Document of The World Bank FOR OFFICIAL USE ONLY Report No 36918-MW MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON ASSISTANCE TO THE REPUBLIC OF MALAWI UNDER THE ENHANCED HEAVILY INDEBTED POOR COUNTRIES INITIATIVE August 11, 2006 Department: AFTP1 and PRMED Country Management Unit: AFC02 Region: Africa This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization MALAWI Currency Equivalents (Exchange Rate effective July 17, 2006) Currency Unit = Malawi Kwacha MKW 1 = USD 0.0069 USD 1 = MKW 143.90 Government Fiscal Year July 1 ­ June 30 Weights and Measures Metric System Abbreviations and Acronyms AfDF African Development Fund APR Annual Progress Report DSA Debt Sustainability Analysis GDP Gross Domestic Product GOM Government of Malawi HIPC Heavily Indebted Poor Countries IBRD International Bank for Reconstruction and Development IDA International Development Association IFMIS Integrated Financial Management Information System IMF International Monetary Fund SMP Staff Monitored Program JSAN Joint Staff Advisory Note MGDS Malawi Growth and Development Strategy MDRI Multilateral Debt Relief Initiative MKW Malawi Kwacha MOP Memorandum of the President MPRSP Malawi Poverty Reduction Strategy Paper NPV Net Present Value PRMED Economic Policy and Debt Department PRGF Poverty Reduction and Growth Facility PRSP Poverty Reduction Strategy Paper SDR Special Drawing Rights SWAp Sector Wide Approach TTCs Teacher Training Colleges Vice President: Gobind Nankani Country Director: Michael Baxter Director, AFTPM: Sudhir Shetty Director, PRMED: Vikram Nehru Country Manager: Timothy Gilbo Sector Manager: Emmanuel Akpa Task Team Leader: Khwima Nthara Staff Members: Jos Verbeek, Dorte Domeland, Antonio Nucifora MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON ASSISTANCE TO THE REPUBLIC OF MALAWI UNDER THE ENHANCED HIPC INITIATIVE Table of Contents I. BACKGROUND .................................................................................................... 1 II. FULFILLMENT OF COMPLETION POINT CONDITIONS.............................. 2 III. COMPLETION POINT CONSIDERATIONS AND POSSIBLE TOPPING-UP OF HIPC ASSISTANCE AT THE COMPLETION POINT ................................. 4 IV. IDA'S DELIVERY OF ASSISTANCE UNDER THE ENHANCED HIPC INITIATIVE ........................................................................................................... 5 V. IDA'S DELIVERY OF ASSISTANCE UNDER MDRI ....................................... 5 VI. PROSPECTS FOR LONG-TERM DEBT SUSTAINABILITY UNDER THE ENHANCED HIPC INITIATIVE AND MDRI........................................ 6 VII. SATISFACTORY FINANCING ASSURANCES FROM MALAWI'S CREDITORS .......................................................................................................... 7 VIII. RECOMMENDATION.......................................................................................... 7 List of Figures Figure 1: Debt Service to IDA after HIPC Relief and MDRI, 2005-2045..............6 List of Annexes Annex 1: IDA Credits Subject to Debt Service Reduction under the Enhanced HIPC Initiative......................................................................8 Annex 2: IDA Credits Subject to Debt Service Reduction from October 2006 onward Under the Enhanced HIPC Initiative.................................10 Annex 3 Schedule of Debt Service Reduction under the Enhanced HIPC Initiative............................................................................11 Annex 4: Revised Schedule of Debt Service Reduction under the Enhanced HIPC Initiative.....................................................................12 Annex 5: Revised Schedule of Debt Service Reduction under the Enhanced HIPC Initiative with Topping-up Assistance at Completion Point.........13 MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON ASSISTANCE TO THE REPUBLIC OF MALAWI UNDER THE ENHANCED HIPC DEBT INITIATIVE 1. I submit for your approval the following Memorandum and Recommendation on the assistance to be provided to the Republic of Malawi under the Enhanced Heavily Indebted Poor Countries (HIPC) Debt Initiative with respect to the debt owed by this country to the International Development Association (IDA). This report and its recommendation address the criteria for reaching the completion point under the Enhanced HIPC Initiative as agreed by the Boards of IDA and the International Monetary Fund (IMF) in December 2000,1 and establish the debt relief to be provided with respect to the debt owed to IDA. Upon reaching the completion point, Malawi will