Malawi - Third Structural Adjustment Operation Project

Do_mment of The World Bank FOR OMCIAL USE ONLY CR. 1 -yys Z Rqept No. P-4172--4AI REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATTON TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 28.0 MILLION AND A PROPOSED AFRICAN FACILITY CREDIT OF SDR 37.4 MILLION TO THE GOVERNMENT OF MALAWI FOR A THIRD STRUCTURAL ADJUSTMENT OPERATION November 25, 1985 I Uk deemmmat kM a_rpied dknthm and ua_ y be md by redpient ony in She pcfe nc of their oUik dntl Mg combat my be hewke be dbsacieui wh Wdi BDk humlzad..  CURRENCY EQUIVALENTS (August 1985) Currency Unit = Malawian Rwacha (MI) US$1 = MK 1.80 A1K 1 = US$0.57 GLOSSARY OF ABBREVIATIONS ADMARC = Agricultural Development and Marketing Corporation EPD Economic Plan9ing Division of OPC ESCON Electricity Supply Commission INDEBANK = Investment and Development Bank of Malawi Limited KfW = Kreditanstalt fur Wiederaufbau MDC = Malawi Development Corporation MEPC = Mala'wi Export Promotion Council MTTCO = Malawi International Transport Company ODA = Overseas Development Administration of the United Kingdom OECF = Overseas Economic Cooperation Fund of Japan OPC = Office of the President and Cabinet Press (Holdings) = Press Holding Company PSIP Public Sector Investment Program SPPF = Special Project Preparation Facility USAID = United States Agency for International Development FISCAL YEAR April 1 - March 31 .~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~a  FOR OFFICIAL USE ONLY MALAWI THIRD STRUCTURAL ADJUSTMENT OPERATION CREDITS SUMMARY a/ Borrower: Republic of Malawi Amount: h/ IDA: SDR 28.0 million (US$30.0 million equivalent) African Facility: SDR 37.4 million (US$40.0 million equivalent) Terms: Standard for IDA and the African Facility Credit The credits would support the Government's structural Description: adjustment program. They follow-up a loan made in June 1981, and a credit in January 1984. The program is designed to encourage productivity and efficiency, diversify the export base and promDte exports, strengthen the Government's policy making capability, and improve the performance of development institutions. The foreign exchange provided by this credit would be used for essential imports. The Government will use the counterpart funds for development purposes. Estimated A total of about US$99.0 million equivalent including Disbursements: USS29.0 million equivalent of Special Joint Financing would be disbursed in two tranches, the first in the amount of US$50.0 million being made available for disbursement as soon as the credits become effective, and the remaining US$49.0 million after a review of second tranche release conditions in June 1986. Risks: The principal risks relate to the Government's ability to implement parts of the program in a timely fashion, and to overcome external difficulties arising from transport disruptions and fluctuations in international prices. a/ There is no Staff Appraisal Report. b/ In addition, Special Joint Financing of Y 5.3 billion (about US$22.6 million) and of DM20 million (about US$6.4 million) would be provided respectively by Japan and the Federal Republic of Germany. Bilateral assistance from USAID totalling US$15.0 million equivalent would be provided on a parallel basis. This docurnent has a restrict distribution and may be used by recipients only in the performance of their officia duties. Its contenst may not otherwise be disclosed without World Bank authorization.  DTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECONYENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON PROPOSED CREDITS TO MALAWI FOR A TIURD STRUCTURAL ADJUSThEN OPERATION 1. I submit the following report and recommendation on a proposed IDA credit of SDR 28.0 million (US$30.0 million equivalent) and a proposed African Facility credit of SDR 37.4 million (US$40.0 million equivalent) to the Government of Malawi for a Third Structural Adjustment Operation. Special Joint Financing of Y 5.3 billion (about US$22.6 mill!on equivalent) and DM 20.0 million (about US$6.4 million equivalent) would be provided by Japan and the Federal Republic of Germany, respectively. In adddition, USS15.0 million in parallel bilateral cofinancing would be provided by USAID. AR I . THE BCONONY 2. A Country Economic Memorandum, ertitled 'Malawi Economic Recovery: Resource and Policy Needs- (Report No. 5801-MAI) was circulated to the Executive Directors on October 15, 1985. Basic country data are given in Annex I. 3. Malawi is a small landlocked country in southeastern Africa with a population -f 6.6 million in 1983. With a per capita GNP of US$210, Malawi is one of the poorest countries in the world. The agricultural sector accounts for over 40 percent of GDP and 85 percent of employment. The country's main assets are a moderately fertile soil, good water resources and a climate favorable to crop production. Unlike its neighbors, Malawi has no substantial known mineral resources. Past Performance of the Economy 4. For about a decade and a half after independence in 1964, the Malawi economy displayed vigorous growth. Real GDP grew at an average rate of 5.5 percent per annum over the period 1967-79, corresponding to nearly 3.0 percent per capita. During the same period gross domestic investment increased at an annual rate of 12.5 percent, raising investment's share of GDP to 29 percent in 1979. Meanwhile, domestic savings rose from 4 percent of GDP in 1967 to 17 percent in 1979, increasing the share of investment financed from domestic resources to about 60 percent. Over the 1967-79 period, export volume grew at an annual average rate of 4.5 percent, while import volume grew at 3.5 percent. 5. This impressive growth, despite limited natural and human resources, was largely attributable to the Government's realistic economic policy, which encouraged export-oriented agricultural and agro-industrial growth. The overall policies of the Government provided an attractive  -2- environment to foreign capital and enterprise. Public enterprises were confined to a few key sectors. Relatively low tariffs and the sparing use of quantitative restrictions on imports discouraged uneconomic import substitution. A policy of wage restraint encouraged intensive practices and the expansion of agricultural estate production, and helped to keep Malawian goods competitive in international trade. External Difficulties 6. In recent years, however, the growth of the economy has been checked by: (a) a rapid rise in import prices, particularly of fuel, capital goods and intermediate goods, and swings in the export prices of tobacco, tea and sugar. which caused Malawi's terms of trade to fall by 40 percent between 1977 and 1980; (b) ir. 1980 and 1981 droughts which caused a decline in export volume arnd forced the country to import maize in large quantities, and (c) the rising cost of external transport due to increasing ocean freight charges, port congestion in Mozambique, and the disruption of rail traffic from the traditional Mozambique ports of Beira and Nacala, though which much of Malawi's external trade has traditionally passed. 7. Malawi's deficit on current account rose sharply to an average of 20 percent of GDP in 1978-80, from an average of 8-9 percent in the mid-1970s. Foreign exchange reserves declined significantly, because capital inflows did not cover current account deficits. A sharp increase in the proportion of non-concessional loans led to a rise in the debt service ratio from 7 percent in 1977 to 26.3 percent in 1981. GDP growth declined from 5.5 percent in 1979 to -1.1 percent in 1980, and to -5.2 percent in 1981. Domestic savings and investment declined significantly during this period. The Government's budgetary deficit rose from the usual 7-8 percent levels to nearly 14 percent of GDP. 8. The crisis revealed important structural weaknesses in the economy. First, Malawi is dependent on exports of tobacco, tea and sugar, the prices of which commodities are subject to wide fluctuations. Second, smallholder production growth has been slow, due largely to low producer prices. Third, the finances and management of Malawi's parastatals deteriorated. Fourth, the Government's fiscal position becnme weaker as expenditure growth outpaced revenue, and it became difficult to meet the recurrent costs of development projects financed by external aid. Fifth, formal and informal price controls weakened incentives to production in the manufacturing, service and agricultural sectors. Sixth, public administration needed strengthening if it was to deal effectively with a crisis on this scale. Government's Response to Crisis 9. To cope with these problems, the Government prepared a structural adjustment program in consultation with the Bank and IMF covering the period 1981/82 - 1985/86. This program was supported with a US$45 million SAL I loan by the Bank and by a series of stand-by arrangements and a three-year US$100 million EFF arrangement with the Fund in September 1983, followed by an SDR 55 million SAL II credit which became effective in  - 3 - January 1984. Both SAL I and SAL II, which were supplemented by a US$1 million technical assistance loan and a US$1.5 million technical assistance credit respectively, have been fully disbursed. 10. Malawi has carried out the structural adjustment program under SAL I and SAL II with considerable success, and developments in the economy since 1983 have been encouraging. After three years of stagnation, the growth of per capita income has resumed. The deficit on current account has been reduced largely because of increased world prices of tobacco and tea, and an increase in tobacco export volume. The Government's budgetary deficit as a percent of GDP has gradually decreased and the financial position of key parastatals has shown improvement. Details of recent economic developments are discussed in the section dealing with the impact of the Structural Adjustment Operations (paras. 24 to 26). 11. Malawi still faces structural constraints on growth and the need for further adjustment is apparent. The third structural adjustment operation presented in this report, iike the first two, would encourage diversification in production and exports, improve the performance of productive sectors, rehabilitate key development institutions, and improve resource mobilization and allocation in the public sector. PART II. PROGRESS ON COVERNMENT'S STRUCTURAL ADJUSTMENT PROGRAM A. First Structural Adjustment Operation 12. The weaknesses in the Malawian economy and administration, revealed by the adverse economic climate of the late 1970s called for action on several fronts to ensure that the growth of GDP per capita could be sustained without unmanageable balance of payments current account deficits. The first structural adjustment operation was designed to tackle problems in the areas of the balance of payments, prices and incomes, resource management, and institutional structure. The balance of payments was to be improved by offering higher prices for smallholder export crops, and taking measures to make the Agricultural Development and Marketing Corporation (ADMARC) more efficient. Prices and wages were to be frequently reviewed and adjusted, public utility and transport tariffs increased, and the exchange rate was to be reviewed periodically. In order to improve resource management, steps were to be taken to increase the effectiveness of the Department of Statutory Bodies in assisting public enterprises in planning and financial management. Efforts were also made to ensure an appropriate level and structure of interest rates, to increase government revenue, to strengthen the control and monitoring of domestic expenditures, and to improve the monitoring and management of public debt. An Investment Coordination Committee was to be set up to oversee public investments. Key ministries were to be strengthened and major public and private sector conglomerates reorganized. The program also called for studies in the areas of agriculture, energy, and parastatal management and finance. 