## The Government of Malawi has finalized its third annual progress report (APR)

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---

### Overview of the APR process and timing
- APR covers Malawi’s Poverty Reduction Strategy (MPRS) for the period July 2004 to December, 2005.
- The APR was completed in February 2006 and formally circulated to the Boards of the World Bank and the IMF in April, 2006.
- Malawi’s fiscal year runs from July 1st to June 30th.
- Although the MPRS expired in mid-2005, the authorities still used the policies and strategies in it as a basis for formulating the 2005/06 budget.
- The Malawi Growth and Development Strategy (MGDS) is the successor to the MPRS; the MGDS is due to be submitted for final Cabinet approval at end-August 2006. The 2006/07 budget that was recently presented in Parliament was guided by the draft MGDS.
- The first year of MPRS implementation was 2002/03; a progress report was submitted to the Executive Boards of the IMF and the World Bank on October 10, 2003. The second APR was submitted to the Executive Boards in June 2005.

### Participation, transparency, and reporting gaps
- Findings on participation and alignment:
  - Government aligned PRSP processes further with national planning and reporting and continued extensive consultation with civil society and the development community.
  - Reviews have become central to Malawi’s policy formulation process.
  - Participation from the private sector and parliamentarians in APR preparation was minimal.
- Staff recommendations:
  - Future reviews should ensure greater participation by the private sector and key members of parliament.
  - Future reviews should include annual targets for all sectors against which reported achievements can be evaluated.
  - The APR should more explicitly outline how its findings will help improve implementation of the next phase of the government’s poverty reduction strategy.

### Macroeconomic performance and risks
- Positive developments:
  - Macroeconomic performance improved under the Staff Monitored Program during 2004/05, paving the way for approval of a new PRGF arrangement in August 2005.
  - Authorities were broadly successful in enforcing fiscal discipline through 2004/05 and the first half of 2005/06.
- Challenges and shortcomings in APR coverage:
  - The APR’s macroeconomic discussion focused mainly on budget execution and lacked a broader discussion of macroeconomic performance and future objectives.
  - A forward-looking discussion of macroeconomic objectives for the remainder of 2005/06 and for 2006/07 is absent; staffs understand forward-looking policies will be discussed in the MGDS.
- Specific macroeconomic issues during 2005/06:
  - Severe food crisis following a significant dry spell that adversely affected the 2004/05 crop, imposing severe strain on budgetary resources and leading to higher expenditures in the second half of 2005/06.
  - Exchange rate management inadequacies: the exchange rate was kept artificially overvalued for an extended period, putting pressure on external reserves and resulting in accumulation of private external payment arrears on imported goods and services.
  - Foreign exchange shortages and persisting arrears on import payments contributed to allowing the exchange rate to depreciate and elimination of arrears on import payments.
  - To contain inflation, the Reserve Bank of Malawi withdrew excess liquidity following reductions in the liquidity reserve ratio.
- Program targets and outcomes:
  - Program performance under the PRGF through end-December 2005 remained broadly satisfactory.
  - All quantitative targets agreed under the PRGF for end-June 2006 are likely to have been met except the performance criterion on domestic borrowing and the indicative target on discretionary spending, largely due to the higher food security expenditure.

### Progress in poverty reduction and PPEs
- Poverty levels and data:
  - Using the first Integrated Household Survey (IHS1), the poverty headcount in 1997/98 was 54.1 percent.
  - According to the second Integrated Household Survey (IHS2) conducted in 2004/05, 52.4 percent of the population is still living in poverty, which amounts to 6.3 million Malawians.
  - APR conclusion: poverty remained high over the implementation period of the MPRS.
- Findings and recommendations on PPEs and monitoring:
  - PPEs received their budgeted resources timely and fully, with resources partly coming from Heavily Indebted Poor Country (HIPC) Initiative savings.
  - Staffs commend authorities for resource protection but recommend an evaluation of the effectiveness of PPEs to assist with prioritization and scaling up of the most effective PPEs.
  - Given IHS2 and the MGDS, the government should embark on an evaluation of the effectiveness of PPEs to better monitor impacts on the poor.
  - Future APRs should include an analysis of the consistency of Malawi's poverty reduction targets with those of the Millennium Development Goals (MDGs).

