Malawi WT/TPR/S/231/Rev.1 
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V. AID FOR TRADE 
(1) OVERVIEW  
1. Economic growth in Malawi is closely correlate d with export performance.  Aid that supports 
export-led growth potentially has a direct impa ct on economic growth, and by extension poverty 
alleviation.  The revised version of the Malawi Growth and Development Strategy (MGDS) for 2006-
11 mentions trade as one of its underlying objectives.  However the MGDS does not specify how to translate this goal into policy.  The MGDS did not capture the recommendations of the Diagnostic 
Trade Integration Study (DTIS) undertaken under the Integrated Framew ork (IF).  The MGDS 
addresses supply-side constraints without linking th em to factors impeding trade performance.  The 
MGDS is the basis on which the World Bank,  IMF, African Development Bank (AfDB), 
United Nations, and bilateral donors ali gn their national support strategies. 
2. A 2009 joint country economic memorandum (CEM ) by the African Development Bank, the 
U.K. Department for International Developmen t (DFID), the Millennium Challenge Corporation 
(MCC), and the World Bank recommends that it is vita l for aid to be realigned to support export-led 
growth.
1  Donor support is currently focused on social- sector spending.  The Government is keen to 
promote more projects with a direct impact on economic growth and infrastructure development.2  
Mainstreaming of trade in the successor strategy to the MGDS 2006-11 will be important in this 
regard, and the planned update of the DTIS can play a useful role in this process.  As part of this 
process, attention should be given to the future development of the services sector, in particular 
tourism, and the investment needed in education to underpin growth.  Ongoing negotiations with the 
MCC on a compact agreement also offer an opportunity to mainstream export-led growth into 
assistance provided to Malawi.  Assuming MCC conditions are met, the first MCC funding could start in late 2010. 
(2) M
AINSTREAMING TRADE INTO NATIONAL DEVELOPMENT STRATEGIES  
(i) Vision 2020 and the Malawi Growth and Development Strategy 
3. Malawi's Vision 2020 sets out the long-term development perspective for Malawi, to be 
attained through a series of medium-term operational st rategies.  The current strategy is the Malawi 
Growth and Development Strategy – fro m Poverty to Prosperity (MGDS 2006-2011).3  The objective 
of the MGDS is to reduce poverty through sustained economic growth and infrastructural development, so as to transform the country fro m a predominately importi ng and consuming economy 
into a predominately manufacturing and exporting one. 
4. The revised MGDS emphasizes ten key priority areas (KPAs):  agriculture and food security;  
irrigation and water development;  education, scien ce, and technology;  transport infrastructure and 
the Nsanje inland port;  climate change, natural re sources, and environment management;  integrated 
rural development;  public health, sanitation, a nd HIV/AIDS management; youth development and 
empowerment;  energy, mining, and industrial deve lopment;  and improved governance.  The revised 
MGDS also has five thematic areas on which nationa l development is to be anchored:  sustainable 
economic growth;  social protection;  social deve lopment;  infrastructure development;  and improved 
governance. 
                                                     
 
1 World Bank (2009c). 
2 The Aid Atlas and Annual Debt a nd Aid Report shows that infrastru cture received approximately 7% 
of donor funds in 2008-09, the smallest allocation to an MGDS priority. 
3 Malawi SDNP online information.  Viewed at:  http://www.sdnp.org.mw/~esaias/ettah/vision-2020. WT/TPR/S/231/Rev.1 Trade Policy Review 
Page 54 
 