13. Under the first structural adjustment operation which was launched in June 1981, the Government adjusted agricultural prices, increased some public utility tariffs, established an Investment  -4- Coordination Committee, and allocated additional funds to the agriculture sector. An energy assessment study was carried out. Steps were taken to strengthen the management of Press (Holdings), a very large semi-private enterprise, and some of its subsidiaries. However, in a number of areas progress was slow. There were delays in starting the proposed studies. Formal agreement between the Government and Press on the restructuring of the latter was slow in coming. Agricultural price policy continued to favor maize at the expense of export crops. Public enterprises continued to display poor performance. The Government was slow in adjusting their charges and tariffs. 14. These delays, combined with continuing adverse developments in the world economy, exacerbated the country's economic difficulties. The balance of payments and the budgetary position continued to worsen. As a result, IMF withheld the last two drawings under the two-year stand-by arrangement, and the Bank delayed the release of the second tranche of SAL I. Eventually, however, performance began to improve. After discussions with the Bank, the Government agreed to modify its basis for setting agricultural prices. The studies agreed in SAL I were started. The 1982/83 budget showed significant improvement. Sufficient funds were allocated to key programs, particularly in agriculture. The Government strengthened its capability to monitor external debt, and agreed to a debt service target of 20 percent. These improvements in performance made it possible for the Bank to release the second tranche of SAL I in April 1982, and for the Fund to enter into a new stand-by arrangement. 3. Second Structural Adjustment Operation 1. Second Phase of Structural Adjustment 15. Preparations for the second phase of the structural adjustment program began in June 1982, when Malawi was still confronting a depressed economy and external transport difficulties were still disrupting the country's external trade. The Government was having difficulty in making progress in a number of politically sensitive areas, including the restructuring of Press (Holdings) and in reaching internal consensus on the decontrol of domestic prices. As a result, it took longer than expected to formulate the second phase of the program. The SDR55 million SAL II credit agreement was not signed until January, 1984. 16. While SAL II was primarily intended to continue progress in the field covered by SAL I, it also branched into other areas. To improve performance in the agricultural sector, more attractive prices to smallholders and improved procurement and distribution of fertilizer were deemed to be essential. The Government committed itself to contribute to a revolving fund established unier an IDA/IFAD- supported Smallholder Fertilizer Project, and to procure and distribute fertilizer to smallholders. It also agreed to eliminate the remaining subsidy for fertilizer by 1985/86. The Government undertook a far-reaching reorganization program for ADMARC. The Government also agreed to allocate sufficient funds in the budget to meet the recurrent costs of agricultural  - 5 - projects. In order to restore the viability of the estate sector and improve its productivity, an extension management training and credit program was to be designed. The Government decided to gradually remove formal and informal price controls which were seriously hampering the industry. 17. The Government prepared a three-year public investment program which was reviewed by the Bank. It also agreed to ensure that the budget provided adequate funds for education and road maintenance, and to maintain the proportion of GDP it collected as revenue at or above the FY82/83 level. The Government also decided to take steps to improve the collection of fees and charges. In institutional strengthening, the Government was to implement the recommendations of the studies started under SAL I with a view to improving the financial and operational effectiveness of the parastatals. The Department of Statutory Bodies was instructed to review the accounts of the parastatals annually, and where needed, to recommend increases in tariffs and user charges. The Government was to take measures to strengthen the staffing of the Economic Planning Division of the Office of President and Cabinet (OPC) with a view to improving its capability for policy formulation and implementation. The process of forward budgeting was to be improved with the preparation of three-year projections for revenue and expenditures. The Government was to improve the debt monitoring system and formulate an external borrowing strategy and plan. 18. In September 1983, the IMF approved an extended arrangement (EFF) for a three-year period in the amount of SDR 100 million, to help the Government reduce inflation, the current account deficit, and the budget deficit. The program called for the implementation of measures on both the demand and the supply side. The Malawian Kwacha was devalued by 12 percent in September 1983 and tied to a basket of currencies in January 1984, with a further devaluation of 3 percent. 2. lmplementation of the Second Phase of the Structural Adjustment i ogramr 19. For the 1984/85 crop season, in accordance with the objective of shifting incentives in favor of exported commodities, price increases of 29 percent for tobacco, 17 percent for groundnuts, and 9.5 percent for cotton were effected, while the price of maize was held constant. The smallholder fertilizer subsidy, based on the cost of importing through the Mozambican ports of Beira and Nacala, was removed. Nevertheless, the Government continued to absorb the increased costs resulting from the extended transportation routes. ADMARC's management was strengthened with the recruitment of certain key staff. Capacity utilization and financial control have improved under the new management. Some progress was made towards the rationalization of ADMARC's assets through divestment and swap arrangements with MDC and Press, and a long-term investment strategv and program, based on strengthening of existing subsidiaries, was prepared. Steps were taken for setting up a credit facility to provide medium- and long-term credit to tobacco estates. However, no significant progress was made in preparing a program for management training and extension because  the expected financial support from private institutions such as the Tobacco Research Authority and Tobacco Control Commission was not forthcoming. 20. After a slow start, the number of commodities whose prices are controlled was reduced from 56 in December 1983 to 9 in September 1985. Even though the remaining items under control which include maize meal, petroleum, and fertilizer, represent a large volume of transactions, the steps taken towards price liberablization were impressive. 21. The restructuring of Press (Holdings) proved to be a lengthy process. Under SAL I and II, Press restructuring received primary attention because the poor financial health of this nominally private, large enterprise was adversely affecting the operations of a number of important institutions including the two commercial banks. The Government made some difficult decisions and launched a multi-faceted restructuring operation, as a result of which the two commercial banks operating in Malawi were also set on sound financial footing. The Press Restructuring Agreement was signed in December 1983. Soon after that, the subsidiary companies specified in the Agreement were formed and their boards were named, and new corporate guidelines were adopted. Arrangements were made to swap assets with the Malavi Development Corporation (MDC) and ADMARC. A new Companies Act, wjich enabled the Press companies to improve their debt to equity ratios by issuing convertible preferred stock, was ratified by the Parliament. The efficiency and financial position of Press companies have steadily improved under new management. 22. Progress was slower than expected in strengthening the economic planning staff of the Office of the President and Cabinet because of a freeze on the size of the civil service pending the report of a Civil Service Review Commission. There was progress, however, in the implementation of the consultant reports on Malawi Railways, ADMARC and MDC. MDC's progress under new management since May 1984 has been impressive. The company now appears to be in a position to pursue its primary objective of attracting investments to new projects, while turning over its existing investments to produce cash for new projects. A number of parastatals including Malawi Railways, the Electricity Supply Coimaission (ESCOM), Air Malawi, Malawi Housing Corporation, and Blantyre and Lilongwe Water Boards increased their tariffs to reduce their financial deficits. Some progress has been made in setting up a system for monitoring external debt. 23. The Government prepared a realistic three-year public investment program covering the 1984/85 - 1986/87 period. However, the budget presented for 1984/85 deviated from this program. Allocations for government buildings were too high, taking up about 40 percent of available counterpart funds, while counterpart funding for donor supported development projects was less than required. The projected disbursements of external funds were also unrealistically high. However, after discussions with the Bank and the Fund, the necessary adjustments were made in the program. The Ministry of Finance has prepared realistic three-year projections of revenue and expenditure. The 1984/85 budget included an  -7- increase in the import levy and the surtax rate, and the tripling of rent on leasehold land, which increased revenue as a proportion of GDP above the FY82/83 level, as the Government had targeted. Allocations to key developmental departments in the 1984/85 budget were somewhat tight but adequate. The Ministry of Finance prepared a satisfactory external borrowing plan. C. Impact of the Structural hijustueut Operations 24. The four-year period since the Government initiated its structural adjustment program is not long enough for the full effects to have become apparent. Moreover, it is difficult to separate the impact of .he program from that of other factors bearing on development. Nevertheless, it is obvious that the program has been greatly beneficial to the economy. The annual rate of growth of GDP has been impressive since 1982. Against the target of 3.4 percent annual GDP growth, in real terms GDP grew at rates of 2.5 percent, 4.4 percent and 6.8 percent, in 1982, 1983 and 1984, respectively. Preliminary projections are for a 3.3 percent GDP growth in 1985. There have been large increases in agricultural production which can be directly attributed to improved price incentives and other Government policies. Maize production increased threefold after a 67 percent price increase in 1981. Cotton production grew by 137 percent in 1984, after a price increase of 33 percent in 1983. Smallholder tobacco production rose by 107 percent in 1984. The better supply and distribution of smallholder fertilizer has also contributed to these increases of output. 