Malawi First Growth and Resilience DPO with a Catastrophe Deferred Drawdown Option

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It is the first in a programmatic series of two in the amount of US80 million dollars equivalent and is combined with a Catastrophe Deferred Drawdown Option (Cat-DDO) of US57 million dollars equivalent. It helps the Government of Malawi (GoM) address longstanding macroeconomic imbalances, as supported through a new International Monetary Fund (IMF) program and strengthen structural and governance foundations for a more dynamic and resilient economy. The reforms underpinning this operation will also increase the country’s preparedness for future shocks, especially climate-related disasters that have had a disproportionate impact on the poor. The operation supports the aims of the country’s national development plan, Malawi 2063, and the World Bank’s Country Partnership Framework (CPF), FY2021-25. By strengthening resilience to climate change impacts in one of the world’s most vulnerable countries, it aligns with the World Bank’s Evolution priorities. To address persistent problems in fiscal governance and transparency, pillar 1 aims to strengthen the legal framework for PFM, attract private finance, increase transparency in procurement, and improve the targeting and financial management of the AIP. Pillar 2 addresses core constraints to private sector-led growth by strengthening the institutional foundations of the energy sector, supporting the digital economy through robust data protection legislation, and enabling the development of a deposit insurance system that can foster financial inclusion and financial sector stability. Pillar 3 operationalizes Malawi’s CCDR by protecting poor households’ livelihoods through effective shock-sensitive social safety nets, improving the legal and regulatory framework for government to both manage and respond to disaster risks and to enhance the resilience of buildings. These reforms are being implemented in close coordination with a prospective ECF program and are complemented by planned budget support programs from other development partners to help ensure the Government has support in the medium term as it implements difficult but essential reforms. Over the past two years, the World Bank has been 'leaning in' during a critical time for Malawi, including through emergency financing for recurrent costs, the scale up of social protection, a backstopping facility for strategic commodity imports and the triggering of Contingency Emergency Response Components. This DPO complements these efforts.