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CONFORMED COPY 
 
GRANT NUMBER H573-MW 
 
Financing Agreement 
 
(Third Poverty Reduction Support Development Policy Financing) 
 
between 
 
REPUBLIC OF MALAWI 
 
and 
 
INTERNATIONAL DEVELOPMENT ASSOCIATION 
 
Dated June 16, 2010  
 
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GRANT NUMBER H573-MW 
FINANCING AGREEMENT 
 
AGREEMENT dated   June 16, 2010, entered into between REPUBLIC OF MALAWI 
(“Recipient”) and INTERNATIONAL DEVELOPMENT ASSOCIATION (“Association”) for 
the purpose of providing financing in support of the Program (as defined in the Appendix to this 
Agreement).  The Association has decided to provide this financing on the basis, inter alia, of (a) 
the actions which the Recipient has already taken under the Program and which are described in 
Section I of the Schedule to this Agreement, and (b) the Recipient’s maintenance of an 
appropriate macroeconomic policy framework.  The Recipient and the Association therefore 
hereby agree as follows: 
ARTICLE I 
—
GENERAL CONDITIONS; DEFINITIONS 
1.01. 
The General Conditions (as defined in the Appendix to this Agreement) constitute an 
integral part of this Agreement. 
1.02. 
Unless the context requires otherwise, the capitalized terms used in this Agreement have 
the meanings ascribed to them in the General Conditions or in the Appendix to this 
Agreement. 
ARTICLE II 
—
FINANCING 
2.01. 
The Association agrees to extend to the Recipient, on the terms and conditions set forth 
or referred to in this Agreement, a grant in an amount equivalent to thirty five million six 
hundred thousand Special Drawing Rights (SDR 35,600,000) (variously, “Grant” and 
“Financing”).   
2.02. 
The Recipient may withdraw the proceeds of the Financing in support of the Program in 
accordance with Section II of the Schedule to this Agreement.
 
2.03. 
The Maximum Commitment Charge Rate payable by the Recipient on the Unwithdrawn 
Financing Balance shall be one-half of one percent (1/2 of 1%) per annum. 
2.04. 
The Payment Dates are June 15 and December 15 in each year. 
2.05. 
The Payment Currency is Dollars. 
ARTICLE III 
—
PROGRAM 
3.01 
The Recipient declares its commitment to the Program and its implementation.  To this 
end: 
(a) 
the Recipient and the Association shall from time to time, at the request of either 
party, exchange views on Recipient’s macroeconomic policy framework and
 
the 
progress achieved in carrying out the Program; 
 
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(b) 
prior to each such exchange of views, the Recipient shall furnish to the 
Association for its review and comment a report on the progress achieved in 
carrying out the Program, in such detail as the Association shall reasonably 
request; and 
(c) 
without limitation upon the provisions of paragraphs (a) and (b) of this Section, 
the Recipient shall promptly inform the Association of any situation that would 
have the effect of materially reversing the objectives of the Program or any 
action taken under the Program including any action specified in Section I of the 
Schedule to this Agreement. 
ARTICLE IV 
—
REMEDIES OF THE ASSOCIATION 
4.01. 
The Additional Event of Suspension is that a situation has arisen which shall make it 
improbable that the Program, or a significant part of it, will be carried out. 
ARTICLE V 
—
EFFECTIVENESS; TERMINATION
 
5.01. 
The Additional Condition of Effectiveness is that the Association is satisfied with the 
progress achieved by the Recipient in carrying out the Program and with the adequacy of 
the Recipient’s macroeconomic policy framework. 
5.02. 
The Effectiveness Deadline is the date ninety (90) days after the date of this Agreement. 
 