25. The deficit on the balance of payments current account remained high until 1984, when it declined to only 2.9 percent of GDP compared with 12.3 percent in 1983. Thus, performance was considerably better than the EFF program target of 8.8 percent. After declining in both 1982 and 1983, the US dollar value of exports increased by 34 percent in 1984, partly because of higher tobacco and tea prices. The volume of exports increased by about 16 percent in the three-year period after 1981, very close to the 5.5 percent annual growth envisaged in the structural adjustment program. Meanwhile, exports of smallholder products rose from 28.4 percent of total exports in 1981-19B3 to 35.4 percent in 1984. The volume of oil imports has declined by about one third since 1980, in part because of the increased blending of ethanol with regular petrol. However, lower prices for tea and tobacco as well as higher external debt service are exrt-ted to increase the deficit on current account in 1985. The Government's budgetary deficit which was 15.9 percent of GDP in 1981, fell to 8.3 percent by 1984. The Government has improved its control of budgetary expenditures and is trying to improve the process of budgetary allocation. However, the deficit needs to be further reduced to ease pressure on the balance of payments. 26. The economic progress made in the past four years is all the more impressive in view of the fact that the external transport crisis has, if anything, worsened. The Government has handled this crisis well by establishing coordination mechanisms, by exploring alternate routes, and by constructing new routes and bridges with some donor support. The  relaxation of price controls has helped to improve the business climate. The rehabilitation of several key organizations including Press and MDC, once a drag on the economy, has improved their management and finances to a point where they can once again make a contribution to growth. PART III. THIRD PHASE OF THE GOVERIENT'S STRIUCTURAL ADJUlSTMEN POGRAMl A. Economic Background 27. The third phase of the structural adjustment program will. consolidate and expand the gains made during the first two phases, attack some weaknesses that have become evident, and help to sustain the growth of per capita income. Higher capital formation is needed to sustain growth of agriculture and industry. Increased flow of external resources is necessary to supplement domestic savings. In view of relatively high-levels of external debt service, it is desirable that the concessional element of external aid should increase. Detailed tables for the economic framework of SAL III are given in Annexes I, V and VI. 28. The structural adjustment program should make possible an average 3.7 percent annual GDP arowth in real terms during the 1985-90 period. This implies a relatively small increase of per capita income. Agriculture should grow at about 3.5 percent per annum. Industry is expected to grow at a little more than 4 percent annually, compared with less than 1 percent annually during the previous five years. The remaining sectors should grow at a rate of slightly under 4 percent per annum. To achieve these growth rates, fixed capital formation needs to increase from around 13 percent of GDP in 1984 to about 15.5 percent in 1990. However, even at these increased rates, it will be essential to employ capital more efficiently than in the recent past. Greater care will have to be exercised in the design of the public sector investment program. The maintenance and utilization of existing capital must also be improved. To finance increased investme-,t without excessive reliance on external savings, domestic savings will have to rise to 15 percent of GDP from 14.1 percent in 1979-84. This, in turn, will require turning the public sector into a net saver rather than a net dissaver. In order to achieve this, the budgetary deficit, which stood at 15.9 percent of GDP in 1981, and fell to about 8.3 percent in 1984/85, must be reduced still further. More careful project selection and scrutiny of recurrent expenditure will be needed to ensure fuller utilization of existing capacity and adequate funding of development projects. 29. In the recent past, balance of payment problems were eased by reducing imports, but healthy growth will call for a steady increase in imports. External debt service will also add to balance of payments difficulties. The diversification and a growth of exports will therefore be vital to the success of the structural adjustment program. With appropriate exchange rate and price policies, exports should grow at 4.9 percent in real terms annually over the 1986-90 period despite projected  -9- lower exports in 1985 and 1986. The value of total exports are projected to rise to US$466.8 million in 1990 from USS238.8 million in 1985. Tobacco exports could grow at 2.1 percent annually, and tea exports at about 3 percent. Cotton and groundnut exports are also expected to increase. Further increases in the production of new crops for export and import substitution such as wheat, sunflower and other oil seeds, guar beaus, and macadamia and cashew nuts, should help to improve the trade account. Crop diversification must be supported by improved research, a strengthening of the extension services and an expansion of credit. Manufactured exports are expected to grow at 5.1 percent annually despite transportation difficulties and slow growth in neighboring countries. The export promotion policies contemplated under the structural adjustment program should help to achieve both agricultural and industrial export targets. 30. Since 1979 imports have declined by 50 percent in volume. To sustain the projected annual GDP growth rate of 3.7 percent, imports need to expand by a minimum of 3.1 percent dur..ng the period 1986-90. This corresponds to a rise in imports (fob) from US$185.0 million in 1985 to US$299.9 million in 1990. According to these figures the trade balance will improve gradually throughout the period. Meanwhile, the deficit on the service account is expected to go up by nearly 60 percent from US$175 million in 1984 to US$285 million in 1990, mainly because of high transportation costs and increased interest charges on foreign borrowing. To limit these costs, the Government must continue to coordinate external transport and minimize non-concessional borrowing. According to these projections, the balance of payments current account deficit will be about USS110-120 million annually throughout the period. 31. Success in structural adjustment calls for a reversal of the decline in external resource transfers that began in 1981. A medimr- and long-term capital net inflow of about USS115 million annually is projected during the period 1985-90, on the basis of current and expected loan and grant commitments. The relatively high debt-service ratio of about 35 percent over the next few years will permit only limited amounts of non-concessional borrowing. After taking into account all projected flows of capital, there will remain a cumulative gap of about US$115 million over 1985-90. The Consultative Group for Malawi, which will be organized in January 1986, will seek to bridge this gap. B. Incentives and Productive Efficiency 1. Sectoral Policies 32. Agriculture. The Government will continue to rely on smallholder price incentives to increase and diversify production, encourage exports and efficient import substitution, and maintain an adequate supply of food. In determining the crop prices the Ministry of Agriculture is experimenting with a model developed with Bank assistance which traces the implications of different pricing decisions on production, incomes, balance of payments, and public finances. The Rank will continue to be consulted on smallholder crop prices.  - 10 - 33. Under a project jointly financed by IFAD and IDA, procurement and distribution of smallholder fertilizer for the 1984/85 season proceeded smoothly. Procurement arrangements for the 1985/86 season were also made well in advance. The Government continues to subsidize suallholder fertilizer to partially offset the additional cost due to the extended import routes. Despite a 21 percent price increase for the 1985/86 crop year, the subsidy remains at about 22 percent, cr around MK 10 million. The Government will also encourage the use of high-analysis fertilizer through research, training and aemonstration. Under the SAL III program, the Government will consult the Bank before announcing 1986/87 smallholder fertilizer prices. 34. Because the early reopening of the Mozambican routes is highly unlikely, the reliance on extended southern routes will continue. The Government, therefore, plans to remove the remaining subsidy on fertilizer to eliminate the burden on the budget as well as to encourage its more economic use. However, to avoid the potential advefse impact on production and incomes of a sudden fertilizer price increase, the Government will spread the removal required of subsidy reductions over a four-year period ending with the 1989/90 crop season. 35. The estate sector expanded agricultural production rapidly up until the late 1970s when they employed 50 percent of wage labor. Three estate crops, tobacco, tea and sugar, contributed over 80 percent of total exports. However, in the latter 1970s, falling prices and sharply rising costs depressed the estate sector. A large number of them continue to suffer from managerial and financial weaknesses. Because of the export potential of the estate sector, the program includes measures to encourage diversification of their production and to improve their financial and technical management. 36. The lack of access of estates to finance, particularly for medium- and long-term financing, is a major impediment to productivity improvement. Under SAL II, the Government had considered the establishment of an Agricultural Development Bank (AGRIBANK). However, a consultant's study indicated that AGRIBANK would not be a viable undertaking at this time, and the establishment of such a Bank has been postponed. Instead, the Government has worked out a pilot scheme to provide estates with long-term credit through the two commercial banks and the Industrial and Development Bank (INDEBANK). The credit scheme will be supported by the Bank under the Industrial and Agricultural Credit Project, which is being submitted to the Executive Directors at abonTt the same time as this operation. 37. If an estate credit scheme is to bear fruit it must be combined with improvements in estate management and extension services. A scheme for this purpose will be set up under SAL III at first on the tobacco estates but eventually on all estates. The sum of MK 700,000, raised from fines paid by the tobacco industry for overproduction, has been earmarked for the new scheme for which ODA of the United Kingdom is providing technical and financial assistance. The scheme is expected to be essentially self-financing in the long run from users.  - 11 - 38. Industry. Under SAL III the Government will complete the price liberalization program begun under SAL II. By the end of 1985, only a few strategic items will be subject to price control. Under SAL III, the Government will broaden the focus of industrial sector policies beyond price liberalization and will take further steps to improve the overall policy environment. The Industrial Development Act of 1964 introduced a system of industrial licensing administered by the Ministry of Trade, Industry and Tourism and empowers the Ministry to grant "exclusive protection- to new industries for five years. Currently, the licensing system based on the 1964 Act is applied liberally and no "exclusive protection' has been granted for several years. Although applications are gazetted, as required by the Act, applications are not rejected on the grounds that other firms are operating in the same field. Nevertheless, the Act creates some uncertainty on the part of prospective investors. Particularly after extensive decontrols of industrial prices, it is essential that competition among the potential investors be actively encouraged by the Government, and the industrial licensing system should not give the impression that it can be used as an instrument of protection. Under SAL III, the Government intends to review the Industrial Development Act with a view to ensuring that the Act does not provide a basis for discriminatory practices. 39. In the early 1980s a stringent foreign exchange situation led at times to refusals to allocate foreign exchange to importers of goods that were also produced domestically. To encourage efficiency in domestic industry and to achieve the objectives of the price liberalization program, foreign exchange should be available for the importation of competing products. In Malawi, because of the small market, some industries consist of only a few firms. With price decontrols, unless these firms are subjected to competition from abroad, they may be tempted to raise their prices unjustifiably. The Government will accordingly facilitate the importation of competing products to prevent the potential exploitation of the consumer and to encourage overall efficiency. 40. Transportation. External transport problems continue to be a serious drag on the economy. The cost of these problems to the economy was estimated at about US$50 million, or 20 percent cf the value of exports, in 1983. The actual cost must be higher, since this figure does not take into account the need to carry larger inventories, the loss of confidence on the part of importers from Malawi, and reluctance to invest in new ventures. Prospects for the reopening of the Mozambican routes in the near future are not encouraging and in all likelihood Malawi will continue to pay a very high price for external transport. To reduce the impact of the transport crisis on the economy, the Government set up an emergency task force which included representatives of the private sector. A Malawi International Transport Company (MITCO) was formed to facilitate freight bookings and to coordinate front and back haul trips. MITCO has been successful in dealing with these extremely complex transport problems. Malawi has already made the necessary adjustments in its shipping patterns and cannot look forward to any significant decline in transport costs through better routing. At the same time, the new Blantyre-Dar es Salaam corridor was opened in 1984 and a Northern Corridor Transportation Project, with lake and rail components, is being appraised by the Bank.  - 12 - 2. Exchange Rate Policy 41. The issue of foreign exchange allocation is closely related to the exchange rate policy of the Government. Ideally, an active exchange rate management policy removes the need for a foreign exchange allocation system, or at least minimizes it. Since Malawi tied its currency in 1984 to a basket of the currencies of its major trading partners, the Reserve Bank frequently adjusted the rate. Nonetheless the Kwacha appreciated in real effective terms on the trade-weighted basis, particularly in the latter half of 1984 and in March 1985, and the Government devalued the Kwacha by 15 percent. Under SAL III, the Government is committed to maintaining an active exchange rate policy which, coupled with appropriate fiscal and monetary policies, should virtually eliminate the need for an allocation system. Developments in the area of exchange rate management will be closely monitored in coordination with the Fund. 3. Promotion of Exports 42. While an active exchange rate management policy will help to keep Malawian products competitive in international markets, under SAL III, the Government will also take a number of steps to promote exports. Although the Malawi Export Promotion Council (MEPC), set up in 1971, was intended to provide promotional services for exporters, its staff and resources are too Limited for it to play a very effective role. The Government has already agreed with UNDP on a US$750,000 three-year project for trade promotion and export diversification. The project will strengthen the MEPC staff in the areas of export promotion policy, product and market development, and trade information services. A center to train exporters and government officials in export promotion will be established. 43. The Government will design and adopt an export promotion policy package under SAL III. Consultancy services will be available under the UNDP project. While the existing credit system adequately serves the needs of large scale exporters, small and medium scale exporters can only obtain credit if they can put up satisfactory collateral. To meet their needs and facilitate the credit demands of small and medium size exporters and to encourage the export of non-traditional products, the Government is to set up an export credit facility to provide pre- and post-shipment financing, export credit guarantee, and export credit insurance. A study financed by the Special Project Preparation Facility (SPPF) will be carried out under the supervision of the International Trade Centre of UNDP to assess needs under these headings and to recommend the requisite institutional arrangements which will be coordinated by the Reserve Bank of Malawi. 4. Changes in the Tax System 44. Tax revenues rose from 11 percent of GDP in 1973/74 to about 18 percent in 1983/84. The 1985/86 budget included three new measures to increase tax revenues: a 10 percent levy on the value of exports of tea and tobacco, a 35 percent increase in land rent, and acceleration of the payment of corporate taxes. Malawi's accomplishment in this respect is impressive in comparison with other Sub-Saharan African countries.  - 13 - However, in recent years there ha- been an excessive reliance on increase in tax rates for quick revenue. 45. Most of the rise in revenue over the last decade has come from increases in taxes on imports, in particular intermediate goods and fuel products, and to a lesser extent from increases in corporate taxation. The higher rates of direct taxation act as disincentives to saving and investment, while the taxation of intermediate inputs, whether domestically produced or imported, distort production and weaken incentives to export promotion and efficient import substitution. In addition, the ad hoc introduction of many taxes has led to an increasingly complex tax structure resulting in delays and inefficiencies in collection. 46. The Government has therefore commissioned a study of the tax system with a view to incorporating the necessary reforms. The Government's objective is to ensure that revenues are generated with minimum distortions of relative prices. This calls for: (a) broadening of the tax base and reduction of rates, (b) a shift of taxation from external trade to domestic transactions, (c) a shift of taxation from production to consumption, and (d) simplification of the tax structure and streamlining of tax administration. Such a restructuring is expected to reduce the need for new and additional tax measures each year. 47. The study will investigate the possibility of increasing taxes on domestic manufactures which are considerably lower than those on competing imports, and eliminating taxes on intermediate inputs. This removal of protective elements in taxation will complement the measures being taken under the structural adjustment program to decontrol prices and maintain a liberal foreign exchange allocation system. The Government has asked the Bank to provide technical support for the comprehensive tax study and Bank missions visited Halawi in March and June 1985. The Government has engaged three consultants under SPPF to carry out the study, which should be completed by December 1985. The Bank will work closely with the Government in the design of the revisions to be made in the tax system, which will be initiated with the 1986/87 budget. C. Public Sector Management 48. Malawi has prudently avoided building up a large central bureaucracy. It also has a relatively well trained and dedicated civil service. The Government has maintained a pragmatic approach to utilizing expatriate services and delegating responsibility to agencies and professional organizations outside the Central Government. Until the late 1970s, the administrative machinery served the needs of the country well. However, recent adverse developments have revealed some administrative weaknesses. Many of these weaknesses can be traced to inadequate personnel policies and the lack of a clear statement of development objectives and strategies. A Civil Service Review Commission was appointed to review the situation, and its report, submitted in July 1985, contains recommendations on personnel administration, training, financial and resource management, and salary structure. A committee consisting of senior government officials is now reviewing the report with a view to preparing a program of action.  - 14 - 49. Policy and planning staff need to be strengthened both in OPC and in the ministries. This could not be done under SAL II mainly because of a freeze on hiring pending completion of the Civil Service Review Commission's report. Under SAL III, the Government, with the help of consultants, will strengthen and reorganize the economic staff of OPC. The 'Government has recently merged the Economic Planning and Development Division of OPC into one unit and upgraded the ranking of the chief officer. The economic analysis staff of the Ministry of Finance will also be strengthened. 50. Better planning of public expenditure is an integral part of the structural adjustment program. The EFF program with IMF calls for a reduction of the budget deficit by cutting both development and recurrent expenditures in real terms. It is therefore all the more important for the Government to review both development and recurrent expenditures, and ensure that important projects and programs do not go unfunded. 51. The present system of preparing and presenting the budget emphasizes control and accountability, rather than performance and output. In view of the larger role now played by social and economic programs, the Covernment has decided to present the budget in a form which will make it possible to identify and analyze the cost of individual programs. A Bank consultant has visited Malawi and demonstrated in two ministries how this might be done. While the old system will continue to be in effect with the 1986/87 budget, the ministries are going to prepare supplementary tables based on this new approach. Once the potential difficulties due to inexperience with the system in the early stages are ironed out, the new system of budgetiug will gradually be installed. 