### Sectoral progress and policy-specific recommendations
- Pillar 1 — Sustainable pro-poor growth:
  - Agricultural inputs and credit:
    - MPRS strategy includes expanding credit (through Savings and Credit Cooperatives (SACCOs)) and through Public Works Programs (PWP).
    - SACCOs were formed based on farmers’ cooperatives and associations and the number of farmers accessing inputs through the Targeted Input Program (TIP) was increased.
    - Staffs recommend poverty and social impact analyses be conducted to evaluate whether programs improving access to inputs and credit are having their intended impact.
  - Irrigation schemes:
    - Achievements: distribution of treadle pumps, excavation of canals, installation of motorized pump based schemes, rehabilitation of sprinkler irrigation schemes and dams.
    - Staffs recommend assessment of the impact and performance of the diverse irrigation technologies used.
  - Mining:
    - Steps taken to promote small-scale mining: training in techniques and mineral processing, facilitated access to loans, mining policy review, inventory update.
    - Staffs recommend future reports provide more details on the specific types of minerals that offer the greatest prospects.
- Pillar 2 — Human capital development:
  - Education:
    - Actions: in-service teacher training facilities constructed, guidelines for deployment of teachers from urban to rural areas prepared, more secondary schools built, university intake substantially increased through parallel programs, loan trust fund introduced for disadvantaged pupils, steps taken to reduce tertiary education reliance on subvention.
    - Staffs note significant inequities persist in the education system and urge authorities to redouble efforts to eliminate disparities.
  - Health and Central Medical Stores (CMS):
    - Actions: procurement and distribution of new ambulances to all district health offices and central hospitals; radio communication equipment installed in most districts; Ministry of Health embarked on a six year emergency training program and doubled intake in training institutions; salary top-up scheme introduced; reforms at CMS including rolling out delivery from regional medical stores to districts.
    - Staffs welcome efforts but recommend a more detailed discussion of progress in improving CMS independence and note that past progress has been slow.
- Pillar 3 — Improving quality of life of the most vulnerable:
  - Fertilizer program change:
    - Since 2005/06, government discontinued the free TIP in favor of a targeted input price subsidy program.
    - APR notes the new program is still beset with problems of targeting.
    - Staffs observe the change to a voucher subsidy is regressive: the poorest farmers may be unable to pay for the subsidized fertilizer, and urge policies to protect the most vulnerable.
    - Footnote: A Poverty and Social Impact Analysis conducted by the Fiscal Affairs Department concluded that the current voucher-based fertilizer scheme is not very successful in targeting benefits to intended recipients and recommended increased focus on smallholder productivity, better targeting by offering fertilizer instead of cash, and more involvement of the private sector.
  - Food and Nutrition Security Policy:
    - APR indicates finalization of the Food and Nutrition Security Policy and establishment of nutrition sentinel surveillance data sites in every district.
    - Staffs recommend the APR should have presented key features of the new policy and noted any departures from MPRS nutrition strategies.
- Pillar 4 — Good governance:
  - Public sector reform and IFMIS:
    - Integrated Financial Management Information System (IFMIS) introduced after several failed attempts; expected to improve financial management and expenditure control.
    - Staffs suggest APR should have highlighted risks ahead given past hitches in rolling out IFMIS.
  - Parastatal reform and privatization:
    - APR omitted a comprehensive review of parastatal reform; recent actions such as privatization of Malawi Telecommunications Limited, restructuring of the Agricultural Development and Marketing Corporation (ADMARC), liquidation of Malawi Development Corporation, and failed attempts to privatize Air Malawi should have been reviewed.
  - Public procurement and anti-corruption:
    - Activities undertaken by the Anti-Corruption Bureau included training, workshops, and public awareness campaigns.
    - Office of director of public procurement established and standard bidding documents of international standards have been prepared.
    - Staffs recommend a detailed update on progress in reforming the public procurement system and identification of additional constraints to effective functioning.