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ARTICLE VI 
—
REPRESENTATIVE; ADDRESSES
 
6.01. 
The Recipient’s Representative is its Minister at the time responsible for finance. 
6.02. 
The Recipient’s Address is: 
Ministry of Finance 
P.O. Box 30049 
Capital City 
Lilongwe 3 
Malawi 
Facsimile: 
265-1-789173 
 
6.03. 
The Association’s Address is: 
 
International Development Association 
1818 H Street, N.W. 
Washington, D.C. 20433 
United States of America 
 
Cable 
address: 
 Telex: 
  Facsimile: 
 
INDEVAS 
 248423(MCI) 
 1-202-477-6391 
Washington, D.C. 
  
 
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AGREED at Lilongwe, Republic of Malawi, as of the day and year first above written. 
 
REPUBLIC OF MALAWI 
 
By /s/ Ken Edward Kandodo 
 
Authorized Representative 
 
INTERNATIONAL DEVELOPMENT ASSOCIATION  
 
By/s/ Sandra Bloemenkamp  
 
Authorized Representative 
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SCHEDULE 
Program Actions; Availability of Financing Proceeds 
Section I. 
Actions Taken Under the Program
.
The actions taken by the Recipient under the Program include the following, which have been 
found acceptable by the Association:
 
Improving the Functioning of Agriculture Markets
1. 
The Recipient has implemented a macro weather insurance scheme to improve 
predictability of maize markets and complement physical storage of maize stocks.  
2. 
The Recipient has prepared and published a medium term plan for its farm inputs subsidy 
program (2011-2016). 
Improving Business Environment through Improvements in Contract Enforcement
3. 
The Recipient has completed an audit of pending cases in the General Division of its 
High Court of a commercial nature for possible transfer to the Commercial Division of its 
High Court. 
Improving Social Protection 
4. 
The Recipient has adopted and published revised guidelines for identification of 
beneficiaries of the 2009/10 Fiscal Year farm inputs subsidy program based on field 
experiences from the 2008/9 Fiscal Year. 
Improving the Budget Process
5. 
The Recipient has adopted a revised budget classification structure and associated chart 
of accounts. 
6. 
The Recipient has undertaken a procurement review of its farm inputs subsidy program 
for the 2009/10 Fiscal Year and commenced implementation of its key recommendations. 
Improving Payroll Management
7. 
The Recipient has developed an action plan to address the weaknesses identified in the 
HRMIS review and personnel audit of the civil service. 
Improving Timeliness and Follow up of External Audit
8. 
The Recipient has issued a treasury minute responding to issues raised by the Public 
Accounts Committee of its Parliament in connection with audits furnished by the 
Recipient’s Auditor General to such committee. 
 
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Improving Debt Management
9. 
The Recipient has operationalized its Debt Management Committee, comprised of 
representatives of its central bank, Treasury, Accountant General’s Office, Ministry of 
Justice and Ministry of Development, Planning and Cooperating for the purpose of 
making recommendations regarding incurring of domestic and external debt.  
 
Section II. 
Availability of Financing Proceeds
A. General. 
 
The Recipient may withdraw the proceeds of the Financing in accordance with 
the provisions of this Section and such additional instructions as the Association may 
specify by notice to the Recipient. 
B. 
Allocation of Financing Amounts.
 
The Financing is allocated in a single tranche, from 
which the Recipient may make withdrawals of the Financing.  The allocation of the 
amounts of the Financing to this end is set out in the table below: 
 
Allocations 
Amount of the Financing Allocated 
(expressed in SDR)
 
(1) Single Withdrawal Tranche 
35,600,000 
Total Amount 
35,600,000 
C. 
Withdrawal Tranche Release Conditions.
 
No withdrawal shall be made of the Single Withdrawal Tranche unless the Association is 
satisfied (a) with the Program being carried out by the Recipient, and (b) with the 
appropriateness of the Recipient’s macroeconomic policy framework. 
 