52. Malawi's current economic difficulties give special importance to the preparation of a three-year public investment program as part of structural adjustment program. Development projects have to be carefully screened so that scarce resources - both external and domestic - are properly utilized. The recurrent costs of these projects have to be assessed carefully. The Government prepares three-year projections for all development expenditures to be financed through the central budget, including some parastatal investments, for which funds are channelled through the budget. Excluded are projects financed by the parastatals from their own funds, which are not significant at present. 53. The Bank has reviewed the three-year public investment program for the period 1985/86-1987/88, and found its size and project content realistic. This is a three-year rolling program which needs to be updated annually by dropping the first year and adding another year. The Bank will review the public investment program for 1986/87-1988/89 before releasing the second tranche of SAL III. 54. To provide a basis for planning revenue and expenditure beyond the current fiscal year, the Ministry of Finance prepared three-year projections under SAL II. The methodology used in these preparations was basically sound and the underlying assumptions were realistic. It is intended that such projections should be regularly prepared in future, and  - 15 - under SAL III, the Ministry of Finance will prepare three-year projections for revenue and expenditure for 1986/87-1988/89. With the help of the Bank, a debt unit was established in the Ministry of Finance under SAL II. This will enable the Ministry of Finance, in conjunction with OPC and the Reserve Bank, to prepare an improved version of the external borrowing plan. 55. Parastatal Finances. Despite some improvement in the management and finances of major parastatals, some continue to experience financial difficulties. Under SAL III, the Government aims at avoiding operational deficits in nine major commercially oriented parastatals while improving their efficiency. To this end, the debt equity structure of individual parastatals are being examined with a view to carrying out the necessary restructuring. To improve their operational efficiency, the Government intends to prepare guidelines on cost of capital from the Government, subject parastatals' project proposals to rigorous appraisal, take measures to increase revenue and, if necessary, scale down operations. 56. The Department of Statutory Bodies (DSB) is responsible for monitoring the finances and administration of parastatals, but it must strengthen its staff and improve its procedures if it is to perform this task effectively. Under SAL III, the Government will recruit new staff to DSB and will develop more effective monitoring systems. The Government is now working on the details of a time-bound plan to improve the parastatals' performance and DSB's objectives, and has asked for Bank assistance. This plan will iWe reviewed by the Bank in June 1986. 57. ADMARC, MDC, and Press Operations. Under the first two SAL programs, the Government took steps to overcome the problems faced by a number of parastatal and semi-private organizations. In particular, ADMARC, MDC. and Press (Holdings) have been reorganized, the results being more encouraging in the cases of MDC and Press than in those of ADMARC. These organizations need to continue to further strengthen their finances and management, and to increase the efficiency of their operations. 58. ADMARC faces a serious liquidity problem due to sharp falls in the export price of tobacco and, despite larger domestic production in 1985, the volume of maize exports. ADMARC has exceeded its overdraft limits with the commercial banks, and has borrowed additional sums from the Government and the Reserve Bank. This liquidity problem not only impairs its ability to market smallholder crops, but also has a serious impact on the budget and domestic credit. It is therefore essential that the Government take measures to restore ADMARC's financial health. Some of ADMARC's problems have their roots in government policy. While the Government attaches primary importance to maintaining sufficient maize stocks, there has been no study of stock requirements or of the cost of maintaining maize stocks compared with other options. ADMARC now bears the high cost of financing these non-commercial stocks. The Government will re-examine its food security policy, with special reference to the level of maize stocks necessary to meet emergencies. The cost of carrying these stocks will he borne by the Government.  - 16 - 59. ADMARC buys smallholder crops at prices set by the Government and announced before the cropping season. In turn, it sells part of this maize in the domestic market at prices set by the Government. The level at which these prices are set has an obvious bearing on ADMARC's finances. ADMARC also contributes to the fund established for the procurement and distribution of fertilizer. Under SAL III the Government will take into account ADMARC's financial health in setting snallholder and consumer prices, including maize. In principle, ADMARC will ensure that the overall crop account will give a surplus, and the deficit in any given account is minimized. 60. The Government is reviewing the role of private traders in agricultural markets. ADMARC has a monopoly of the purchase of smallholder dark-fired tobacco and cotton, and dominates the markets for other smallholder crops, especially maize. The Government is expected to take measures to encourage private traders to participate more actively in agricultural markets. 61. The diversified nature of ADMARC's activities imposes a heavy burden on its management. ADMARC's organization will be restructured with a view to allowing its management to concentrate on marketing. ADMARC'S asset rationalization will be accelerated according to a program which will be finalized by March 1986, and immediate steps will be taken for the disposal of certain assets. 62. The Government has appointed a task force representing ADMARC, the Reserve Bank, the Ministry of Agriculture, OPC, and the Ministry of Finance, to prepare an action plan for dealing with ADMARC's operational and financial problems. A Bank mission recently visited Malawi to assist the Government in the preparation of such a plan and explore the need for Bank support. The principles adopted by the comnittee on ADMARC's restructuring was reviewed by the Bank and found satisfactory. The action plan on ADMARC's restructuring will be finalized in the next two to three months. 63. MDC has made good progress toward restoring its financial viability and rationalizing its assets. In 1984, MDC improved its finances significantly, by selling assets worth 4.8 million, converting about MK 13 million in debt due to Government to equity, and arranging to repay its remaining debt. MDC has prepared a sound five-year plan and a satisfactory investment policy, and has strengthened its projects staff. The Government will continue to monitor MDC's performance and the corporation will be encouraged to play a more active developmental role, particularly in agro-industry. 64. Press (Holdings) has made significant progress under the restructuring program developed under SAL I and II and has re-established its financial viability. A new management team is performing effectively. For the year ending September 30, 1984, Press made a small after-tax profit and paid about MK 1.5 million out of profits to the Government and ADMARC under its income note obligations. Press is expected to make a considerably larger profit in 1985. However, progress in selling assets in  - 17 - order to repay the Government has been less satisfactory. The Government will monitor the corporation's progress in financial reconstruction, and will keep the Bank informed. D. Other Issues 1. Socio-Economic Impact of the Structural Adjustment Program 65. Hany elements of the structural adjustment program have a bearing on employment, income distribution, and poverty. On balance, it can safely be said that the program has benefitted the poorer people. Higher prices have encouraged the production of smallholder crops, while the domestic terms of trade have shifted in favor of the agricultural sector, so that about 75 percent of the rural population are receiving higher incomes. There is likely to have been an accompanying increase in employment. SAL III, by promoting better utilization of the agricultural estates and providing credit, management training and extension services, should further increase production and the demand for labor. Although phasing out of the remaining fertilizer subsidy over a four-year period would impose some burden on smallholders, production is not expected to be significantly affected. 66. Hitherto, mostly the urban population appears to have borne the brunt of the adjustments. The lifting of price controls has raised the prices of a number of commodities. Real wages have declined in the urban areas, as a result of the restraints on wage and salary increases. However, in the longer run, as the decontrol of prices encourages new investment and higher capacity use, pressures on prices should lessen and urban employment should increase. Under SAL III, the Government will continue with the policy of permitting the importation of goods which are also produced domestically, to keep prices down. It should be added that while price decontrols have affected the real purchasing power of the consumers, higher consumer prices should be set against the benefits of more reliable availability of supplies. 67. Under the structural adjustment program, the restructuring and improvement of the finances of the main developmental institutions and parastatals helped to expand industrial output and employment. The SALs provided resources for imports and helped to maintain the real levels of Government spending. In the absence of SAL resources, more severe foreign exchange shortages would have resulted in sharply reduced imports of machinery and equipment, and internmediate products which in turn world have curtailed production and employment. The SAL resources also helped to avoid drastic cuts in Government spending at the expense of the poor. 2. Government-Fund-Bank Relations 68. The IMF followed the 1982/83 stand-by with a three-year SDR 100 million extended arrangement (EFF) for Malawi in September 1983. Purchases were to be made quarterly, subject to satisfactory performance. During the first year four purchases were made as scheduled. Two more purchases were made during the second year. Further purchases were contingent upon a  - 18 - mid-year review scheduled for December 1984, but the review was not completed in view of emerging financial difficulties. The EFF program was reinstated in May 1985 on the basis of a significant improvement in the financial position of the public sector. However, because interruption in purchases, the size of the program was reduced to SDR 81 million and the purchases were rephased. 69. Following a mission in September 1985, the Fund informed the Government that projected 1985/86 exports would be much lower and the overall balance of payments deficit substantially larger than expected, and that the program's domestic financial objectives, including reduction of the budget deficit and banking system financing of ADMARC, were not likely to be attained, unless measures were taken to improve ADMARC's finances. Steps are being taken by the Government to deal with this problem as discussed in paras. 