### Cross-cutting issues: gender, HIV/AIDS, environment
- Gender:
  - APR outlines mainstreaming gender issues, reducing gender-based violence, and promoting a gender-sensitive legal environment.
  - Staffs recommend future APRs include specific actions to enhance women’s participation in decision making at various levels.
- HIV/AIDS:
  - APR indicates progress in sensitizing the young to HIV/AIDS-related issues.
  - Staffs recommend future progress reports be more comprehensive in outlining measures to improve quality of life of those already infected and to mitigate the economic and social impact of HIV/AIDS as envisaged in the MPRS.
- Environment:
  - APR notes progress in strengthening legal and institutional framework: revision of the National Environmental Plan and the Environmental Management Act.
  - Compliance problems: most new developers do not comply with Environmental Impact Assessment (EIA) requirements because licensing authorities do not usually refer these to the Department of Environmental Affairs.
  - Staffs recommend APR indicate specific steps to ensure licensing authorities and developers comply with the law.

### Monitoring, evaluation, and suggested improvements
- Staffs’ evaluation of APR content and utility:
  - APR focuses on presenting achievements related to priority MPRS activities, and in some cases compares achievements to targets set for the year; such comparisons are limited and could be expanded.
  - The APR would have greater value if it outlined how findings will help improve implementation of the next phase of the poverty reduction strategy.
- Recommended actions for future APRs:
  - Include annual targets for all sectors and explicit evaluations of achievements against those targets.
  - Provide forward-looking macroeconomic objectives for the remainder of the current fiscal year and the coming fiscal year.
  - Conduct and present poverty and social impact analyses for major programs (e.g., input access, credit programs, TIP/voucher scheme).
  - Evaluate effectiveness of PPEs and the consistency of poverty targets with MDGs.
  - Provide detailed updates on parastatal consolidation, public procurement reform, and progress in IFMIS roll-out.
  - Present key features of new policies (e.g., Food and Nutrition Security Policy) and specific steps to enforce environmental and EIA requirements.
  - Ensure greater participation by private sector and parliamentarians in review processes and report explicitly on measures to enhance women’s participation and on interventions for those living with HIV/AIDS.

### M&E system: progress and gaps
- Findings:
  - A needs assessment of M&E capacity constraints in local assemblies was carried out during the review period.
  - Following assessment recommendations, the process of recruiting district M&E officers was initiated and consultants were engaged to prepare training manuals for the officers.
  - Beyond the recruitment of M&E officers, the APR gives no indication of what remains to be done to make the system fully operational.
- Policy recommendations (staffs’ emphasis):
  - Use the preparation of the new Malawi poverty reduction strategy as an opportune time to introduce a strong M&E system where goals are translated into operational plans and indicators are identified to allow monitoring of progress in individual activities as well as toward higher level goals.
  - Elaborate linkages between planning, budgeting, accounting, and the policy review process.

### APR presentation and reporting quality
- Findings:
  - Improvements noted in how progress implementing the MPRS is presented in the APR compared with prior reporting.
  - The current APR focuses on presenting achievements that result from implementing priority policies contained in the MPRS, in line with last year’s JSAN recommendation.
  - In some areas, the APR presents outputs achieved against targets for the year.
- Policy recommendations (staffs’ advice):
  - Apply the current APR’s achievement-vs-targets approach to all areas covered by future APRs.
  - Future APRs should provide a summary of all the recommendations.
  - Ensure private sector and parliamentarians also participate in the review process.
  - Indicate the extent to which progress reporting is being used to provide transparent information on implementation of the MPRS to key domestic and external stakeholders.

### Risk assessment and mitigation
- Findings:
  - The APR did not assess risks to the strategy.
  - Identified risks to be assessed in future APRs include:
    - the impact of a potential deterioration in the fiscal stance,
    - an increase in poverty rates,
    - limitations in the government's institutional capacity to implement the strategy.
- Policy recommendation:
  - Upcoming APRs should assess these risks and outline measures to mitigate them.