 
5. Trade and export development are identified as issues in the five relevant KPAs and the five 
thematic areas.  What is lacking is any clear st rategy as to how this can be  realized through specific 
initiatives.  The revised MDGS recognizes the potentia l of trade and export for growth, but does not 
provide an operational framework to realize these trade objectives. 
6. Economic growth in Malawi is export-led.4  Further mainstreaming of trade objectives into 
Malawi's national development stra tegy would help sustain the impr essive rates of economic growth 
achieved since 2006.5  Furthermore, given Malawi's ai d dependence (about 40% of the annual 
budget), it is essential that the national development st rategy, and accompanying policies, reflect this 
economic reality and provide a basis agains t which donors can align their support. 
(ii) The integrated framework 
7. Malawi's involvement with the IF dates back to 2001.  A Diagnostic Trade Integration Study 
(DTIS) was approved by the Government of Malawi  in February 2004.  The main objective behind 
the DTIS was to develop recommendations for programmes and policies that Malawi and its 
development partners would pursue to enhance Mala wi’s trade performance.  The DTIS contains an 
action matrix setting out key trade and developmen t challenges.  It was updated in November 2006. 
8. Policy recommendations from the DTIS were not fully mainstreamed into the MGDS, 
although the revised MGDS did reflect trade objectives for the ten KPAs.  In 2006, the IF Focal Point at the Ministry of Industry and Trade (MIT) initia ted a process of mainstreaming trade into sectoral 
strategies.  This work ended in 2008 due to lack of  financial support.  The award of EIF Tier 1 grant 
funding to the Ministry of Commerce in Septembe r 2009 should help revive this process.  The EIF 
project will help build institutional capacity, mainst ream trade into national development strategy, and 
facilitate donor coordination.  The three-year  project will be implemented by the MIT. 
9. Review of the DTIS and its action matrix is a key element of the new project.  Areas 
identified for review include:  productivity, qualit y, and competitiveness of products and services;  
trade facilitation;  infrastructure;  standards devel opment and enforcement;  and capacity at enterprise 
and institutional level.  The project should improve  the capacity of the National Implementation Unit 
and the DTIS review should help identify projects for funding under Tier II of the Enhanced IF.  MTI 
sees the EIF as a key instrument to generate aid-for-trade resources.   
10. With the current MGDS ready to expire, an update of the DTIS is a timely opportunity to 
further mainstream trade into the successor national development strategy at an early stage.  The 
Malawian authorities plan the MGDS's successor to become operational in the fiscal year 2011/12. 
(iii) Supply-side and trade-related infrastructure constraints 
11. The MGDS outlines supply-side and trade-related infrastructure constraints in the mainstay 
sector of the economy (the agriculture and ag ri-processing sector), in potential growth sectors 
(tourism, mining, manufacturing), and discusses ho w to promote an enabling environment for the 
private sector.  It also examines binding constraint s in irrigation and water development, transport 
infrastructure development, and energy generation and supply. 
12. Although the MGDS recognized that progress had been made since 2004 in improving road 
and transport infrastructure, further investment is  needed to:  reduce lead times on export, lower 
                                                     
