Malawi : Mobilizing Long-Term Finance for Infrastructure
Malawi has a large infrastructure gap, which is beyond what the government can afford. Over the period of two decades (1998-2017), the total public investment in Malawi averaged 4.18 percent of GDP per year while in the energy and water and sanitat...
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| Language: | English |
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World Bank, Washington, DC
2021
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| Online Access: | http://documents.worldbank.org/curated/en/140581613025278823/Full-Report http://hdl.handle.net/10986/35138 |
| Summary: | Malawi has a large infrastructure gap,
which is beyond what the government can afford. Over the
period of two decades (1998-2017), the total public
investment in Malawi averaged 4.18 percent of GDP per year
while in the energy and water and sanitation sectors alone,
a similar level of investment, about 4 percent of GDP
annually, will be required to meet the growing
infrastructure demand. At the same time, the fiscal space
has been decreasing as evidenced by the growing public debt,
total public debt increased from 28 percent of GDP in 2007
to 63 percent of GDP in 2019. In this context, Malawi needs
to make well though-out choices in prioritizing its
investment program, improve the efficiency of infrastructure
planning and implementation, and crowd-in financing from
both foreign and domestic private investors. The report
argues that the preconditions for enabling the needed
transformation exist. Improvements in the macro-economic
environment in the past five years makes private investment
more possible, although in the short-term, the COVID-19
pandemic will have a negative impact as risk aversion
increases. The regulatory framework for public-private
partnerships (PPPs) is in place and further evolving, and a
large PPP in the energy sector (about $1 billion) is
currently under development. Domestic long-term investors
(pension funds and life insurance companies) have been
rapidly accumulating long-term funds in the past few years
(especially after regulatory reforms to introduce a
mandatory pension system) and are looking for long-term
investment opportunities. The report proposes that the
Government of Malawi (GoM) undertakes reforms to improve the
fiscal space and in turn increase infrastructure investments
through its own resources and encourage the role of the
private sector in the financing of infrastructure. More
specifically, the GoM can (a) improve the efficiency of the
public investment management framework and integrate it with
the PPP framework, (b) improve the efficiency of
infrastructure delivering state-owned enterprises, (c)
advance the PPP program by allocating resources to develop
the needed capacity, and (d) deepen the domestic long-term
finance market by availing long-term liquidity facilities to
catalyze bank lending to infrastructure, issuing regulations
to expand the range of long-term finance instruments and
vehicles, and introducing a program of transaction testing,
piloting, and market sounding to systematically link supply
and demand side of the infrastructure finance, among others. |
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