D. 
Deposits of Financing Amounts.
 
Except as the Association may otherwise agree:   
1. 
all withdrawals from the Financing Account shall be deposited by the 
Association into an account designated by the Recipient and acceptable to the 
Association; and 
2.  
the Recipient shall ensure that upon each deposit of an amount of the Financing 
into this account, an equivalent amount is accounted for in the Recipient’s budget 
management system, in a manner acceptable to the Association. 
E. Excluded 
Expenditures
.
The Recipient undertakes that the proceeds of the Financing shall not be used to finance 
Excluded Expenditures.  If the Association determines at any time that an amount of the 
Financing was used to make a payment for an Excluded Expenditure, the Recipient shall, 
promptly upon notice from the Association, refund an amount equal to the amount of 
such payment to the Association.  Amounts refunded to the Association upon such 
request shall be cancelled.
 
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F. 
Closing Date.  
The Closing Date is May 31, 2011. 
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APPENDIX 
Section I. Definitions 
1. 
“Excluded Expenditure” means any expenditure: 
(a)  
for goods or services supplied under a contract which any national or 
international financing institution or agency other than the Association or the 
Bank has financed or agreed to finance, or which the Association or the Bank has 
financed or agreed to finance under another credit, grant or loan; 
(b) 
for goods included in the following groups or sub-groups of the Standard 
International Trade Classification, Revision 3 (SITC, Rev.3), published by the 
United Nations in Statistical Papers, Series M, No. 34/Rev.3 (1986) (the SITC), 
or any successor groups or subgroups under future revisions to the SITC, as 
designated by the Association by notice to the Recipient: 
 
Group
Sub-group Description 
of 
Item 
112  
Alcoholic 
beverages 
121  
Tobacco, 
un-manufactured, 
tobacco refuse 
122  
Tobacco, 
manufactured 
(whether or not containing 
tobacco substitutes) 
525 
 
Radioactive and associated 
materials 
667 
 
Pearls, precious and 
semiprecious stones, 
unworked or worked 
718  
718.7 
 
Nuclear reactors, and parts 
thereof; fuel elements 
(cartridges), non-irradiated, 
for nuclear reactors 
728 
728.43  
Tobacco processing 
machinery 
897  
897.3 
Jewelry of gold, silver or 
platinum group metals (except 
watches and watch cases) and 
goldsmiths’ or silversmiths’ 
wares (including set gems) 
971  
 
Gold, non-monetary 
(excluding gold ores and 
concentrates) 
(c) 
for goods intended for a military or paramilitary purpose or for luxury 
consumption; 
 
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(d) 
for environmentally hazardous goods, the manufacture, use or import of which is 
prohibited under the laws of the Recipient or international agreements to which 
the Recipient is a party; 
(e) 
on account of any payment prohibited by a decision of the United Nations 
Security Council taken under Chapter VII of the Charter of the United Nations; 
and 
(f) 
with respect to which the Association determines that corrupt, fraudulent, 
collusive or coercive practices were engaged in by representatives of the 
Recipient or other recipient of the Financing proceeds, without the Recipient (or 
other such recipient) having taken timely and appropriate action satisfactory to 
the Association to address such practices when they occur. 
2. 
“Fiscal Year” means the Recipient’s fiscal year which commences on July 1 of each 
calendar year and ends on June 30 of the following calendar year. 
3. 
“General Conditions” means the “International Development Association General 
Conditions for Credits and Grants”, dated July 1, 2005 (as amended through October 15, 
2006) with the modifications set forth in Section II of this Appendix. 
4. 
“HRMIS” means the Human Resource Management Information System introduced by 
the Recipient in September 2006, for management of personnel and payroll records of the 
Recipient’s civil service.  
5. 
“Letter of Development Policy” means the letter dated April 19, 2010, from the Recipient 
to the Association, describing the Program (as hereinafter defined), declaring the 
Recipient’s commitment to the execution of the Program, and requesting assistance from 
the Association in support of the Program during its execution. 
6. 
“Program” means the program of actions, objectives and policies designed to promote 
growth and achieve sustainable reductions in poverty and set forth or referred to in the 
Letter of Development Policy. 
7. 
“Public Accounts Committee” means the public accounts committee of the Recipient’s 
National Assembly. 
8. 
“Single Withdrawal Tranche” means the amount of the Financing allocated to the 
category entitled “Single Withdrawal Tranche” in the table set forth in Part B of Section 
II of the Schedule to this Agreement. 
Section II.  Modifications to the General Conditions 
The modifications to the “International Development Association General Conditions for Credits 
and Grants”, dated July 1, 2005 (as amended through October 15, 2006) are as follows:   
1. 
The last sentence of paragraph (a) of Section 2.03 (relating to Applications for 
Withdrawal) is deleted in its entirety. 
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2. 
Sections 2.04 (
Designated Accounts)
 and 2.05 (
Eligible Expenditures
)
are deleted in their 
entirety, and the remaining Sections in Article II are renumbered accordingly. 
3. 
Section 2.05 (renumbered as such pursuant to paragraph 2 above) is modified to read as 
follows: 
“Section 2.05.
 Refinancing Preparation Advance 
 