 
4 World Bank (2009c). 
5 A recent World Bank Policy Research Paper suggests  that economic growth is strongly correlated 
with export revenues (Lea and Hanmer, 2009). Malawi WT/TPR/S/231/Rev.1 
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domestic trucking costs, lower costs of cross-borde r and transit trade with neighbouring countries, 
lower costs to reach domestic, regional, and inte rnational markets (supply and distribution), and 
improve mobility and connectivity of rural producin g communities to markets.  One key objective in 
the area of water transport is a plan for Malawi to have direct access by water to ports along the 
Indian Ocean through the Shire-Zambezi Waterway.  
13. In the energy sector, electricity provisi on is inadequate, unreliable, and inaccessible 
(Chapter IV(2)(i)).  The objective is to reduce th e number and duration of blackouts, increase access 
to reliable, affordable, electricity in rural areas and other targeted areas, improve coordination and the 
balance between energy needs across different sectors, including tourism and mining. 
14. The Integrated Trade and Industry Policy and th e Private Sector Development (PSD) Strategy 
identify specific supply-side constraints in more detail and make recommendations on where 
assistance should be focused.  Areas identified includ e support for customs modernization, support for 
development/rehabilitation of internal and regi onal transport links, standards development and 
enforcement, institutional capacity building, i ssues of productivity, limited trade and industry 
financing, inadequate skilled manpower, lack of an  adequate network of trade representation abroad, 
quality and skills development, a nd low levels of investment. 
15. A National Export Strategy (NES) for 2010-14 is being developed by the Ministry of Industry 
and Trade in consultation with other ministries,  the Malawi Export Promotion Council, Malawi 
Investment Promotion Agency, Malawi Bureau of  Standards, the private sector, civil society, 
academia, and members of the donor community.  Th e NES aims to promote the production of goods 
and services for which Malawi has a comparative a dvantage in existing regional markets.  The NES 
should help prioritize available resources and galvanize additional resources from the donor 
community. 
16. Various reports commissioned by Malawi's deve lopment partners have examined supply-side 
constraints in detail at both an economy-wide level and for specific sectors.6  The Country Economic 
Memorandum, published in 2009 by the MCC, the A frican Development Bank, DFID, and the World 
Bank, analyses in detail national supply-side constraint s in the agriculture secto r, for trade logistics, 
energy, and in respect of the macroeconomic environment. 
(iv) Specific trade-related technical assistance needs 
17. A lot of the difficulties in implementing the WT O Agreements, identified during the last TPR 
of Malawi, are still valid today.  Implementation-rela ted difficulties are primarily attributable to weak 
institutional capacity of the various agencies in th e country responsible for different aspects of the 
WTO Agreements.  Specific examples of these needs ar e:  (i) alignment of national laws, rules, and 
regulations to WTO requirements;  (ii) notifica tion requirements;  (iii) training of government 
officials on WTO matters, including capacity building for negotiations. 
18. Malawi's implementation-related concerns are, inter alia , in customs valuation, safeguards, 
countervailing measures, SPS, TBT, and TRIPS.  Malawi Customs authorities are still having 
difficulties in fully implementing the Customs Valuat ion Agreement.  Discussions with the authorities 
in the course of this Review indicated that th is was mainly due to problems of under-invoicing of 
imports.  Training in classification is currently pr ovided by the World Customs Organization (WCO), 
the Common Market for Eastern and Southern Africa  (COMESA), and SADC.  However, the benefits 
arising from the implementation of the Agreement on Customs Valuation cannot be fully realized 
                                                      