### Comprehensive review of the MPRS (2002/03 – 2004/05)
- Findings from the government’s comprehensive review:
  - The review covered the three year period of implementation (2002/03 – 2004/05) and was separate from the APR assessed in this JSAN.
  - The review process was highly participatory, involving government institutions, civil society, the private sector and the development community.
  - The review candidly finds that despite some efforts to implement MPRS policy priorities, poverty levels in Malawi have not changed.
  - Targets expected to be achieved at the end of the three year period in various sectors were missed to a large extent because of lack of realism about availability of financing and implementation capacity.
- Agreed lessons (staffs):
  - Need to set up institutionally embedded processes to ensure budgets are clearly linked to the strategy.
  - Although budget formulation guidelines state line ministries should budget only on the basis of MPRS priorities, vetting of budget submissions is still not rigorous enough.
  - Management needs to use M&E systems as a management tool to ensure timely action to remove constraints where progress is lagging.

### Successor strategy: MGDS
- Facts:
  - A successor strategy, the MGDS, takes into account new information from the 2006 Poverty and Vulnerability Assessment (PVA) and incorporates improvements based on lessons from the comprehensive review.
  - The MGDS covers the period 2006/07 – 2010/11 and includes an explicit results framework.
  - The MGDS was prepared through a participatory process and was discussed at Cabinet on May 30, 2006.
  - Cabinet adopted the strategy in principle, subject to the finalization of a human resource and capital needs assessment.
  - The government intends to formally adopt the strategy soon.

### Conclusion (staffs’ judgement)
- Findings and commendations:
  - The government should be commended for preparing an APR that staffs judge to be a significant improvement over previous APRs.
  - Staffs note the improved focus on achievements related to priority actions outlined in the MPRS and commend the authorities for preparing the APR in a timely manner.
- Final recommendations (reiterated):
  - Ensure broader participation in future reviews (including private sector and parliamentarians).
  - Indicate how progress reporting is used to provide transparent information to key domestic and external stakeholders.

*Source: _cr06339 - 26. The APR outlines progress made in developing a functioning national*

### 1. The Government of Malawi has finalized its third annual progress report (APR)

### The Government of Malawi has finalized its third annual progress report (APR)

### Overview of the APR process and timing
- APR covers Malawi’s Poverty Reduction Strategy (MPRS) for the period July 2004 to December, 2005.
- The APR was completed in February 2006 and formally circulated to the Boards of the World Bank and the IMF in April, 2006.
- Malawi’s fiscal year runs from July 1st to June 30th.
- Although the MPRS expired in mid-2005, the authorities still used the policies and strategies in it as a basis for formulating the 2005/06 budget.
- The Malawi Growth and Development Strategy (MGDS) is the successor to the MPRS; the MGDS is due to be submitted for final Cabinet approval at end-August 2006. The 2006/07 budget that was recently presented in Parliament was guided by the draft MGDS.
- The first year of MPRS implementation was 2002/03; a progress report was submitted to the Executive Boards of the IMF and the World Bank on October 10, 2003. The second APR was submitted to the Executive Boards in June 2005.

### Participation, transparency, and reporting gaps
- Findings on participation and alignment:
  - Government aligned PRSP processes further with national planning and reporting and continued extensive consultation with civil society and the development community.
  - Reviews have become central to Malawi’s policy formulation process.
  - Participation from the private sector and parliamentarians in APR preparation was minimal.
- Staff recommendations:
  - Future reviews should ensure greater participation by the private sector and key members of parliament.
  - Future reviews should include annual targets for all sectors against which reported achievements can be evaluated.
  - The APR should more explicitly outline how its findings will help improve implementation of the next phase of the government’s poverty reduction strategy.

