomes in a virtuous cycle. The overall progress in combating poverty and improving the 
quality of life has been positive, with poverty headcount decreasing from 52.4 in 2005 to 40 percent by 
2008. 
 
Despite the repeated shocks that have hit Malawi since 2008, the broad orientation of the economy and 
the thrust of the government’s reform program are geared to changing the long-term prospect of Malawi 
for a broad-based growth. However, in the short term, government’s efforts at fiscal consolidation and 
efforts to address the resulting macroeconomic imbalances could negatively affect the progress achieved 
thus far. Sustained inflows of donor aid are therefore critical to avoid reversal of the progress made in 
recent years. 
 
2. Proposed objective(s) 
 
The PRSC series aims at assisting a reform program of the Government of Malawi (GoM) as it 
implements the Malawi Growth and Development Strategy (MGDS) by supporting implementation of 
policy and institutional reforms that will lead to the following medium-term outcomes
:
(i) increased 
agricultural productivity, (ii) increased private sector investment, and (iii) sustained improvements in fiscal 
management.
 
Within this framework, the proposed third poverty reduction support credit (PRSC-3) seeks to achieve 
three main objectives.  Firstly, it consolidates the progress achieved in the reform program undertaken in 
the last two series.
 
Secondly,
 
it continues to provide a framework for harmonizing Bank support for 
policy and institutional changes with other development partners.  Lastly, it will be the Bank’s 
instrument for augmenting financial support to help the Government cope with negative fiscal and 
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balance of payments effects created by the global financial crisis and other exogenous shocks that 
threaten to reverse the progress made. 
 
3. Preliminary description 
 
The proposed PRSC-3 to the Republic of Malawi is the third and final in a series of three annual 
development policy lending (DPL) operations to assist the Government’s reform program in support of 
the Malawi Growth and Development Strategy (MGDS).   
 
The credit selectively supports the reform efforts by the Government in the following areas: (i) 
improved functioning of agricultural markets, and taking steps that will form the basis of increased 
participation of the private sector in the fertilizer subsidy program; (ii) improved business environment 
through a reduction in the length of time it takes to enforce commercial contracts; (iii) improved 
economic governance with a focus on four areas: improved payroll management through a review of the 
Human Resource Management Information System (HRMIS) and the carrying out of a Personnel Audit; 
improved budget process through the introduction of a calendar that incorporates all budget related 
activities; improved timeliness in external financial accountability through the submission of a delayed 
audit report to Parliament; and improved debt management through better coordination of the debt 
management institutions. 
 
4. Environment Aspects 
 
During the preparation of PRSC-1, the Bank reviewed the possible impact of PRSC supported reforms 
in agricultural marketing, increased fertilizer use, and improving the environment for doing business, but 
found that the negative environmental impacts of these reforms is likely to be minimal. Since reforms 
being supported under PRSC-3 are a continuation of reforms undertaken in the last two PRSCs, there are 
no significant negative environmental impacts expected under the proposed credit.
 
5. Tentative financing 
 
Source: ($m.) 
BORROWER/RECIPIENT 0 
International Development Association (IDA) 
54 
 Total 
54 
 
6. Contact point 
 
Contact: Young Chul Kim 
Title: Senior Economist 
Tel: +258-21-482-335 
Fax:  
Email: Ykim2@worldbank.org 
Location: Maputo, Mozambique (IBRD)