57-61. 70. The staff of the Bank have maintained close contact with the Fund staff working on Malawi. They have shared information and views, particularly on matters related to the SAL and EFF programs, and have informed each other on developments in these areas. The staff of the Bank and the Fund have also worked closely on issues such as the timing of the adjustment process, the levels of projected external resource transfers, and the level of imports required to support the Government's adjustment program, with a view to resolving any differences in approach. E. Su-mary of Structural Adjustment Actions 71. The Government's structural adjustment program strategy is outlined in its Letter of Development Policy (Annex IV) and the entire program is summarized in the tabulation which follows.  'R~~~~~~ !!ali5iiiffi ,Bt5sai S g ijtt- iii  V ri Pr 411 PM~ ~~~~- 11i 1111111 hUhl *:i ii ~~ii' {,id~ RItiIIi, Rh  |l 1 11111 1 I!I ,ik I I i ?t r 1 |ii, iI  - 22 - PART IV. THE PROPOSED THIRD STRUCTURAL -ADJUSTMENT OPERATION History Of The Proposed Credit 72. The structural adjustments made in Malawi since 1981 under SAL I and II have contributed significantly to improved economic performance and have provided the basis for dialogue between the Government and the Bank on a broad range of economic issues. The adjustments to be undertaken under SAL III are built on reforms and policies already initiated in such fields as smallholder producer pricing (para. 16), the phasing out of fertilizer subsidies (para. 19), the preparation of a public investment program (para. 52); the preparation of three-year revenue and expenditure projection, and an improved version of the external borrowing plan (para. 54); the decontrol of prices (para. 38); the pursuit of an active exchange rate policy (para. 41); and the rehabilitation of the key statutory bodies (paras. 55-64). 73. The difficult economic environment has exposed weaknesseses in policy and budget formulation and in organizational effectiveness. Measures to remedy these weaknesses are essential to sustained development. In particular, attention will be paid to the establishment of an estate management training and extension service (para. 37); providing term credit for estates (para. 36); export promotion and export credit (paras. 42 and 43); restructuring of the tax system (paras. 44 to 47); improved incentives and personnel administration for the civil service (para. 48); improved budgeting, policy formulation, planning and public investment programming (paras. 50 to 54). 74. On May 3, 1985, the Bank agreed to provide Malawi with US$400,000 under a Special Project Preparation Facility to finance studies in the key areas of (a) budgeting, (b) the setting up of an export financing agency; and (c) reform of the tax system. These studies would provide the technical basis for action under the proposed structural adjustment program. 75. The proposed operation was appraised in May 1985. Negotiations took place in Washington on November 6-13, 1985. The Malawian delegation was led by Mr. J.C. Malewezi, Principal Secretary, Ministry of Finance. Annex III contains a timetable of key events in processing the operation and the special conditions of the proposed credits. Policy Actions 76. The policy actions to be carried out by the Government are described in its Letter of Development Policy (Annex IV). The tabulation at the end of Part III summarizes the actions taken under SALs I and II as well as the action to be undertaken under SAL III credit. Before entering into negotiations the Government and IDA reached agreement on a three-year public investment program and on smallholder crop prices for 1985/86. The conditions of release of the second tranche of the credit are as follows: (a) agreement on smallholder prices for 1986/87, including a specific target for the removal of the fertilizer subsidy; (b) completion of the  - 23- price decontrol program; (c) agreement on the three-year public investment program for the period 1986/87-1988/89; (d) satisfactory progress in formulating an export promotion policy and setting up a credit agency; and (e) the finalization of an action plan for the rationalization of ADMARC's assets and taking measures for the disposal of identified assets. Co-financing Arrangements 77. A total of US$114.0 million would be provided to support the Government's structural adjustment program, including an IDA credit equivalent to USs30.0 million, an African Facility Credit equivalent to US$40.0 million, and Special Joint Financing equivalent to approximately US$29.0 million. The balance would consist of US$15.0 million in bilateral aid provided by USAID. 78. Special Joint Financing is to be provided by KfI, on behalf of the Government of the Federal Republic of Germany, and by OECF, on behalf of the Japanese Government. KfW will commit DM20 million (approximately US$6.4 million) to SAL III to finance a flexible list of agricultural exports (fertilizers, pesticides, veterinary drugs, etc.). Following appraisal in November 1985, it is expected that the Government of Malawi and the KfW will sign a separate Development Grant Agreement in early 1986. OECF will lend Y 5.3 billion (approximately USS22.6 million) to the Government of Malawi under a separate loan agreement which is expected to be signed in January and become effective in February 1986. 79. USAID would provide parallel co-financing. USAID, under its recently approved Economic Policy Reform Program, is providing a total of US$15 million as follows: (a) a program grant of US$12 million to be disbursed in three annual tranches subject to Government's reducing fertilizer subsidies and the use of high analysis fertilizer and (b) a technical assistance component of US$3 million to be used to increase the efficiency of agricultural marketing, arid to help the Government planning, budgeting and project implementation. In addition, ODA is expected to provide around US$3.5 million for an extension service and a management training program for the estate sub-sector. The funds would be used to finance technical assistance, vehicles and equipment. They would come from the current bilateral program. ODA is expected to appraise the scheme in December, with implementation likely to commence in the first half of 1986. Disbursement Arrangements 80. IDA (US$30 million), African Facility (US$40 million) and Special Joint Financing Credits (US$29 million). A total of US$99 million from these sources would be disbursed in two tranches. The first tranche would amount to US$50 million equivalent, of which US$20 million (US$5 million from the African Facility and USS15 million from IDA) would be available for retroactive financing from appraisal (May 23, 1985). The first tranche of USS50 million equivalent would consist of: (a) US$1 million for technical assistance from IDA, US$.4 million of which would be used to reimburse the SPPF; (b) a further US$19 million from IDA; (c) US$20 million from the African Facility; and (d) US$10 million from Special Joint  - 24 - Financing. The second tranche would be available for disbursement after a review of performance in June 1986, subject to satisfactory implementation of the overall program and the specific conditions outlined in para. 76. The disbursement of funds for technical assistance would not be subject to these conditions. 81. The proposed credit would reimburse 100 percent of the foreign exchange costs of eligible imports. The Reserve Bank would be responsible for the preparation and submission of withdrawal applications, which would be consolidated in amounts of at least US$50,000. The Reserve Bank would also process the foreign exchange applications for imports. The Reserve Bank is adequately staffed to undertake these responsibilities which it has discharged effectively in past SAL operations. Public and private importers alike will receive adequate assistance in preparing documents. 82. Except for retroactive expenditures, reimbursement would be made for eligible imports paid for after the signing of the nroposed credit. No reimbursement would be made for imports financed from other sources. Disbursements should be completed by September 30, 1987. 83. To expedite disbursements, the Reserve Bank would open two Special Accounts (Revolving Funds) - one for the IDA credit and one for African Facility and Special Joint Financing. The initial deposit would be US$5 million from IDA and US$5 million from the African Facility which represents approximately 15Z of the total amounts to be disbursed from these two sources. 84. USAID. The first of the US$4 million three annual tranches conditioned on reduction of the fertilizer subsidy was released following the announcement of a satisfactory price for 1985/86 tranches. US$3 million for technical assistance would be disbursed for the expenditures i"dicated in para. 79. Procurement Arrangements 85. IDA. Procurement would be limited to goods from Bank member countries, Switzerland and Taiwan. Both private and public sector imports would be eligible for financing. Contracts for the procurement of goods by the private sector less than US$2 million equivalent would follow normal commercial practice. Government contracts equivalent to less than US$2 million would follow Malawi Government practice, which is acceptable to IDA. All purchases, both public and private under contracts amounting to more than US$2 million would be procured through international competitive bidding. Certain commonly traded commodities may be purchased at prices quoted in organized international markets. Whatever procurement methods are used, not more than US$20 million of the IDA credit or US$20 million of the Special Facility credit would be used to finance imports in any single trade group or subgroup. Altogether, it is expected that around USS25 million would be spent on petroleum and food which would be purchased at international prIces. Expenditures for goods covered by invoices of less than US$5,000 equivalent would not be eligible for financing.  - 25 - 86. African Facility and Special Joint Financing Credits. Expenditures covered by these credits would be confined to goods produced in, or services supplied from, the territories of any Part II member of IDA, Part I members of IDA who have contributed to the African Facility and any country which enters into Special Joint Financing arrangements with IDA. Allocation of Structural Adjustment Financing 87. All of the US$114.0 million would be used to help finance general imports other than luxuries and armaments. It is estimated that eligible imports in 1986 will total about USS320 million equivalent. The proposed financing would finance about 36 percent of this amount, thus permitting rapid disbursement. Benefits 88. The principal benefit of the Structural Adjustment Program has been to correct the structural weaknesses which have retarded economic growth. The balance of payments situation has improved; more attractive prices have restored incentives and flexibility to agriculture and industry; a number of development institutions have been rehabilitated; resource allocation in the public sector has improved; and SAL-related technical assistance projects have helped to improve public resource management and rebuild public institutions. The proposed Third Structural Adjustment credit would build on and consolidate the progress achieved thus far. Risks 89. There are three risks which may affect the success of the program: a) The high cost of transport by circuitous routes has already adversely affected Malawi's exports of tobacco, maize and tea, and may make it more difficult to diversify exports. This risk is mitigated by plans to develop the lower-cost Northern Corridor through Tanzania. b) Drastic changes in the prices of Malawi's chief exports - tea, tobacco and sugar - and of its essential imports, especially fertilizer, could offset the gains from the program. The diversification of exports and the use of high analysis fertilizer should partly offset this risk. c) Some of the proposed changes in such fields as fiscal policy and procedure, economic planning and better public investment programming could meet with opposition and delay implementation. In the past, however, Government has demonstrated its willingness to undertake politically difficult action.  - 26 - PART V. BAIK GROUP OPERATIONS IN H&LAVI 90. Over the past 19 years, Malawi has received 34 IDA credits and one Special Fund credit totalling about US$463 million and eight Bank loans totalling US$99 million, of which two were on third window terms. The first Bank loan to Malawi was made on third window terms in June 1976 and the first Bank loan on standard terms in April 1977. Of the Bank Group assistance, some US$165 million (29 percent) was for agriculture, US$108 million (19 percent) for education, US$114 million (20 percent) for roads, US$98 million (18 percent) for structural adjustment, US$39 million (7 percent) for power, US$11 mi-ilion (2 percent) for water, and the balance of US$27 million (5 percent) for health, development finance, technical assistance, and urban housing. For FY86, a credit of equivalent of US$11.6 million for an Agricultural Extension and Planning Support Project has so far been approved. Documents for a US$7.8 million loan for an Industrial and Agricultural Credit Project are being submitted to the Executive Directors at about the same time as this operation. A Forestry/Wood Energy project is also scheduled to be presented to the Executive Directors during FY86. IFC's equity participations and lending commitments in Malawi total about US$25.8 million and include investments in textiles, sugar, a DFC (INDEBANK), tourism, and the manufacture of alcohol from molasses. In addition, a US$0.5 million equity subscription and US$1.8 million loan investment in the Viphya Plywoods and Allied Industries United were approved in August 1984, but are not yet signed. On September 23, 1985, an IFC investment to finance the first leasing and finance company was approved. Annex II contains a summary statement of Bank Group Operations as of September 30, 1985. Bank Lending Policy in Malawi 91. During the next five years, Bank group assistance will focus on helping Malawi to restructure its economy, especially in the areas of agriculture and transport. Emphasis will also be laid on improving administrative skills and organization of Government and other development institutions. Bank Group assistance will also address the pressing needs in the area of human resource development, including the issue of Malawi's rapid population growth, over three percent annually, among the highest in the world. Future lending in health and population, water supply, transportation and education will support Government investments in these sectors. 92. The Bank Group's economic and sector work will continue to provide a basis for discussions with the Government on key development issues. Studies prepared or funded by the Bank already completed or to be completed in the near future are as follows: (a) crop diversification, land utilization, livestock, smallholder irrigation, management and training, and an updated Sector Memorandum; (b) external transport; (c) problems of population growth; (d) financial sector; and (e) institutional aspects of development. A Public Sector Investment Review has recently been carried out. Together with the above mentioned studies, it provides a basis for helping Malawi develop appropriate sectoral strategies and medium term development programs.  - 27 - 93. The recently circulated Country Economic Memorandum focuses on the resource requirements for sustained growth. A Consultative Group meeting is planned in January 1986 to improve donor coordination and mobilize additional resources needed to support Malawi's adjustment process. The CEM planned for FY87 will concentrate on the long term constraints on Malawi's economic development. Disbursements 94. The levels of disbursement for Malawi, including program support were as follows: in 1982, US$70.1 million; in 1983, US$33.2 million; in 1984, US$58.2 million; and in 1985, US$46.4 million. The rate of disbursements of Bank Group loans and credits to Malawi has been generally satisfactory. During the period FY80-85, the disbursement rate on loans and credits to Malawi (excluding non-project lending) averaged about 26 percent per annum, significantly higher than the Eastern Africa Regional average of 19 percent and the Bank-wide average of about 21 percent. External Public Debt 95. By the end of 1984, Malawi's external public debt outstanding and disbursed totalled US$741 million. In late 1982, Malawi rescheduled both its official and commercial debts. Otherwise its debt servicing, including repayments to the IMF, would have amounted to over US$130 million, equivalent to over 40 percent of exports of goods and services. This compares tb a level of about 10 percent in the mid-1970s. A second year of rescheduling was agreed to in October of 1983, keeping the debt service ratio to 26.7 percent in 1983. The Government has indicated that it will not be asking for any further rescheduling, and the debt service ratio is expected to remain at about 40 percent in 1985 and 1986 before falling to less than 25% in 1990. Because of this high debt service ratio, commercial bank borrowing will have to remain sharply curtailed and the balance of payments gap should be closed by concessionary financing. Similarly, constraints on local borrowing would indicate the need for local cost financing to be provided by donors. Project Implementation 96. The implementation of Bank projects continues to be generally good, as emphasized in the Audit and Project Completion Reports- However, the third National Rural Development Program (NRDP)project and the Fifth Highway project have been delayed by inadequate budget provision and management shortcomings. These problems are being addressed satisfactorily by the Government. PArr VY. __y___ATION 97. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association. 98. I am also satisfied that the proposed African Facility Credit would comply with Resolution No. IDA 85-1 adopted on May 21, 1985 by the Executive Directors of the Association.  - 28 - 99. I recomend that the Executive Directors approve the proposed credits. A. W. Clausen President Attachments Washington, DC November 25, 1985 * =X~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~  - 29 - ANNEX I Page 1 of 7 DEFINMONS OF SOCAL INDICATORS Noter Alho ite data are drawn from sousm gnrally judged tbe meat outhoritatve nd rdiable. it hould aso be noted that tty may not be internanornly cmparale because of the lack of stndardized defintion and concepts uaod by different countrier in collecting the data. Th data are. nonethel. taeful to desmbe order of manitude. indicate trendar and chaize certain major difren between countieL he reference group are aII the ame country group or tie subjoet country nd (2) a country group with nomewhat hhr ave* ineome than the country group of the subet country (except or -High Income Oil Expoters group where -Middle Inwome North Afria nd Middle East is chosen ba&mse of strongr secio.cultural afnitie). In the refernce goup data the av*a ame population weighted rithmeLic mea for eac indiat and shown, only when majority ofthe counmries in a group hs data ror that indictuo Since the coverge ofcountrie.mong the indictl depends on the avilability ofda nd is not uniform. caution must he exercied in rdating average f one indicator to anther These averaes a only uefl in emnpaig te value ofone indicao at a time among the country and reference groups. AREA (thousand sq.km.) Crude Nht Rate (per theuaud)-Number of live biths in the year Tota--Total surface area comprising land area and inland waters per thiousand of mid-year population; 1960, 1970. and 1983 data. 1960. 1970 and 1983 data. Crude Dth Rate (per JJuksadj-Number of deaths in the year Agrcastiral-Estimate of agricultural area used temporarily or per thousand of mid-year population; 1960. 1970, and 1983 data. permanendy for crops. pastures. markct and kitchen gardens or to Grem Rgpraducie Rate-Average number of daughters a womnan lie fallow. 1960. 1970 and 1982 data. will bear in her normal reproductive period ir she experiences present age-specific fertility rateis usually five-year averages ending GNP PER CAPITA (USS--GNP per capita estimates at current in 1960. 1970, and 1953. market prices, cakulaed by same conversion method as World Ihidl Muuiu-Acps.n, Assai (themads)-Annual num- Bwsk Atlas (1981483 basis): 1983 data. ber ofacceptors ofbirth-control devices under auspices of national ENERGY CONSUMPTION PER CAPITA-Annual apparent family planing program. consumption of commercial primary energy (coal and lignite. Fedy Psuming- rs (percew ef rd we)-The percen- petroleum. natural gas and hydro-. nuclear and geothermal elec- tage of married women of child-bearing age who are practicing or tricity) in kilograms of oil equivalent per capita: 1960, 1970. and whose husbands are praiciug any form of contraception. Women 1982 data. of child-bearing age are generaly women aged 15-49. although for some countries contraceptive usage is measured for other age POPULATION AND VITAL STATISTICS groups. Tetl PopeiAtiom MideYer (thomuds)-As or July i; 1960. 1970. FOOD AND NUTRITION and 1983 data. Urla_ tP.leati.u (percent of atotd)-Rzstio Of urban to total ,EIAre ofFoodPredcldir Fer Cpiyfta (1969-71 = 10)-Index orper nopulation; Popdlifferent dpvefinitions of urban areaoa teompar- capita annual producton of all food commodities Production population; different definitions of urban areas may affec compar- exdudes aninal feed and seed for agriculture. Food commodities ability of data among countries: 1960.1970. and 1983 data. include primary commodities (cg. sugarcane instead or sugar) - Projections which are edible and contain nutrients (e.g. coffee and tea are ,Ppuation in year XW 20-The projection of population for 2000. ctcuded); they comprise cerals, root crops, pulse oil seeds, made for each economy separately. Starting with information on vegetables, ftuits, nuts, sugarcane and sugar beet livestock, and total population by age and sex. fertility rates, mortality rates, and livestock products. Aggregate production of each tounry is based international migration in the base year 1980. these parameters on national average producer price weights, 1961-65, 1970. and were projected at five-year intervals on the basis of generalized 1982 data. assumptions until the population became stationary. Fe Cpita S*r qfCaris (percent efseqadeates)-Comput- Stationary popuktion-ls one in which age- and sni-specific mor- ed from calorie equivalent of net food supples available in country tality rates have not changed over a long period, while age-specific per capita per day. Available supplies comprise domestic produc- fertility rates have simultaneously remained at replacement level tion, imports less exports, and changes in stock. Net supplies (net reproduction rate= 1). In such a population. the birth rate is exclude animal feed. seeds for use in agriculture. quantities used in constant and equal to the death rate. the age structure is also food processing, and losses in distribution. Requirements were constant. and the growth rate is zero. The stationary population estimated by FAO based on physiological needs for normal activity size was estimated on the basis of the projected characteristics of and health considering environmental temperature, body weights, the population in the year 2000. and the rate of decline of fertility age and sex distribution of population, and allowing 10 percent for rate to replacement level. waste at household level 1961. 