6  The World Bank has published research on transport costs in Malawi and on the potential for mineral 
sector growth. WT/TPR/S/231/Rev.1 Trade Policy Review 
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without capacity building in the area of enforcemen t, and installation and enhancement of customs-
related infrastructure.  Customs has not yet insta lled scanners, and needs to establish laboratories to 
support classification;  cargo verification and examina tion is currently done manually.  Customs has 
already introduced a Risk Management Unit (Cha pter III(1)(i)).  Customs indicated the need for 
training in the following areas:  valuation;  tariff classi fication;  interpretation of rules of origin;  post 
clearance audits;  investigation a nd prosecution;  and enforcement. 
19. With respect to intellectual property rights (IP R), Malawi intends to comply with the TRIPS 
Agreement by the end of the new extended period for LDCs, which is 2013 (and 2016 for 
implementation of patent protection for pharmaceuti cal products).  However, the absence of domestic 
expertise on IPR matters has seriously delayed the revi ew of its existing obsolete legislation.  Under 
the Malawi Constitution, the Law Commission is mandat ed to review all legislation in Malawi.  Based 
on this mandate the Law Commission has appointed  a Special Law Commission to review the Trade 
Marks Act of Malawi with funding from DFID under the Rule of Law Program.  The Commission has 
chosen to review this Act first as it is the most fr equently used among the IP-related laws.  The review 
of the Trade Marks Act is expected to conclude toward s the third quarter of 2010.  It is envisaged that 
the Law Commission will receive further funding to review the remaining IP-related laws. 
20. According to the authorities, assistance has mainly been provided by WIPO and other 
institutions in this area.  There is, however, a con tinuing need to enhance the knowledge and skills in 
the department, as well as in other public institutions  and the private sector, through training courses 
and workshops.  Furthermore, when WTO-consistent legislation is put in place, a further major hurdle 
will be to provide effective enforcement through, inter alia , training of customs and police officials. 
21. As an LDC, Malawi was automatically elig ible for a trade faci litation needs assessment, 
under the auspices of the Trade Facilitation Trust F und, set up within the context of the Doha 
Development Agenda negotiations, and managed by the WTO secretariat.  A needs assessment was 
conducted in November 2008 under the guidance of an independent consul tant provided by the 
Southern African Global Competitiveness Trade Hub. 
22. Malawi has so far made relatively few notif ications to the WTO.  According to the 
authorities, the difficulties in meeting the notifica tion requirements are due mainly to a lack of 
understanding of the requirements, and of how notifications are to be made and submitted to the WTO 
Secretariat.  In this regard, training on notifica tions should be considered as a priority for future 
assistance. 
23. The limited training of government officials on WTO matters, including negotiating skills in 
the multilateral context, is another constraint on Malawi's participation in the multilateral trading 
system, which has been further hampered by the ab sence of a resident diplomatic representation in 
Geneva.  WTO-related issues are covered by its missi on in Brussels, in order to concentrate trade 
matters, including ACP and EU relations, into a singl e location.  However, Malawi rarely attends 
WTO meetings.  Therefore, Malawi has mainly relied on the WTO Non-Resident initiatives for 
information on day-to-day activities of the WTO.7 
(3) AID FOR TRADE SUPPORT TO MALAWI8 
24. Over 20 donors provide official development assistance to Malawi.  A series of non-
governmental organizations also provide support.9  Aid has been provided for debt relief, direct 
                                                      
7 The "Geneva Week" is a twice a year activity, during which non-resident representatives are invited 
to the WTO for briefing on the state of play of work, and participation in the work of WTO bodies. 
8 See also Box IV.2. Malawi WT/TPR/S/231/Rev.1 
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budget support, sector budget support, and project support.  In 2006, Malawi benefited from debt 
relief under the Highly Indebted Poor Countries a nd the Multilateral Debt Relief initiatives, which 
reduced the total external debt stock from US$3 b illion to US$400 million.  External debt declined 
from an average (in NPV terms) of 253.3% of exports in 2005 to 40.9% in 2006.  
Table V.1 
Aid-for-trade flows:  CRS proxies 
(ODA:  US$'000, 2006 constant prices) 
  Commitments Disbursements 
CRS purpose codes  2002-05 
Average 2006 2007 2006 2007 
Trade policy and regulations and trade-related adjustment       
33110 Trade policy and administra tive management 287 2,169 137 315 421 
33120 Trade facilitation 4 254 277 254 277 
33130 Regional trade agreements (RTAs) 48 475 375 475 375 
33140 Multilateral trade negotiations 29 - 0 - 0 
33150 Trade-related adjustment - - 46 - 0 
33181 Trade education/training 121 - 18 - 0 
 Sub total 488 2,897 854 1,043 1,074 
Economic infrastructure      
21010 to 21081 Transport and storage 30,891 31,387 26,844 6,546 7,724 
22010 to 22040 Communications 949 2,745 1,642 742 1,059 
23010 to 23082 Energy supply and generation 506 5,315 263 180 5 
 Sub total 32,346 39, 447 28,749 7,468 8,788 
Building productive capacity      
25010 Business and other services 1,452 302 718 320 522 
24010 to 24081 Banking and financia l services 1,153 635 3,904 146 1,150 
31110 to 31195 Agriculture 43,695 54,708 37,082 25,142 31,486 
31210 to 31291 Forestry 6,286 125 229 1,894 3,771 
31310 to 31391 Fishing 4,645 718 277 451 56 
32110 to 32182 Industry 592 7,744 4,360 572 157 
32210 to 32268 Mineral resources and mining 125 23 57 23 0 
33210 Tourism 10 1,035 221 74 255 
 Sub total 57,958 65, 289 46,848 28,622 37,398 
Total aid or trade 90,793 107,633 76,450 37,134 47,260 
Total sector allocable ODA 464,615 482,653 418,375 314,818 404,705 
 