become eligible for debt relief under the Multilateral Debt Relief Initiative (MDRI) from IDA. 2. This document complements the joint IDA-IMF paper entitled "Republic of Malawi: Enhanced Heavily Indebted Poor Countries (HIPC) Initiative Completion Point Document", the Third Annual Progress Report (APR) for the Malawi Poverty Reduction Strategy Paper (MPRSP) prepared by the Malawian authorities, and the IDA-IMF Joint Staff Advisory Note (JSAN) of the APR, all concurrently submitted with this document. The completion point document presents: (i) Malawi's progress in fulfilling the triggers of the completion point under the Enhanced HIPC Initiative; (ii) an update of Malawi's reconciled public external debt and the debt relief committed at the decision point under the Enhanced HIPC Initiative; (iii) considerations of a possible topping-up of enhanced HIPC assistance at completion point; and (iv) the provision of MDRI relief by IDA, the IMF, and the African Development Fund (AfDF). I. BACKGROUND 3. Malawi reached the decision point under the Enhanced HIPC Initiative in December 2000. Based on the debt sustainability analysis (DSA) presented in the decision point document, debt relief under the Enhanced HIPC Initiative amounted to US$643 million in net present value (NPV) terms as of end 1999. This reduced Malawi's NPV of debt after full application of traditional debt relief from US$1,469 billion to US$827 million. Assistance under the HIPC Initiative corresponded to a common reduction factor of 43.7 percent on the NPV of debt outstanding as of end-December 1999 for all creditors. Debt relief attributed to multilateral creditors amounted to US$480 million (75 percent of total HIPC Initiative relief) in NPV terms. 4. Debt relief from IDA under the Enhanced HIPC Initiative approved at the decision point amounted to US$331 million in NPV terms (US$588 million in nominal terms). According to the decision point calculations, this assistance would be delivered 1Malawi: Decision Point Document for the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative Report No. P7423-MAI. - 2 - through a 55 percent reduction in debt service to IDA over the 2001-2020 period. Interim assistance in the amount of US$118 million in nominal terms has been delivered through end-August 2006. Annex 3 of the current memorandum presents the debt service reduction schedule approved by Executive Directors at the time of the decision point. II. FULFILLMENT OF COMPLETION POINT CONDITIONS 5. In the view of staffs of the IDA and IMF, Malawi has satisfactorily met the requirements for reaching the completion point under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative. Specifically, Malawi has; (i) prepared a full poverty reduction strategy paper (PRSP) and implemented it satisfactorily for at least one year; (ii) maintained macroeconomic stability and satisfactorily implemented an IMF- supported program; and (iii) satisfactorily implemented a set of policy and structural reforms for improving economic governance and service delivery as set out in the decision point document. In total, Malawi has implemented twenty two out of twenty four specific completion point triggers. In addition, Malawi has used the budgetary savings from interim relief broadly in line with the proposals set out in the decision point document. 6. As a result of implementing these completion point requirements, Malawi is now poised to accelerate its pace of growth and poverty reduction. The preparation of its first PRSP reflected a highly participatory process that helped in identifying the key development challenges that faced the country and its implementation provided a good basis on which to improve poverty outcomes. The government is now in the process of finalizing its second-generation strategy - the Malawi Growth and Development Strategy (MGDS), which places much greater emphasis on growth as a basis for poverty reduction. With the completion point conditions having been met, the new strategy will be implemented within the context of a stable macroeconomic environment, significantly improved public expenditure management system, and a conducive framework for improving health and education outcomes, as well as for protecting the most vulnerable in society. 7. After a period of uneven macroeconomic performance following the decision point in 2000, macroeconomic stability has been maintained since mid-2004, initially under an IMF Staff Monitored Program (SMP) and then under the IMF's Poverty Reduction and Growth Facility (PRGF) program. In particular, all the quantitative targets under these programs have been met since mid-2004, and with the restoration of fiscal discipline, domestic debt and inflation are declining. 