If the Financing Agreement provides for the repayment out of the 
proceeds of
 
the Financing of an advance made by the
 
Association or the Bank 
(“Preparation Advance”), the Association shall, on behalf of the Recipient, 
withdraw from the Financing Account on or after the Effective Date the amount 
required to repay the withdrawn and outstanding balance of the advance as at the 
date of such withdrawal from the Financing Account and to pay all accrued and 
unpaid charges, if any, on the advance as at such date.  The Association shall pay 
the amount so withdrawn to itself or the Bank, as the case may be, and shall 
cancel the remaining unwithdrawn amount of the advance.” 
4. 
Sections 4.01 (
Project Execution Generally
), and 4.09 (
Financial Management; 
Financial Statements; Audits
)
are deleted in their entirety, and the remaining Sections in 
Article IV are renumbered accordingly. 
5. 
Paragraph (a) of Section 4.05 (renumbered as such pursuant to paragraph 3 above and 
relating to 
Use of Goods, Works and Services
)
is deleted in its entirety. 
6. 
Paragraph (c) of Section 4.06 (renumbered as such pursuant to paragraph 3 above) is 
modified to read as follows: 
“Section 4.06. 
Plans; Documents; Records 
…
(c) 
The Recipient shall retain all records (contracts, orders, invoices, 
bills, receipts and other documents) evidencing expenditures under the Financing 
until two years after the Closing Date. The Recipient shall enable the 
Association’s representatives to examine such records.” 
7. 
Section 4.07 (renumbered as such pursuant to paragraph 3 above) is modified to read as 
follows: 
“Section 4.07. 
Program Monitoring and Evaluation 
…
(c)  
The Recipient shall prepare, or cause to be prepared, and furnish 
to the Association not later than six months after the Closing Date, a report of 
such scope and in such detail as the Association shall reasonably request, on the 
execution of the Program, the performance by the Recipient and the Association 
of their respective obligations under the Legal Agreements and the 
accomplishment of the purposes of the Financing.” 
8. 
The following terms and definitions set forth in the Appendix are modified or deleted as 
follows, and the following new terms and definitions are added in alphabetical order to 
the Appendix as follows, with the terms being renumbered accordingly: 
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(a) 
The definition of the term
 “Eligible Expenditure” is modified to read as follows:   
“‘Eligible Expenditure’ means any use to which the Financing is put in support 
of the Program, other than to finance expenditures excluded pursuant to the 
Financing Agreement.” 
(b) 
The term “Financial Statements” and its definition as set forth in the Appendix 
are deleted in their entirety. 
(c) 
The term “Project” is modified to read “Program” and its definition is modified 
to read as follows:  
 
“‘Program’ means the program referred to in the Financing Agreement in support 
of which the Financing is made.”  All references to “Project” throughout these 
General Conditions are deemed to be references to “Program”. 
(a) 
The term “Program Preparation Advance” (renamed as such pursuant to 
subparagraph 8 (c) above) is modified to read “Preparation Advance” and its 
definition is modified to read as follows:  
“‘Preparation Advance’ means the advance referred to in the Financing 
Agreement and repayable in accordance with Section 2.05.
”