Source:  OECD, Creditor Reporting System. 
25. Aid for trade is monitored using the OECD Cr editor Reporting System database.  According 
to its estimates Malawi received US$547.2 million in aid-for-trade assistance between 2002-2007.10  
Support has been concentrated in the areas of build ing productive capacity, in particular support to 
agriculture (nearly 50% of all Aid-for-trade assi stance in 2007) (Table V.1).  Aid for economic 
infrastructure was 37% of the total in 2007.  Aid for trade accounted for approximately 18% of total 
sector allocable ODA in 2007 (or 15% of total ODA) .  Comparable figures for aid for trade as a 
                                                                                                                                                                     
9 For example, the Gates Foundation and John Deere Foundation have provided funding for 
Opportunity International Bank to fund rural banks and microfinance in Malawi.  The Clinton Hunter 
Development Initiative also provides assistance for wheat  production and improved cotton farming in Malawi. 
10 Neither budget support nor debt relief are included within the reporting of Aid for Trade.  In 
2006/2007, approximately 17% of aid was delivered through budget support. WT/TPR/S/231/Rev.1 Trade Policy Review 
Page 58 
 
 
percentage of total sector allocable ODA in 20 07 for Kenya, Mozambique , and Uganda were 35%, 
27%, and 47% respectively. 
26. The top six aid-for-trade donors for 2006-07 were the EU (US$18.4m), World Bank 
(US$16.8m), Japan (US$13.6m), Norway (US$13. 2m), African Development Bank (US$11m), and 
the United States (US$6.1m).  Together these donors accounted for 86% of aid for trade (Table V.2). 
Table V.2 
Donor operations 
Donor Overview 
World Bank: 
Country Assistance Strategy (CAS) 2007-10 International Development Association financia l support of US$340 million programmed for 2007-10.  
Focus areas:  agriculture;  infrastructure (energy and water development);  private sector development.  
World Bank and EU support the "Business Environm ent Strengthening Technical Assistance" Project 
(Chapter II(4)). 
 
African Development Bank: 
Country Strategy Paper 2005-09 African Development Fund funding of US$200 milli on programmed for 2008-10.  Focus areas:  rural 
infrastructure;  human capital and institutiona l capacity;  governance fr ameworks.  Loans of 
US$181 million approved to finance the Nacala Ro ad Corridor linking Mozambique, Malawi, and 
Zambia. 
 
European Union: 
Country Strategy Paper 
(CSP) and national indicative programme 2008-13 Indicative EU support for 2008-13  totals €436 million from the 10
th European Development Fund and 
€15 million for unforeseen needs (e.g. emergency assist ance).  Focus areas:  budget support;  agriculture 
and food security;  regional interconnectivity (focus on road infrastructure).  Non-focal-sector support is 
also provided for regional integration, trade, a nd investment.  €25-30 mill ion annually goes to budget 
support.  €15.9 million "food facility " approved to cope with high fertilizer and falling commodity 
prices.  European Commission is the EIF donor fac ilitator.  European Investment Bank has lent €94 
million for Beira corridor rehabilitation.  New regiona l integration, trade and investment programme 
currently under design. 
 