8. A number of the completion point triggers aim at improving health and education outcomes. All but two of these have been implemented. On health, the budget for drugs and medical supplies has been increased in per capita terms while reforms of the system for providing drugs have been initiated; and the recruitment, training and deployment of nurses and medical personnel have been expanded. To improve the quality of education, the share of education spending in the discretionary budget has been maintained at about 29 percent since decision point; and there has been an increase in resource allocation - 3 - towards teaching materials. These and other sectoral reforms meant that although two completion points triggers in these areas have not been met, Malawi is much better placed now to improve its health and education outcomes than it was at decision point. 9. The completion point triggers that have not been met are: (i) the share of health expenditure should be at least 13 percent of the discretionary recurrent budget; and (ii) yearly enrollment of student teachers in training colleges should be at least 6,000. Although these targets were not met during the interim period, the authorities made some efforts towards achieving them. On the former, the share of health expenditure averaged 12 percent during the period 2001/02 ­ 2004/05. With support from donors, the government has articulated a prioritized policy program for the health sector that is now supported through a Sector Wide Approach (SWAp) funding arrangement, which includes IDA. The SWAp agreement was signed in 2004, and based on preliminary actual figures for FY 2005/06, the health sector's share of discretionary recurrent spending for 2005/06 increased to 18 percent. With regard to the latter, yearly enrollment in teacher training was 3,000 in 2000 and early attempts to increase this number through a crash course did not go far enough to meet the target while causing deterioration in the quality of trained teachers. This approach was, therefore, abandoned and a new program has now been introduced, which is longer than the crash course but shorter than the previous two-year program. The government is also increasing the intake into Teacher Training Colleges (TTCs) with donor support, including IDA. However, even with these efforts, the target of 6,000 is unlikely to be met in the near future and staffs now believe that this target was overly ambitious. 10. The HIPC completion point triggers in the area of governance, which focused on strengthening public expenditure management and separating fiscal management and audit functions, have been implemented. They have been complemented by other governance-related reforms in a range of areas. Notable governance-related reforms have included: (i) amendment in 2004 of the Corrupt Practices Act of 1995, which among other improvements, widens the definition of corruption to criminalize abuse of office and possession of unexplained wealth by public officers, and provides for the protection of whistle blowers; (ii) the development and operationalization of a new public procurement system that conforms to international standards; (iii) the adoption in 2005 (after a long period of failed attempts in the past) of the Integrated Financial Management Information System (IFMIS); and (iv) improvements in the budget process including participation and making the budget more comprehensive, as well as improvements in its evaluation. As a result of these reforms, Malawi's governance indicators generally compare well with those of other low-income countries. - 4 - III. COMPLETION POINT CONSIDERATIONS AND POSSIBLE TOPPING-UP OF HIPC ASSISTANCE AT THE COMPLETION POINT 11. As described in the completion point document, additional loan information received from creditors has resulted in a downward revision of the NPV of total external debt as of end-December 1999 by US$3 million.2 Exports of goods and services between 1997 and 1999 have been downward revised from an average US$551 million per year over 1997-99 to US$547 million.3 As a consequence, total HIPC assistance to Malawi increased from $643 million to US$646 million and the common reduction factor was revised upwards from 43.7 percent to 44.1 percent. The NPV of debt owed to IDA and the IBRD at end-December 1999 has been revised slightly downwards from US$757 million to US$756 million. In light of these revisions, it is proposed that the Executive Directors approve an upward revision of IDA's assistance in NPV terms from US$331 million to US$333 million. 