### Macroeconomic performance and risks
- Positive developments:
  - Macroeconomic performance improved under the Staff Monitored Program during 2004/05, paving the way for approval of a new PRGF arrangement in August 2005.
  - Authorities were broadly successful in enforcing fiscal discipline through 2004/05 and the first half of 2005/06.
- Challenges and shortcomings in APR coverage:
  - The APR’s macroeconomic discussion focused mainly on budget execution and lacked a broader discussion of macroeconomic performance and future objectives.
  - A forward-looking discussion of macroeconomic objectives for the remainder of 2005/06 and for 2006/07 is absent; staffs understand forward-looking policies will be discussed in the MGDS.
- Specific macroeconomic issues during 2005/06:
  - Severe food crisis following a significant dry spell that adversely affected the 2004/05 crop, imposing severe strain on budgetary resources and leading to higher expenditures in the second half of 2005/06.
  - Exchange rate management inadequacies: the exchange rate was kept artificially overvalued for an extended period, putting pressure on external reserves and resulting in accumulation of private external payment arrears on imported goods and services.
  - Foreign exchange shortages and persisting arrears on import payments contributed to allowing the exchange rate to depreciate and elimination of arrears on import payments.
  - To contain inflation, the Reserve Bank of Malawi withdrew excess liquidity following reductions in the liquidity reserve ratio.
- Program targets and outcomes:
  - Program performance under the PRGF through end-December 2005 remained broadly satisfactory.
  - All quantitative targets agreed under the PRGF for end-June 2006 are likely to have been met except the performance criterion on domestic borrowing and the indicative target on discretionary spending, largely due to the higher food security expenditure.

### Progress in poverty reduction and PPEs
- Poverty levels and data:
  - Using the first Integrated Household Survey (IHS1), the poverty headcount in 1997/98 was 54.1 percent.
  - According to the second Integrated Household Survey (IHS2) conducted in 2004/05, 52.4 percent of the population is still living in poverty, which amounts to 6.3 million Malawians.
  - APR conclusion: poverty remained high over the implementation period of the MPRS.
- Findings and recommendations on PPEs and monitoring:
  - PPEs received their budgeted resources timely and fully, with resources partly coming from Heavily Indebted Poor Country (HIPC) Initiative savings.
  - Staffs commend authorities for resource protection but recommend an evaluation of the effectiveness of PPEs to assist with prioritization and scaling up of the most effective PPEs.
  - Given IHS2 and the MGDS, the government should embark on an evaluation of the effectiveness of PPEs to better monitor impacts on the poor.
  - Future APRs should include an analysis of the consistency of Malawi's poverty reduction targets with those of the Millennium Development Goals (MDGs).

### Sectoral progress and policy-specific recommendations
- Pillar 1 — Sustainable pro-poor growth:
  - Agricultural inputs and credit:
    - MPRS strategy includes expanding credit (through Savings and Credit Cooperatives (SACCOs)) and through Public Works Programs (PWP).
    - SACCOs were formed based on farmers’ cooperatives and associations and the number of farmers accessing inputs through the Targeted Input Program (TIP) was increased.
    - Staffs recommend poverty and social impact analyses be conducted to evaluate whether programs improving access to inputs and credit are having their intended impact.
  - Irrigation schemes:
    - Achievements: distribution of treadle pumps, excavation of canals, installation of motorized pump based schemes, rehabilitation of sprinkler irrigation schemes and dams.
    - Staffs recommend assessment of the impact and performance of the diverse irrigation technologies used.
  - Mining:
    - Steps taken to promote small-scale mining: training in techniques and mineral processing, facilitated access to loans, mining policy review, inventory update.
    - Staffs recommend future reports provide more details on the specific types of minerals that offer the greatest prospects.
- Pillar 2 — Human capital development:
  - Education:
    - Actions: in-service teacher training facilities constructed, guidelines for deployment of teachers from urban to rural areas prepared, more secondary schools built, university intake substantially increased through parallel programs, loan trust fund introduced for disadvantaged pupils, steps taken to reduce tertiary education reliance on subvention.
    - Staffs note significant inequities persist in the education system and urge authorities to redouble efforts to eliminate disparities.
  - Health and Central Medical Stores (CMS):
    - Actions: procurement and distribution of new ambulances to all district health offices and central hospitals; radio communication equipment installed in most districts; Ministry of Health embarked on a six year emergency training program and doubled intake in training institutions; salary top-up scheme introduced; reforms at CMS including rolling out delivery from regional medical stores to districts.
    - Staffs welcome efforts but recommend a more detailed discussion of progress in improving CMS independence and note that past progress has been slow.
- Pillar 3 — Improving quality of life of the most vulnerable:
  - Fertilizer program change:
    - Since 2005/06, government discontinued the free TIP in favor of a targeted input price subsidy program.
    - APR notes the new program is still beset with problems of targeting.
    - Staffs observe the change to a voucher subsidy is regressive: the poorest farmers may be unable to pay for the subsidized fertilizer, and urge policies to protect the most vulnerable.
    - Footnote: A Poverty and Social Impact Analysis conducted by the Fiscal Affairs Department concluded that the current voucher-based fertilizer scheme is not very successful in targeting benefits to intended recipients and recommended increased focus on smallholder productivity, better targeting by offering fertilizer instead of cash, and more involvement of the private sector.
  - Food and Nutrition Security Policy:
    - APR indicates finalization of the Food and Nutrition Security Policy and establishment of nutrition sentinel surveillance data sites in every district.
    - Staffs recommend the APR should have presented key features of the new policy and noted any departures from MPRS nutrition strategies.
- Pillar 4 — Good governance:
  - Public sector reform and IFMIS:
    - Integrated Financial Management Information System (IFMIS) introduced after several failed attempts; expected to improve financial management and expenditure control.
    - Staffs suggest APR should have highlighted risks ahead given past hitches in rolling out IFMIS.
  - Parastatal reform and privatization:
    - APR omitted a comprehensive review of parastatal reform; recent actions such as privatization of Malawi Telecommunications Limited, restructuring of the Agricultural Development and Marketing Corporation (ADMARC), liquidation of Malawi Development Corporation, and failed attempts to privatize Air Malawi should have been reviewed.
  - Public procurement and anti-corruption:
    - Activities undertaken by the Anti-Corruption Bureau included training, workshops, and public awareness campaigns.
    - Office of director of public procurement established and standard bidding documents of international standards have been prepared.
    - Staffs recommend a detailed update on progress in reforming the public procurement system and identification of additional constraints to effective functioning.

