Millennium Challenge Corporation (MCC), a United States of America government agency, has outlined conditions for Malawi to boost its chances of qualifying for the award of a second compact grant.
The conditions MCC chief executive officer Sean Cairncross announced to journalists in Blantyre yesterday include demonstrated commitment to good governance and sustaining investments in the first MCC compact which focused on energy.
He said the decision by MCC board of directors to select Malawi for consideration for a compact programme is positive, but Malawi Government’s continued commitment to strengthen democratic institutions, maintaining sound policies and investing in its people and passing the MCC scorecard will be critical each year. The next compact may take up to three years before qualifying countries are confirmed.
Said Cairncross: “For Malawi to be selected, it has shown tremendous progress on our indicators which measure governance, economic stability and investment in the government for its people. So, we expect those indicators to continue.”
He said MCC has already approved the findings of the preliminary economic constraints to growth analysis, conducted by MCC economists and government, in the second compact, which identifies potential areas of investment.
Said Cairncross: “This analysis begins the process of objectivity narrowing down the focus of second compact investment by identifying constraints to growth in the economy. The analysis identified three binding constraints to growth; macroeconomic stability, high costs for road freight and barriers linking farms to markets and access to land for investments.
“The next step in the process of developing a second compact will be to unpack the social and economic issues surrounding these potential areas of investments. We want to develop a compact that addresses the needs of Malawi’s people and seizes the opportunities to spur private sector led economic growth.”
Millennium Development Trust chief executive officer Dye Mawindo, while observing that the current political impasse does not pose a threat to the compact’s eligibility criteria as the reaction from government has been good, said the second compact has higher expectations and that government is required to contribute 7.5 percent of the total negotiated compact value to show commitment to the programme.
He said contributions are either directly or in kind.
In March 2012, MCC suspended Malawi’s energy compact after a series of poor governance decisions under the administration of former president Bingu wa Mutharika who, among other things, accused some donors of sponsoring demonstrations against his government.
During the last MCC scorecard in 2018, Malawi was ranked at 65 percent on controlling corruption from 59 percent in 2017.
The high scorecard came at a time when perceptions were high that corruption had reached uncontrollable levels and involving high ranking government officials.
According to Transparency International (2018), Malawi ranks 120 out of 175 countries on Corruption Perception Index.
In his remarks during the meeting with the MCC delegation at Sanjika Palace in Blantyre later yesterday, President Peter Mutharika said government will do its best to qualify for the second compact as the binding growth constraints under the second compact are key in realising the country’s goals of being a producing nation.
He further called on American investors to come and invest in the power sector in Malawi.
Since 2014, the economic growth of Malawi has been below five percent which economists argue is not good enough for a country which has 51.5 percent of the population poor.
Economics Association of Malawi (Ecama) president Chikumbutso Kalilombe indicated yesterday that entrenching macroeconomic stability is very key for achieving sustainable and inclusive growth.
In December last year, Malawi became eligible for a second compact after successfully completing the $350.5 million. n