12. Malawi's debt sustainability outlook after HIPC assistance has deteriorated substantially since the decision point as a result of a fundamental change in Malawi's economic circumstances due to exogenous factors. Staffs, therefore, recommend the provision of topping-up assistance at the completion point consistent with the guidelines under the enhanced HIPC Initiative.4 Since the decision point, the NPV of debt-to- exports ratio, after assuming full delivery of HIPC assistance, increased from 150 percent at end-1999 to 245 at end-2005. Even after taking into account additional bilateral debt relief and the absence of further negative exogenous shocks, the ratio is likely to remain high through the projection period. This increase in the NPV of debt to exports ratio was not the result of larger than projected new borrowing, but was rather due to factors outside Malawi's control, lower key export prices, a decline in the discount rate and a depreciation of the US dollar vis-à-vis the euro lead to a substantial increase in the NPV of debt to exports ratio5 and to a fundamental change in Malawi's economic circumstances. Moreover, unanticipated increases in international oil prices since the decision point contributed to a deterioration in Malawi's debt servicing capacity. 13. Should the Executive Directors endorse this recommendation, topping-up will be provided equiproportionally by Malawi's creditors based on the NPV of debt after additional bilateral debt relief as at end December 2005. Total topping-up assistance to Malawi would amount to US$411 million in end-2005 NPV terms (equivalent to a common reduction factor of 34.5 percent of the total NPV of debt as of end-20056), of 2The revisions were the result of updated creditor information and re-classification of loans. Moreover, a downward revision in exports slightly increased the NPV of debt-to- exports ratio. 3The revision was first reported in the staff report to the Board at end-2003, during the first review of the PRGF arrangement approved at end-2000. 4See Box 1 of IDA/SecM2001-0539/1 (8/21/2001) and EBS/01/141 (8/20/2001). "Enhanced HIPC Initiative: Considerations Regarding the Calculation of Additional Debt Relief at the Completion Point", IDA/SecM2003-0476, August 2003. 5The volume of new borrowing was lower than projected at decision point, but loans were less concessional since at the time of decision point, it was assumed that the grant element of new borrowing would be 71 percent, even exceeding IDA's grant element. 6Total NPV of debt after bilateral debt relief beyond HIPC. - 5 - which US$404 million would correspond to multilateral creditors and US$7 million to bilateral creditors. IDA's share in the overall topping-up would amount to US$289 million in NPV terms, or about 70.3 percent of the total. Assuming full delivery of topping-up assistance, the NPV of debt-to exports ratio would average 146.0 percent during the period 2005 -2025. IV. IDA'S DELIVERY OF ASSISTANCE UNDER THE ENHANCED HIPC INITIATIVE 14. In light of the revision in the estimate of debt outstanding at decision point, it is proposed that the Executive Directors approve the upward revision of debt relief from IDA from $331 million to US$333 million in NPV terms. It is proposed that this assistance be delivered by increasing the reduction in debt service falling due between October 2006 and December 2020 from 55 percent to 56 percent. Annex 4 of the current memorandum presents the revised debt service reduction schedule. Provided that Executive Directors agree with this revision and that satisfactory assurances of debt relief have been received from Malawi's other creditors at the Completion Point under the Enhanced HIPC Initiative the debt service reduction for the remaining period up to 2020 would become irrevocable. 