Politics of the MDGs and Malawi, The

Preface

“If Goal eight is ignored it is hard to imagine the poorest countries achieving Goal 1-7”

"The Eight MDGs set minimum standards for reducing poverty and hunger; attaining universal primary education and gender equality; reducing child and maternal mortality, as well as the spread of HIV/AIDS, malaria and other deadly diseases; ensuring environmental sustainability; and promoting a global partnership for development. The main policy frameworks through which Malawi is implementing measures for achieving the MDGs are the Poverty Reduction Strategy Paper (PRSP), which was launched in 2002, and the Malawi Economic Growth Strategy (MEGS), which was launched in 2004.

Malawian poverty is widespread and deep. The broad picture is one of extremely low standards of living and substantial inequality throughout the country and especially in rural areas. Malawi’s GNI per capita has fallen from US$ 200 in 1990 to US$157 in 2003. The servicing of debt is a major burden on the country’s limited budgetary and foreign exchange resources. It also diverts resources away from expenditure on education, health, water and sanitation development and other social and economic services. In this regard, it is a major obstacle to the attainment of the MDGs. Malawi did not qualify for the original Highly Indebted Poor Countries (HIPC) Initiative in 1996 as a means of reducing its debt burden because its debtservice ratio was below the threshold of 20-25 percent. But it qualified under the enhanced HIPC, which was adopted in 1999, when the qualifying debt-service ratio was reduced to 15 percent. Malawi reached its Decision Point in December 2000, and adopted a PRSP in April 2002.

The resources saved on debt servicing, estimated at US$50 million per annum, are committed to
expenditure on pro-poor activities identified in the PRSP. The International Monetary Fund, the World Bank and other donors are providing debt relief under the initiative. The asymmetries and imbalances in the global trading system, including a number of World Trade Organisation agreements, constitute serious impediments to the country’s growth and development. Malawi continues to face difficulties in implementing the agreements, including adapting national laws and improving its institutional capacity to meet its WTO obligations. Its access to industrial country markets remains restricted in areas where it has comparative advantage, including agricultural products and labour-intensive manufacturers. As one of the poorest countries in the world, Malawi needs additional assistance in the form of Official Development Assistance (ODA). Yet ODA has declined in recent years as a proportion of donor countries’ Gross National Income (GNI). Malawi’s official foreign debt stands at about US$3 billion. According to the 2004 Global Human Development Report, the Human Development Index (HDI) for Malawi is 0.388, which revealed that close to two-thirds of the population live in poverty, the majority of which are women.

Of particular importance to this research report is Goal Eight, outlining Northern governments’ commitment to a global partnership for development - a late addition to the MDGs. Goal eight relates to issues of: debt cancellation, trade justice, equitable governance in global institutions, and political, social and economic rights for the poor – as an indispensable foundation for a politics that will enable sustained progress to end poverty in the South. It is an important goal for holding developed countries accountable in advancing the MDGs. This goal is particularly significant, as it requires richer countries to reform their policies and actions to contribute to the fight against poverty. The lack of basic rights in poor countries stems from and reinforces highly unequal power, within and between countries, which marginalize poor people’s needs and priorities.

This paper is an attempt to provoke debate towards an answer. It argues that what is overdue is a viable global partnership that enables African countries to attain the Millennium Development Goals (MDGs) through having a lasting solution to their debt overhang, better and effective aid delivery, diversification and access to markets in the North for their primary commodity produce as well as fair trade. We draw from the Malawian experiences to suggest that a “development
Marshal Plan” requires both a viable national agenda and fundamental global action to be sustainable. We take an international perspective, although Malawi is the primary focus of analysis.

The paper is therefore organised as follows: Chapter I briefly examines the nature and severity of Malawi’s development challenges. It also looks at the national plans and strategies put in place to attain the Millennium Development Goals. Chapter II evaluates the relationships between Debt on the one hand and the challenge to attain the Millennium Development Goals on the other. Empirical evidence suggests that debt badly deprives Malawi its prospects for a full-fledged democracy and equitable social service provision to its populous nation. Chapter III focuses on the aid delivery and its impact on Malawi’s potential to attain the MDGs, while Chapter IV addresses issues of trade and investment which are vital to the attainment of the MDGs. Chapter V speaks to the existing and potential roles that key stakeholders can play to make MDGs attainable and Chapter VI gives precise recommendations to pull Malawi out of its current economic quagmire and daunting poverty. Malawi accumulated external debts without a corresponding growth in the economy, exports capability or poverty reduction. This report indicates that much of the borrowing contracted during 1973-82 was consumed by Balance of Payments (BOP) deficits caused by the first and second round of the oil crises.

The report also finds that export commodity price deflation that started in the late 1970s and worsened during the 1980s also contributed to widening gaps in external liquidity and increasing demand for foreign borrowing. The primary shock to world interest rates that had started with surging inflation in the US after 1976 was transmitted worldwide and as a result, the rate of interest on Malawi debt rose (by 373%) from only 1.9% in 1976 to more than 9% in 19811. To a significant degree, Malawi herself also takes a larger share of the blame. The government’s policy of seeking comprehensive ownership of the means of production and also centralised management of the economy contributed to enhance external debt accumulation to cover both heavy investment costs and persistent operating losses of public enterprises.

The paper concludes that, while there is ample evidence to support the role of international prices of oil and macroeconomic policies of industrial countries as the precipitators of external debt, domestic economic policies in Malawi itself not only failed to minimize the debt problem, but contributed to its worsening. In resolving all the problems associated with Debt, Trade and Aid engaging civil society is not an option but a necessity.”

From recommendations

Donors, civil society and members of parliament are agreed that Malawi’s level of foreign debt is relatively too high, that the burden of servicing this debt is constraining the ability of the country to pursue the MDGs, and therefore that the country requires debt cancellation. They are also agreed that Malawi’s level of foreign trade is too low, and therefore that developed countries should do more to improve access of Malawi’s exports to their markets. The report gives recommendations related to Government, Civil Sociey Organisation and the Donor Community. These are some of the recommendation for Civil Society Organisations:

• Civil Society Organisations (CSOs) are crucial for the protection and promotion of the Malawian people’s rights and to this end they must continue to lobby and advocate for economic justice and debt cancellation in order to free up resources for Malawi’s Development.
• NGOs must continue to influence government budget allocation, sector prioritisation and production of sound macroeconomic policies.
• Popular education and public sensitisation on the issues of aid, debt and trade is key to NGO mass mobilisation for development. Information repackaging and dissemination with the aim of achieving people-centered and driven development is crucial for Malawi’s sustainable development.
• Civil society must create a strong culture of information sharing and networking. This requires that civil society leaders improve internal governance and management so as to facilitate free flow of information.