### Cross-cutting issues: gender, HIV/AIDS, environment
- Gender:
  - APR outlines mainstreaming gender issues, reducing gender-based violence, and promoting a gender-sensitive legal environment.
  - Staffs recommend future APRs include specific actions to enhance women’s participation in decision making at various levels.
- HIV/AIDS:
  - APR indicates progress in sensitizing the young to HIV/AIDS-related issues.
  - Staffs recommend future progress reports be more comprehensive in outlining measures to improve quality of life of those already infected and to mitigate the economic and social impact of HIV/AIDS as envisaged in the MPRS.
- Environment:
  - APR notes progress in strengthening legal and institutional framework: revision of the National Environmental Plan and the Environmental Management Act.
  - Compliance problems: most new developers do not comply with Environmental Impact Assessment (EIA) requirements because licensing authorities do not usually refer these to the Department of Environmental Affairs.
  - Staffs recommend APR indicate specific steps to ensure licensing authorities and developers comply with the law.

### Monitoring, evaluation, and suggested improvements
- Staffs’ evaluation of APR content and utility:
  - APR focuses on presenting achievements related to priority MPRS activities, and in some cases compares achievements to targets set for the year; such comparisons are limited and could be expanded.
  - The APR would have greater value if it outlined how findings will help improve implementation of the next phase of the poverty reduction strategy.
- Recommended actions for future APRs:
  - Include annual targets for all sectors and explicit evaluations of achievements against those targets.
  - Provide forward-looking macroeconomic objectives for the remainder of the current fiscal year and the coming fiscal year.
  - Conduct and present poverty and social impact analyses for major programs (e.g., input access, credit programs, TIP/voucher scheme).
  - Evaluate effectiveness of PPEs and the consistency of poverty targets with MDGs.
  - Provide detailed updates on parastatal consolidation, public procurement reform, and progress in IFMIS roll-out.
  - Present key features of new policies (e.g., Food and Nutrition Security Policy) and specific steps to enforce environmental and EIA requirements.
  - Ensure greater participation by private sector and parliamentarians in review processes and report explicitly on measures to enhance women’s participation and on interventions for those living with HIV/AIDS.