15. If Executive Directors endorse staffs' recommendation that Malawi receive additional debt relief at the completion point, it is proposed that the Executive Directors approve a further increase in IDA's debt relief under the Enhanced HIPC Initiative to Malawi of US$289 million in NPV terms of following the schedule proposed in Annex 5. This additional HIPC assistance from IDA would be provided only when satisfactory financing assurances of topping-up from other creditors are obtained. To achieve the debt relief under the Enhanced HIPC Initiative framework, including the additional debt relief at the completion point, IDA will reduce 86 percent of the debt service due between October 2006 and December 2020 (Figure 1).7 V. IDA'S DELIVERY OF ASSISTANCE UNDER MDRI 16. Upon approval of the completion point under the Enhanced HIPC Initiative, Malawi will qualify for additional debt relief from IDA, the IMF and the AfDF under the MDRI. IDA will provide MDRI debt forgiveness by irrevocably canceling the borrower's payment obligations under eligible IDA credits. Debt service savings under the MDRI would cover all remaining IDA credit balances through maturity on all loan balances disbursed as of end-2003 and still outstanding as of end-September 2006 to Malawi, after accounting for debt service relief provided under the Enhanced HIPC Initiative.8 Should Directors endorse staffs' recommendation of topping-up assistance, MDRI debt relief to Malawi would imply a stock of debt reduction of US$1,068 million in nominal terms at completion point. This would correspond to annual debt service 7See Annex 3 for the detailed list of IDA credits for which the debt service will be reduced. 8See, International Development Association, "The Multilateral Debt Relief Initiative: Implementation Modalities for IDA", November 18, 2005. - 6 - savings of US$31 million on average over the next 38 years.9 Total debt service savings under the MDRI would amount to SDR816 million (or US$1,166 million) in nominal terms, to be delivered at the beginning of the second quarter of FY07.10 Figure 1 illustrates the impact of MDRI on projected debt service due to IDA as of end-December 2005. Figure 1. Debt Service to IDA after HIPC Relief, possible topping-up and MDRI (in millions of US dollars) 90 80 70 60 50 40 30 20 10 - 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 Before relief After HIPC relief After possible topping up After MDRI After possible topping-up and MDRI Source: IDA staff estimates VI. PROSPECTS FOR LONG-TERM DEBT SUSTAINABILITY UNDER THE ENHANCED HIPC INITIATIVE AND MDRI 17. Should Executive Directors endorse staffs' recommendation of topping-up assistance, Malawi would exit from the Enhanced HIPC Initiative and MDRI with an NPV of debt-to-export ratio of 32.0 percent and NPV of debt-to-GDP ratio of 7.2 percent in end-2006, well below the average of low income countries. With prudent external borrowing, sound public debt management, and effective use of borrowed resources, Malawi's future risk of debt distress is expected to be moderate. While the sensitivity analysis shows that Malawi's NPV of debt-to-exports profile is going to remain below the HIPC threshold under a number of shocks, it is only so in the event that the authorities maintain sound macroeconomic and external borrowing policies over the medium and long term and accelerate the implementation of structural reforms. 9If topping-up assistance were not to be approved, MDRI relief to Malawi would imply a stock of debt reduction of US$1,381.1 million in nominal terms at completion point. This would result in annual debt service savings of US$40.8 million on average over the next 38 year. 10If topping-up assistance were not to be approved, total debt service savings under the MDRI would amount to SDR 1,083.8 million (or US$1,549.1) million in nominal terms under the MDRI. - 7 - VII. SATISFACTORY FINANCING ASSURANCES FROM MALAWI'S CREDITORS 18. Financing assurances for the provision of debt relief to Malawi under the Enhanced HIPC Initiative have been obtained from creditors representing about 97 percent of total HIPC debt relief in NPV terms, as calculated in the decision point document. Malawian authorities, with the assistance of IDA and IMF staff, will continue their efforts toward securing the participation of the remaining creditors. 19. Should the topping-up of enhanced HIPC assistance at the completion point (Annex 5) be endorsed by the Executive Boards of the IDA and the Fund, the staffs of both institutions will also assist the Malawian authorities in obtaining agreement from all creditors on topping-up their respective assistance levels as proposed in the completion point document. VIII. RECOMMENDATION 20. In view of the above, I recommend that the Executive Directors endorse the staffs' assessment contained in the completion point document concerning Malawi's fulfillment of the floating completion point conditions under the Enhanced HIPC Initiative, and that debt relief on debt owed to IDA by Malawi be provided unconditionally. 