MALAWI VERSUS THE WORLD BANK

Sonia Patten
The article discusses conditions in the small south African country of Malawi.

MALAWI : officially the Republic of Malawi, is a landlocked country in southeast Africa that was
formerly known as Nyasaland.
-Malawi is among the world's least-developed countries. The economy is heavily based in
agriculture, with a largely rural population.
- Malawi has a low life expectancy and high infant mortality. There is a high prevalence of
HIV/AIDS, which is a drain on the labour force and government expenditures. There is a diverse
population of native peoples, Asians and Europeans, with several languages spoken and an
array of religious beliefs.

Free Market System- the key to development in nonindustrialized societies

- It led to institutions such as the :
 WORLD BANK
 INTERNATIONAL MONETARY FUND (IMF)
- These institutions drop social and agricultural support programs in favour of market-
based development as a requirement for receiving loans
Washington Consensus : refer to a set of economic prescriptions derived from policies if the IM
and World Bank and endorsed by the U.S. Treasury Department.
Goal: to bring about basic economic reform in poor nations, rapidly moving their economies in
the direction of capitalism and incorporation into the global marketplace.
CONDITIONS FOR SECURING A LOAN:
1. Cuts in spending for health, education and all forms of social welfare
2. Privatization of all state-owned enterprises
3. Opening the economy to foreign competition nd direct foreign investment
4. Allowing the market to determine interest rates
5. Managing currency exchange rates to keep them stable

In addition,
- Governments are to broaden tax base in order to collect more revenue
- Deregulate labor markets and stop using public monies to subsidize commodities
- Withdrawal of subsidies
Commercial fertilizer: an absolute essential agricultural input for even the smallest subsistence
farmer
White Maize: the staple crop in Malawi, which is consumed every meal
-90% of cultivable land in Malawi is planted to maize

1952
- Fertilizer subsidies began in the country when it was still a british colony
o Obective: to ensure distribution o a vital agricultural input at a low cost
to even the most geographically remote smallholder farmer
o Expected Result: increase output of maize, the priority crop, and to
maintain soil fertility
1981
- Experience a balance of payments problem and turned to the World Bank and
IMF for assistance in the form of loans
1984
- The World bank and IMF began attributing problem in the economy to
government subsidy policies, particularly with regard to commercial fertilizer
1985
- The government began progressive reduction of the fertilizer subsidy
1990
- Complete deregulation and liberalization of the fertilizer and seed markets in
Malawi, under the tutelage of the international lending institutions
1994-95
- The process was finalized with complete removal of all types of subsidies and
price controls on all agricultural inputs and products

Government Programs which are created to distribute free or subsidized fertilizer:

 Starter Pak Initiative
 Targeted Input Programme
Nsima – maize porridge
Bingu wa Mutharika- current president of Malawi
-He is an economist trained at a prominent US university, and is well aware that Western
nations heavily subsidize their farmers.