Norway: 
Country Strategy 2008-12 Norway has committed to allocate a minimum of NOK 200 million (approximately US$35 million per 
year) for the period 2008-12.  Norway handles deve lopment funds on behalf of Sweden.  Focus areas: 
budget support;  governance;  health;  environment;  gender.  
United States of America: USAID Country Strategic Plan Millennium Challenge 
Corporation (MCC) U.S. Government provi des approximately US$70 million annually  under USAID's Country Strategic 
Plan.  Focus areas:  poverty reduction;  food security;  governance;  health services;  basic education. 
Malawi qualified as an MCC-eligible country in  December 2007.  In January 2009, a grant of 
US$14.8 million was provided for development of a Mi llennium Challenge Compact.  Priorities agreed 
with recipient government. 
 
UK: Country Assistance Plan 
2008-12 U.K. Department for International Development committed to provide at least £70 million annually 
(approximately US$113 million) for 2008-12.  Scotla nd has committed £9 million for 2010-11.  Focus 
areas:  budget support;  good governance, growth  and social protection; basic services. 
 
Other donors Japan provides assistance under the Tokyo Inte rnational Conference on African Development process. 
Malawi is a beneficiary of TICAD, notably thr ough the One-Village-One-Pr oduct Campaign.  Germany 
has pledged support of €64 million for 2010-11 focusing on health and education.  Ireland established a 
bilateral aid programme in Malawi in 2007. 
 
South-South partners China is active in infrastructure develo pment, trade and investment, and human resource development 
(projects include Chitipa-Karonga road constructi on and a cotton project (Chapter IV(1)(ii)(e)).  
Discussions are ongoing with India on various project s:  mineral resources, thermal and hydropower, 
rural electrification, information technology.  Brazil has offered assistance on biofuels.  Agreement with 
South Africa in 2007 on assistance for agriculture  and livestock;  health and human resource 
development;  trade and industry;  mining; touris m; transport and communications infrastructure. 
 
Source:  WTO Secretariat. 
27. Malawi agreed a Developmen t Assistance Framework for 2008-11 with the United Nations.11  
Malawi has benefited from two IF Trust Fund Window II projects12, and was a beneficiary of the Joint 
Integrated Technical Assistance Pr ogramme (JITAP) between 2003 and 2008.13 
                                                      
11 See:  UNDAF (undated). Malawi WT/TPR/S/231/Rev.1 
 Page 59 
 
 
28. WTO technical assistance has focused on increasing the general understanding of government 
officials on WTO matters.  Since 2002, nine nati onal activities have been conducted in Malawi.  
Malawian officials have also participated in  over 50 regional activities on various WTO-related 
issues.  In addition, since 2002, 5 officials have been  trained in the 12-week trade policy courses;  7 in 
the regional trade policy courses, and 3 have been trained in the 3-week trade policy courses designed 
for LDCs.  In 2006, a Malawian officer was seco nded to the WTO under the Netherlands Trainee 
Programme for 10 months. 
29. Some donors have exited or scaled-back their operations in Malawi.  In 1999, the Dutch 
Government decided to exit Malawi so as to c oncentrate on fewer partner countries.  In 2002, 
Denmark decided to discontinue its  bilateral assistance programme with Malawi over concerns related 
to corruption and political intolerance.14  As part of its Aid Effectiveness Agenda, the Government of 
Canada announced in 2009 that it will be focusing 80% of bilateral resources in 20 countries of focus, 
withdrawing from Malawi, which was not designated as a country of focus.15 
(4) BRIDGING DEMAND AND RESPONSE  
(i) National coordination mechanisms 
30. The Government is increasingly taking the l ead in coordinating donor support.  The 
Department of Debt and Aid in the Ministry of Finance takes the lead in donor coordination.  The Government has developed a Development Assistance Strategy (DAS), which is a coordination plan 
aimed at improving the effectiveness of aid inflow s to Malawi and defining what government and 
development partners have to do to implement the Pa ris Declaration on Aid Effectiveness.  As part of 
this process, the MOF undertakes a Joint Country Pr ogram Review (JCPR) to review progress in the 
implementation of development programmes/projects with donors.  In 2008, the Government 
established sector working groups (SWGs) whos e responsibilities include guiding prioritization of 
donor aid at sector level.  The 12 SWGs are expected to generate a more efficient division of labour amongst development partners in re lation to government priorities. 
31. Approximately 40% of government spending in Malawi is funded by donors, making Malawi 
highly dependent on aid.  In 2006-07, over 50% of project support aid to Malawi was not included in 
the national budget.  The existence of such a large amount of off-budget aid caused a number of 
problems due to spending that was not in line with government priorities (sectorally or geographically), and was a hindrance to improve ment of government systems for procurement.
16  The 
Ministry of Finance has sought to rectify this problem through the use of an Aid Management 
Platform (AMP).  The AMP collates donor disbursement data on a monthly basis from donor focal 
points.  This system is starting to improve the quality  of aid data and so the ability of the Government 
to manage and monitor flows. 
                                                                                                                                                                     