21. I, further, recommend that Executive Directors agree with staffs' recommendation that the proposed revision of the stock of debt in NPV terms and exports as of the decision point warrants a revision of the amount of HIPC Initiative assistance. 22. In view of the long-term external debt sustainability prospects for Malawi, I also recommend that the Executive Directors endorse the staffs' assessment that exogenous factors have negatively impacted Malawi's economic circumstances, and therefore that Malawi qualifies for a topping-up of assistance at the completion point in the amount and manner proposed in Annex 5. Paul Wolfowitz President By: Graeme Wheeler Managing Director Washington, DC August 11, 2006 - 8 - Annex 1 Malawi IDA Credits Subject to Debt Service Reduction Under the Enhanced Heavily Indebted Poor Countries Initiative Balance at December 31, 1999 Credit Project Name Currency In original currency In USD equivalent 1020 EDUCATION USD 3,791,564.53 3,791,564.53 1120 HIGHWAY USD 7,403,018.70 7,403,018.70 1130 LILONGWE AGRICULTURAL DEVEL. USD 3,873,085.84 3,873,085.84 1140 SHIRE VALLEY AGRICULTURAL DEV. USD 2,320,408.36 2,320,408.36 1780 MALAWI POWER USD 3,652,072.25 3,652,072.25 2440 PHASE II LILONGWE AGRIC. DEV. USD 4,780,387.58 4,780,387.58 2820 KARONGA RURAL DEVELOPMENT USD 4,462,039.58 4,462,039.58 3630 PHASE II SHIRE VALLEY AGR. DEV USD 7,245,000.00 7,245,000.00 4260 SECOND POWER USD 5,287,500.00 5,287,500.00 5230 SECOND HIGHWAY USD 7,500,000.00 7,500,000.00 5500 PHASE III LILONGWE AGRI. DEV. USD 6,502,500.00 6,502,500.00 5900 SECOND EDUCATION USD 8,908,132.26 8,908,132.26 6910 THIRD POWER USD 6,480,000.00 6,480,000.00 7110 BLANTYRE WATER SUPPLY USD 5,637,127.27 5,637,127.27 7580 THIRD HIGHWAY USD 8,819,112.49 8,819,112.49 8230 SHIRE VALLEY AGRICULTURAL USD 9,148,500.00 9,148,500.00 8570 NATIONAL RURAL DEVELOPMENT USD 16,627,014.89 16,627,014.89 9100 THIRD EDUCATION USD 12,368,980.66 12,368,980.66 9920 NATIONAL RURAL DEV PROGRAM II USD 12,489,000.00 12,489,000.00 10990 FOURTH HIGHWAY XDR 23,698,500.00 32,526,191.25 11230 FOURTH EDUCATION XDR 21,889,650.72 30,043,545.61 11830 NTL RURAL DEVELOPMENT PROGRAM XDR 4,275,734.39 5,868,445.45 12720 WATER SUPPLY ENGINEERING XDR 2,463,832.17 3,381,609.65 13300 FIFTH EDUCATION XDR 28,891,500.00 39,653,583.75 13430 NTL RURAL DEV PROGRAM IV XDR 8,220,818.18 11,283,072.95 13510 HEALTH XDR 5,855,146.41 8,036,188.45 13520 SMALLHOLDER FERTILIZER XDR 4,283,808.17 5,879,526.71 14230 FIFTH HIGHWAY XDR 11,522,746.56 15,814,969.65 14270 2ND STRUCTURAL ADJUSTMENT XDR 48,786,000.00 66,958,785.00 14280 2ND TECHNICAL ASSISTANCE XDR 1,316,000.00 1,806,210.00 15280 URBAN XDR 10,158,112.82 13,942,009.85 15490 NTL AGRICULTURAL RESEARCH XDR 22,866,320.01 31,384,024.21 16260 AGRI. EXTEN. & PLAN. SUPPORT XDR 10,696,000.00 14,680,260.00 16440 3RD STRUCTURAL ADJ. PROGRAM XDR 26,830,074.95 36,824,277.87 17420 2ND LILONGWE WATER SUPPLY XDR 16,011,787.44 21,976,178.26 17670 FIRST EDUCATION SECTOR XDR 20,420,447.05 28,027,063.58 17680 SECOND FAMILY HEALTH XDR 8,480,327.38 11,639,249.33 18510 SMALLHOLDER AGRICULTURAL CR. XDR 4,416,000.00 6,060,960.00 18790 NORTHERN TRANSPORT CORRIDOR XDR 9,970,731.03 13,684,828.34 19200 INDUSTRIAL & TRADE POLICY ADJ. XDR 49,082,000.00 67,365,045.00 - 9 - Annex 1 (concluded) Malawi IDA Credits Subject to Debt Service Reduction Under the Enhanced Heavily Indebted Poor Countries Initiative Balance at December 31, 1999 Credit Project Name Currency In original currency In USD equivalent 19201 INDUSTRIAL & TRADE POLICY ADJ. XDR 3,880,000.00 5,325,300.00 19202 INDUSTRY AND TRADE ADJUSTMENT XDR 3,686,000.00 5,059,035.00 19203 INDUSTRIAL & TRADE POLICY ADJ. XDR 4,947,000.00 6,789,757.50 19660 AGRI. MARKETING & ESTATE DEV. XDR 13,916,000.00 19,099,710.00 19900 ENERGY I XDR 34,104,000.00 46,807,740.00 20360 INSTITUTIONAL DEVELOPMENT XDR 8,613,653.09 11,822,238.87 20690 INFRASTRUCTURE XDR 22,299,996.26 30,606,744.87 20830 2ND EDUCATION SECTOR XDR 29,280,088.82 40,186,921.91 21210 AGRICUL.SECTOR ADJ.PROGRAM XDR 52,530,352.76 72,097,909.16 21211 AGRICUL.SECTOR ADJ.PROGRAM XDR 4,000,000.00 5,490,000.00 22200 POPULATION, HEALTH & NUTRITION XDR 31,499,602.64 43,233,204.62 22210 FIN. SECTOR AND ENTERPRISE DEV XDR 21,669,026.68 29,740,739.12 22250 FISHERIES DEVELOPMENT XDR 5,470,834.16 7,508,719.88 23790 LOCAL GOVERNMENT DEVELOPMENT XDR 12,417,578.27 17,043,126.18 23860 FIFTH POWER XDR 34,130,373.17 46,843,937.18 23960 ENTREPRENEURSHIP DEV & DROUGHT XDR 85,400,000.00 117,211,500.00 23961 ENTREPRENEUSHIP DEV & DROUGHT XDR 4,290,000.00 5,888,025.00 23962 ENTREPRENEUSHIP DEV & DROUGHT XDR 3,100,000.00 