*Prepared by staffs of IDA and the IMF as a Joint Staff Advisory Note on the APR covering July 2004 to December, 2005.*

### 26. The APR outlines progress made in developing a functioning national

### 26. The APR outlines progress made in developing a functioning national monitoring and evaluation (M&E) system.

### M&E system: progress and gaps
- Findings:
  - A needs assessment of M&E capacity constraints in local assemblies was carried out during the review period.
  - Following assessment recommendations, the process of recruiting district M&E officers was initiated and consultants were engaged to prepare training manuals for the officers.
  - Beyond the recruitment of M&E officers, the APR gives no indication of what remains to be done to make the system fully operational.
- Policy recommendations (staffs’ emphasis):
  - Use the preparation of the new Malawi poverty reduction strategy as an opportune time to introduce a strong M&E system where goals are translated into operational plans and indicators are identified to allow monitoring of progress in individual activities as well as toward higher level goals.
  - Elaborate linkages between planning, budgeting, accounting, and the policy review process.

### APR presentation and reporting quality
- Findings:
  - Improvements noted in how progress implementing the MPRS is presented in the APR compared with prior reporting.
  - The current APR focuses on presenting achievements that result from implementing priority policies contained in the MPRS, in line with last year’s JSAN recommendation.
  - In some areas, the APR presents outputs achieved against targets for the year.
- Policy recommendations (staffs’ advice):
  - Apply the current APR’s achievement-vs-targets approach to all areas covered by future APRs.
  - Future APRs should provide a summary of all the recommendations.
  - Ensure private sector and parliamentarians also participate in the review process.
  - Indicate the extent to which progress reporting is being used to provide transparent information on implementation of the MPRS to key domestic and external stakeholders.

### Risk assessment and mitigation
- Findings:
  - The APR did not assess risks to the strategy.
  - Identified risks to be assessed in future APRs include:
    - the impact of a potential deterioration in the fiscal stance,
    - an increase in poverty rates,
    - limitations in the government's institutional capacity to implement the strategy.
- Policy recommendation:
  - Upcoming APRs should assess these risks and outline measures to mitigate them.

### Comprehensive review of the MPRS (2002/03 – 2004/05)
- Findings from the government’s comprehensive review:
  - The review covered the three year period of implementation (2002/03 – 2004/05) and was separate from the APR assessed in this JSAN.
  - The review process was highly participatory, involving government institutions, civil society, the private sector and the development community.
  - The review candidly finds that despite some efforts to implement MPRS policy priorities, poverty levels in Malawi have not changed.
  - Targets expected to be achieved at the end of the three year period in various sectors were missed to a large extent because of lack of realism about availability of financing and implementation capacity.
- Agreed lessons (staffs):
  - Need to set up institutionally embedded processes to ensure budgets are clearly linked to the strategy.
  - Although budget formulation guidelines state line ministries should budget only on the basis of MPRS priorities, vetting of budget submissions is still not rigorous enough.
  - Management needs to use M&E systems as a management tool to ensure timely action to remove constraints where progress is lagging.

### Successor strategy: MGDS
- Facts:
  - A successor strategy, the MGDS, takes into account new information from the 2006 Poverty and Vulnerability Assessment (PVA) and incorporates improvements based on lessons from the comprehensive review.
  - The MGDS covers the period 2006/07 – 2010/11 and includes an explicit results framework.
  - The MGDS was prepared through a participatory process and was discussed at Cabinet on May 30, 2006.
  - Cabinet adopted the strategy in principle, subject to the finalization of a human resource and capital needs assessment.
  - The government intends to formally adopt the strategy soon.

### Conclusion (staffs’ judgement)
- Findings and commendations:
  - The government should be commended for preparing an APR that staffs judge to be a significant improvement over previous APRs.
  - Staffs note the improved focus on achievements related to priority actions outlined in the MPRS and commend the authorities for preparing the APR in a timely manner.
- Final recommendations (reiterated):
  - Ensure broader participation in future reviews (including private sector and parliamentarians).
  - Indicate how progress reporting is used to provide transparent information to key domestic and external stakeholders.

*Source: _cr06339 - 26. The APR outlines progress made in developing a functioning national*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2006/_cr06339.pdf_