12 A project on Trade Policy Advisory Services and Capacity Building for Trade Integration and a 
project on Standardization, Quality  Assurance and M easurement (SQAM). 
13 See JITAP online information.  Viewed at:  www.jitap.org. 
14 See Ministry of Foreign Affairs of Denmark onlin e information.  Viewed at:  http://www.um.dk/en 
/menu/developmentpolicy/evaluations/publications/reportsbyyear/2008/ 2008+08+exit+evaluation. 
15 Canada had a ten-year Country Program Delivery Strategy (1998-2008) for Malawi.  See Canadian 
International Development Agency online information.  Viewed at:  http://www.acdi-cida.gc.ca/acdi-
cida/ACDI-CIDA.nsf/eng/JUD-51895926-JEP and http://www.acdi-cida.gc.ca/ malawi-e. 
16 Tew (2008). WT/TPR/S/231/Rev.1 Trade Policy Review 
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(ii) Monitoring and evaluation 
32. In 2009, the Save the Children Fund published a report that looked at foreign assistance to 
Malawi, in particular assistance provided by the United States.17  It noted that donor funds seemed to 
be focused on social expenditure, rather than ec onomic growth and infrastructure projects.  This 
analysis has been expanded further in the 2009 Malawi joint Country Economic Memorandum (CEM) 
by the AfDB, DFID, MCC, and World Bank.18 
33. The CEM stated that "aid has only weakly supp orted growth – persiste ntly low levels of 
public investment imply that aid has not sufficiently strengthened productivity.  Total public investment amounts to around 40% of aid inflows.  This implies that in excess of 60% of aid (since 
some investment will have been financed domes tically) is used for recurrent or consumption 
spending.  Although Malawi currently uses its aid fo r social development, which will have long-term 
impacts on productivity through improvements in hea lth and education, aid only weakly addresses 
supply bottlenecks in support of growth such as pow er, transport or irrigation.  Without financing 
increases in productivity, aid risks doing long-term da mage to growth by appreciating the currency 
and creating disincentives in the export sector.  B ecause of the centrality of the export sector to 
Malawi's economy and its sensitivity to the real exch ange rate, it is vital that the use of aid is 
realigned to support export-led growth."   
34. The CEM also recognizes that "the evidence signals a strong probability that education 
currently constrains growth in Malawi, and an even greater probability that it will become a constraint 
in the medium term."  This conclusion is germ ane in relation to the development of the services 
sector, in particular tourism;  a sector on which the CEM is largely silent, but that may offer 
possibilities for long-term growth and employment. 
                                                     
 
17 See:  http://www.savethechildren.org/publi cations/advocacy/stc_malawi_final_report.pdf. 
18 Other evaluations include the World Bank's Independent Evaluation Group’s Country Assistance 
Evaluation and CAS Completion Report.  See World Bank (2006). In March 2007, the World Bank led a Joint 
Country Programme Review (JCPR) process involving all donors in Malawi.  In 2009, the U.K.'s National Audit Office published a report on DFID's aid to Malawi (U.K. National Audit Office, 2009). Malawi WT/TPR/S/231/Rev.1 
 Page 61 
 
 
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