4,254,750.00 23963 ENTREPRENEURSHIP DEV & DROUGHT XDR 27,337,871.77 37,521,229.00 23964 ENTREPRENEURSHIP DEV & DROUGHT XDR 3,200,000.00 4,392,000.00 25130 RURAL FINANCIAL SERVICES XDR 17,033,929.54 23,379,068.29 25140 AGRICULTURAL SERVICES XDR 27,230,848.54 37,374,339.62 26240 SECOND INSTITUTIONAL DEV. XDR 10,551,417.81 14,481,820.94 26960 RAILWAYS RESTRUCTURING XDR 4,182,359.65 5,740,288.62 27530 NATIONAL WATER DEVELOPMENT XDR 21,973,619.32 30,158,792.52 28100 PRIMARY EDUCATION XDR 14,328,152.35 19,665,389.10 28530 FISCAL RESTRUCTURING & DEREG XDR 69,733,879.20 95,709,749.20 28531 FISCAL RESTRUCTURING & DEREG XDR 2,900,000.00 3,980,250.00 28532 FISCAL RESTRUCTURING & DEREG XDR 2,400,000.00 3,294,000.00 28533 FISCAL RESTRUCTURING & DEREG XDR 1,700,000.00 2,333,250.00 28560 SOCIAL ACTION FUND XDR 30,664,945.73 42,087,638.01 30510 SECONDARY EDUCATION XDR 1,537,432.27 2,110,125.79 31330 POPULATION & FAMILY PLANNING XDR 192,424.12 264,102.10 31360 SECOND SOCIAL ACTION FUND XDR 2,188,133.76 3,003,213.59 31460 2ND FISCAL RESTRUCT & DEREGULA XDR 43,800,000.00 60,115,500.00 31470 2ND FISCAL RESTRUCT & DEREG TA XDR 530,893.65 728,651.53 32390 ROAD MAINTENANCE REHABILITA. XDR 747,460.13 1,025,889.03 A0090 3RD STRUCTURAL ADJ. PROGRAM XDR 35,904,000.00 49,278,240.00 A0091 3RD STRUCTURAL ADJ. PROGRAM XDR 7,968,000.00 10,936,080.00 F0060 FIFTH HIGHWAY XDR 11,655,714.64 15,997,468.34 N0250 ENVIRONMENTAL MANAGEMENT XDR 1,686,956.09 2,315,347.23 Source: World Bank, Loan Accounting Department - 10 - Annex 2 Malawi IDA Credits Subject to Debt Service Reduction from October 2006 onward Under the Enhanced Heavily Indebted Poor Countries Initiative Credit Project Name Currency Balance at December 31, 2005 In original currency In USD equivalent 1020 EDUCATION USD 2,453,365.33 2,453,365.33 1120 HIGHWAY USD 4,935,345.90 4,935,345.90 1130 LILONGWE AGRICULTURAL DEVEL. USD 2,582,057.32 2,582,057.32 1140 SHIRE VALLEY AGRICULTURAL DEV. USD 1,546,938.88 1,546,938.88 1780 MALAWI POWER USD 2,556,450.53 2,556,450.53 2440 PHASE II LILONGWE AGRIC. DEV. USD 3,446,325.86 3,446,325.86 2820 KARONGA RURAL DEVELOPMENT USD 3,272,162.30 3,272,162.30 3630 PHASE II SHIRE VALLEY AGR. DEV USD 5,355,000.00 5,355,000.00 4260 SECOND POWER USD 3,937,500.00 3,937,500.00 5230 SECOND HIGHWAY USD 5,700,000.00 5,700,000.00 5500 PHASE III LILONGWE AGRI. DEV. USD 4,972,500.00 4,972,500.00 5900 SECOND EDUCATION USD 6,852,412.26 6,852,412.26 6910 THIRD POWER USD 5,040,000.00 5,040,000.00 7110 BLANTYRE WATER SUPPLY USD 4,407,211.27 4,407,211.27 7580 THIRD HIGHWAY USD 6,929,316.49 6,929,316.49 8230 SHIRE VALLEY AGRICULTURAL USD 7,222,500.00 7,222,500.00 8570 NATIONAL RURAL DEVELOPMENT USD 13,186,950.89 13,186,950.89 9100 THIRD EDUCATION USD 9,853,264.66 9,853,264.66 9920 NATIONAL RURAL DEV PROGRAM II USD 10,143,000.00 10,143,000.00 10990 FOURTH HIGHWAY XDR 19,813,500.00 28,318,841.15 11230 FOURTH EDUCATION XDR 18,301,191.72 26,157,344.29 11830 NTL RURAL DEVELOPMENT PROGRAM XDR 3,574,805.39 5,109,362.10 12720 WATER SUPPLY ENGINEERING XDR 2,117,566.71 3,026,574.57 13300 FIFTH EDUCATION XDR 25,492,500.00 36,435,665.48 13430 NTL RURAL DEV PROGRAM IV XDR 7,160,078.18 10,233,684.94 13510 HEALTH XDR 5,166,316.41 7,384,061.06 13520 SMALLHOLDER FERTILIZER XDR 3,779,832.17 5,402,400.73 14230 FIFTH HIGHWAY XDR 10,296,926.56 14,717,088.22 14270 2ND STRUCTURAL ADJUSTMENT XDR 43,596,000.00 62,310,454.92 14280 2ND TECHNICAL ASSISTANCE XDR 1,176,000.00 1,680,821.52 15280 URBAN XDR 9,302,700.82 13,296,071.20 15490 NTL AGRICULTURAL RESEARCH XDR 20,940,748.01 29,929,982.91 16260 AGRI. EXTEN. & PLAN. SUPPORT XDR 9,912,000.00 14,166,924.24 16440 3RD STRUCTURAL ADJ. PROGRAM XDR 25,153,206.95 35,950,724.10 17420 2ND LILONGWE WATER SUPPLY XDR 15,021,379.44 21,469,606.99 17670 FIRST EDUCATION SECTOR XDR 19,163,819.05 27,390,271.65 17680 SECOND FAMILY HEALTH XDR 7,958,471.38 11,374,804.39 18510 SMALLHOLDER AGRICULTURAL CR. XDR 3,864,000.00 5,522,699.28 18790 NORTHERN TRANSPORT CORRIDOR XDR 8,724,399.03 12,469,521.80 19200 INDUSTRIAL & TRADE POLICY ADJ. XDR 43,010,000.00 61,472,902.70 19201 INDUSTRIAL & TRADE POLICY ADJ. XDR 3,400,000.00 4,859,518.00 19202 INDUSTRY AND TRADE ADJUSTMENT XDR 3,230,000.00 4,616,542.10 19203 INDUSTRIAL & TRADE POLICY ADJ. XDR 4,335,000.00 6,195,885.45 19660 AGRI. MARKETING & ESTATE DEV. XDR 12,212,000.00 17,454,245.24 19900 ENERGY I XDR 29,928,000.00 42,775,192.56 20360 INSTITUTIONAL DEVELOPMENT XDR 7,569,581.09 10,818,975.16 20690 INFRASTRUCTURE XDR 19,624,000.00 28,047,994.48 20830 2ND EDUCATION SECTOR XDR 25,766,488.82 36,827,269.48 21210 AGRICUL.SECTOR ADJ.PROGRAM XDR 46,752,019.76 66,821,259.28 21211 AGRICUL.SECTOR ADJ.PROGRAM XDR 3,560,000.00 5,088,201.20 22200 POPULATION, HEALTH & NUTRITION XDR 33,010,369.71 47,180,731.12 22210 FIN. SECTOR AND ENTERPRISE DEV XDR 19,718,816.68 28,183,513.12 22250 FISHERIES DEVELOPMENT XDR 5,582,878.27 7,979,440.42 23790 LOCAL GOVERNMENT DEVELOPMENT XDR 13,038,047.58 18,634,890.26 23860 FIFTH POWER XDR 35,989,227.77 51,438,323.57 23960 ENTREPRENEURSHIP DEV & DROUGHT XDR 79,422,000.00 113,515,481.94 23961 ENTREPRENEUSHIP DEV & DROUGHT XDR 3,989,700.00 5,702,358.52 23962 ENTREPRENEUSHIP DEV & DROUGHT XDR 2,883,000.00 4,120,585.41 23963 ENTREPRENEURSHIP DEV & DROUGHT XDR 25,424,225.77 36,338,083.17 23964 ENTREPRENEURSHIP DEV & DROUGHT XDR 2,976,000.00 4,253,507.52 25130 RURAL FINANCIAL SERVICES XDR 16,379,089.05 23,410,140.61 25140 AGRICULTURAL SERVICES XDR 29,432,744.22 42,067,338.33 26240 SECOND INSTITUTIONAL DEV. XDR 14,008,197.21 20,021,496.03 26960 RAILWAYS RESTRUCTURING XDR 4,697,653.98 6,714,215.90 27530 NATIONAL WATER DEVELOPMENT XDR 49,621,892.83 70,923,082.77 27531 NATIONAL WATER DEVELOPMENT XDR 1,532,197.12 2,189,923.38 28100 PRIMARY EDUCATION XDR 14,241,793.66 20,355,368.42 28530 FISCAL RESTRUCTURING & DEREG XDR 70,231,709.03 100,380,074.77 28531 FISCAL RESTRUCTURING & DEREG XDR 2,900,000.00 4,144,883.00 28532 FISCAL RESTRUCTURING & DEREG XDR 2,400,000.00 3,430,248.00 28533 FISCAL RESTRUCTURING & DEREG XDR 1,700,000.00 2,429,759.00 28560 SOCIAL ACTION FUND XDR 37,914,149.53 54,189,556.50 30510 SECONDARY EDUCATION XDR 34,385,849.71 49,146,663.42 31330 POPULATION & FAMILY PLANNING XDR 2,193,703.76 3,135,394.97 31360 SECOND SOCIAL ACTION FUND XDR 49,084,236.37 70,154,626.52 31460 2ND FISCAL RESTRUCT & DEREGULA XDR 65,700,000.00 93,903,039.00 31470 2ND FISCAL RESTRUCT & DEREG TA XDR 1,499,975.14 2,143,869.47 32390 ROAD MAINTENANCE REHABILITA. XDR 19,442,038.30 27,787,922.08 33950 PRIVATIZATION UTILITY REFORM XDR 15,290,105.11 21,853,688.53 34510 3RD FISCAL RESTRUCT. DERE. T.A XDR 1,579,819.54 2,257,988.67 34520 3RD FISCAL RESTRUCT. DEREGULAT XDR 43,100,000.00 61,601,537.00 34521 3RD FISCAL RESTRUCT. DEREGULAT XDR 400,000.00 571,708.00 34920 REGIONAL TRADE FACILITATION XDR 3,113,834.34 4,450,510.01 37150 EMERGENCY DROUGHT RECOVERY XDR 22,000,000.00 31,443,940.00 37340 FIMTAP XDR 5,076,924.23 7,256,295.49 37820 THIRD SOCIAL ACTION FUND PROJE XDR 14,713,968.92 21,030,234.36 38790 DEVELOPMENT LEARNING CENTRE XDR 173,301.82 247,695.09 38810 FISCAL MGN & ACCELERATING GROW XDR 16,900,000.00 24,154,663.00 A0090 3RD STRUCTURAL ADJ. PROGRAM XDR 33,660,000.00 48,109,228.20 A0091 3RD STRUCTURAL ADJ. PROGRAM XDR 7,470,000.00 10,676,646.90 F0060 FIFTH HIGHWAY XDR 9,976,342.64 14,258,887.25 N0250 ENVIRONMENTAL MANAGEMENT XDR 6,921,633.79 9,892,883.53 Source: World Bank, Loan Accounting Department - 11 - Annex 3 Malawi Schedule of Debt Service Reduction Under the Enhanced Heavily Indebted Poor Countries Initiative, Calendar Year As Approved at the Decision Point Amount to be reduced Calendar Year (In thousands of U.S. dollars) TOTAL 588,497 2001 16,768 2002 18,860 2003 20,862 2004 22,663 2005 23,460 2006 25,727 2007 26,878 2008 27,677 2009 29,524 2010 30,624 2011 31,306 2012 32,841 2013 34,251 2014 34,444 2015 34,528 2016 35,499 2017 35,964 2018 35,330 2019 35,816 2020 35,477 Source: World Bank, Loan Accounting Department and staff estimates. - 12 - Annex 4 Malawi Revised Schedule of Debt Service Reduction Under the Enhanced Heavily Indebted Poor Countries Initiative Amount to be reduced Calendar Year (In thousands of U.S. dollars) TOTAL 593,460 2001 16,768 2002 18,860 2003 20,862 2004 22,663 2005 23,460 2006 25,810 2007 27,156 2008 27,964 2009 29,833 2010 30,946 2011 31,636 2012 33,189 2013 34,615 2014 34,810 2015 34,896 2016 35,878 2017 36,349 2018 35,708 2019 36,199 2020 35,856 Source: World Bank, Loan Accounting Department and staff estimates. - 13 - Annex 5 Malawi Revised Schedule of Debt Service Reduction Under the Enhanced Heavily Indebted Poor Countries Initiative with Topping-up Assistance at the Completion Point 1/ Amount to be reduced Calendar Year (In thousands of U.S. dollars) TOTAL 1,012,494 2001 16,768 2002 18,860 2003 20,862 2004 22,663 2005 23,460 2006 29,080 2007 47,722 2008 49,480 2009 54,870 2010 57,046 2011 59,524 2012 62,155 2013 65,311 2014 66,121 2015 66,841 2016 68,815 2017 69,673 2018 69,073 2019 72,193 2020 71,978 Source: World Bank, Loan Accounting Department and staff estimates. 1/ Subject to Board approval of topping-up of Enhanced HIPC assistance at the completion point.