1970 and 1982 data. Population Monwenan-ls the tendency for population growth to Fr Capit Supply o_f brewiE (grmns per duy)-Protein content of continue beyond the time that replacement-level fertility has been per capita net supply of food per day. Net supply of food is defined achkieved: that is. even after the net reproduction rate has reached as above. Requirements for all countries established by USDA unity. The momentum of a population in the year t is measured as provide for minimum allowances of 60 grams of total protein per a ratio of the ultimate stationary popultion to the population in day and 20 grams of animal and pulse protein. of which 10 grams the year r. given the assumption that fertility remains at replace- should be animal protein. These standards.are lower than those of ment level from year t onward. 1985 data. 75 grams of total protein and 23 grams of animal protein as an P _p i Dmty averge for the world. proposed by FAO in the Third World Food Per sqkrn.-Mid-year population per square kilometer (100 hec- Supply; 1961. 1970 and 1982 data. tares) of total area; 1960. 1970, and 1983 data. Fr Capoia Poei Supply From AtmME!and Paise--Protein supply Per sqkm. agrinthural land-Computed as above for agricultural of food derived from animals and puises in grams per day; 196145. land only. 1960. 1970. and 1982 data. 1970 and 1977 data. Popuatiom Age StrIctare (percent)-Children (0-14 years). work- CMd (ages 1-4) Death Rate (per thousand)-Number of deaths of ing age (l5-64years). and retired (65 years and over) as pacentage children aged 1-4 years per thousand children in the same age of mid-year population: 1960. 1970. and 1983 data. group in a given year. For most developing countries data derived Populain Givrw Rate (prcentrl-total-Annual growth rates of from life tables: 1960. 1970 and 1983 data. total mid-year population for 1950-60. 1960-70. and 1970-83. HEALTH Popubion Growth Rate (perct)--rrbau--Annual growth rates isfe Expectny at Birth (yews)-Number of years a newborn of urban population for 1950-60. 1960-70. and 1970-83 data. infant would live if prevailing patterns of mortality for all people  - 30- ANNEX I Page 2 of 7 at the time of of its birth were to say the same throughout ib life: ApM-:teacher Ratio - primary, and secondary- Total students en- 1960 1970 and 1913 data. rolled in prinary and secondary lewvs divided by numbers of 1sf. Martahy Rate (per rhawanO-Number of infants who die teadici in the corresponding lewis. before teaching one year of age per thousand live births in a given year; 1960 1970 and 1983 data. CONSUMPTION Aem to Sm lr * (pc qf psIldoJfi i r Cars (per thawed pqpnlarionj-Passenger cn corn- ruml-Number of people (total, urban, and rmral) with reasonable prise motor cars seating kl than eight persons: excludes ambul- as to safe water upply (indudes treated surface water or ances, heases and military vehicla. untreated but uncontananoted water such as that from proteted RAio Reckneivr (per thousand pepubalu -All types of receivers borholcs. springs and sanitary wels) as percentages of their respec- for radio broadcats to general public per thouand or population: tive populationu In an urban arcs a public fountain or standpost excludes un-licensed receivers in countries and in years when located not more than 200 meters from a house may be considered rgisttion of radio ts ws in effect data for mcent years may as being within reasonable at of that house. In rural areas not be comp radb since most countaes fbolished rcensingm reasonable ac would imply that the housewife or mnembers of the housebold do not have to spend a disproportionate pan of the day TVReelts (per trhesmodp.pulsia)-TV recevers for broadcast in fetching the family's water neds. to general public per thousand population; exludes unlinsed TV receivers in countries and in years when registration of TV sets was Accs Ie Ezrera Dispsl 4ceu ef pep_-td.a urban, in r ud rual-Number of people (total urban, and rural) served by m . acreta disposal as percentages of their respective populations. AksWf CfCircVJON (per thaurmfpopulostbu-Shows the aver- Excmeu disposal may include the colleion and disposal. with or age circulation of 'daily geneal intes newspaper." defined as a without treatment. of human exereta and waste-water by water- priodical pubication devoted primarily to reording genal news. borne systems or the uo of pit privies and similar installations. It is considered to be 'daily" if it appears at least four times a week. Aftpm per Pdysiciar-lbpulation divided by number of prac- Ciauesa Amami Aneadmwe per Caia per Yar-Based on the tising physicians qualified from a medical school kt univeniity level. number of tickets sold during the year. induding admissions to PAp.lei per Hmrsiu Pe>n.-ftpulation divided by number of drive-in cinemas and mobile units. practicing male and female graduate nurss. assistant nurses, practical nurses and nursing auxilianes. LABOR FORCE hpwltu per Hospita Red-mi,. wham, and rm'-Ppulation Tarot Labr Fac (thtmdfl_-Economically active persons. in- (total urban. and rura) divided by their respective number of cluding armed forces and unemployed but excluding housewives, hopitalbeds available in public and private, general and students. etc.. covering population of all ages. Definitions in hospitals and rehabilitation centers. Hospitals are etbnishments various countries are not comparabk 1960, 1970 and 1913 data. permanently staffed by at leas one physician. Establishments prov- fae (parcenv)-Fecnale labor force as percentage of total labor iding principally custodia care are not included. Rual hospitals. force. however, include health and medical centers not pennanently staffed Agrcakue (percew-Labor force in fanring. forestry, hunting by a physician (but by a medical assistant nurse, midwife, etc.) and fishing as percentage of total labor rorce 1960, 1970 and 1980 which offer in-patient accommodation and provide a linited range data. of medical Facilities. Indutry (percenJ)-Labor force in mining, construction, manu- Adusiaws per Hespil Red-Total number of admissions to or facturing and dectricity, water and gas as percentage of total labor discharges from hospitals divided by the number of beds. forwr 1960. 1970 and 1980 data. lwkicipada RAte (p_ecek-ra4 uncle amdjkmmrli-a pation HOUSING or activity rates are computed as totaL male, and fne labor force Ar5c ow qf Houehd (porous per hUJensuldj-roial uren, as percentages of total male and ermale population of all ages avid sl-A household consists of a grup of individuals who share respectivdy. 1960. 1970, and 1983 data. These are based on ILO's bving quarters and their main meals. A boarder or lodger nay or partcipation rates reflecting age-sex structureofthe populaton. and may not be induded in the household for statistical purposes. lon time trend. A few estimates are from national sourcn Ave INurmber of Prses pr Romw-mroal, rham, -ad rurl- Eicouodr Dependency Rark-Ratio of population under 15. and Aveage number of persons per room in all urban. and rural 65 and over. to the working age population (those aged 15-64). occupied conventional dwellings. respectively. Dwellings exclude non-pennanent strctures and unoccupied parts. INCOME DlSTRIBLMlON Pqercene fDr De-us wit Ellectricisy-rcral, am, ca rural- Peene of TOWal Disposablk lue (both i cash ad hind)- Conventional dwellings with electricity in living quarters as percen- Accruing to percentile groups i households ranked by total house- tage of total. urban. and rural dwellings respectively, hold income. EDUCATION POVERTY TARGET GROUPS A4ed Euroluenr Ratos The following estimites are very approximate measures of poverty Prniary saed - total, male and fea-Cr total. mk and leveis. and should be interpreted with considerable caution. femak enrolmuent of all ages at the primary levd as percentages of Estimaed Absolute Poewry Incoe Lee (US1 per capi*a)-urbau respective primary school-age populations. While many countries and rura-Absolute poverty income level is that income lvel consider primary school age to be 6-11 years, others do not. The below which a minimal nutritionally adequate diet plus essential differences in country practices in the ages and duration of school non-food requirements is not affordable. are reflected in the rtios given. For some countries with universal Enmured Reaive fovrty lcoe Level (USS per capiia)-_rbar education. gross enrollment may cxceed 100 percent since some ad r*ral-Rural relative poverty income level is one-third of pupils are below or above the country's standard primary-school average per capita personal income of the country. Urban klvel is age derived from the rural level with adjustment for higher cost of Secondary school - total. nik and fenak-Computed as abovc living in urban areas. seowndary education requires at least four years of approved pri- Eirmted Popxlto b elow Absolute Povet las Level (per- mary instructionc provides general. vocationaL or teacher training cent j-rbam aid rura- Percent of population (urban and rural instructions for pupil usualy or 12 to 17 years or agr, correspond- who are absolute poor." enc courss are generally exduded. Vocational Enroiheni tpercent of seenwrry)-Vocational iostitu- Comparative Analysis and Data Division tions include technical, industrial. or other programs which operate Economic Analysis and Projections Department independently or as departments of secondary institutions. June 1985  - 31 - ANNEX I T A 3 L L A Page 3 of 7 1fi411 _ ~- soCUs xmxlcauu nra inle NMRhUhmn oae Wdza*SI 'MT (onsr amcm sTz) Lb m90t ACme LOW -no AmCA uzues INWNo n90etk j-isaTb Semi or ArA AMCOa I. oF lAUUA 1wA C2sonAso W. no tOTaL U.55 ERICULIURL 37.9 39. 3 6.7 7 CPU cli toCo) .. .. 230.0 235.8 1M3 CILOCUAM OF OL EqALUIT) .. 35.0 46.0 62.3 561.5 POEMS STRUL UTATISUC PiOULATlOHIDLUA1 (TUUSANS) 3529.0 4513.0 6625.0 URBAN onaTriou (0 oF TOTAL) 4.4 6.4 11.1 20.1 32.0 rOUIATIOI rsroNsM POPuLnATIOS K 1Y11 200 (HILL) 11.4 SATIONcARY iOPULAflOU (PMLL) 36.0 POPLTIOU 313111 2.0 POrULATM nITT 3 sq. R1. 29.6 38.1 55.9 33.2 65.1 i 11 SQ. s. I. LUAW 93.1 114.3 154.1 112.0 12 POPUIALTIWl SC STRUICII CZ) 0-14 ns 65.5 46J 47.1 64.0 45.6 15-G& in 52.0 50.8 68.9 50.8 53.5 653 AM AVZ 2.4 2.4 4.0 2.9 2.7 POPULAT10O mRm RATE CE) tOTAL 2.0 2.5 3.0 2.8 2.9 DRI 6.3 6.2 7.0 6.4 5.1 caUD BIRTH RmAn CPR THeUS) 5X.0 56 54.0 472 *7.0 Cano DUAH RCTE CPU I05) 29.7 23.0 23.0 17.8 15.0 0ROSS 5PUFOUCTOll RAU 3.8 3.8 3.8 3.3 3.2 FAULT PLANU ACoCET. AMAL (TrOUs) 0s53 (2 or ASRED I .. .. 1.0 fc 3.3 6.4 jrm or rao mm. Pas cAprA (1969-71-100) 90.0 91.0 96.0 83.3 B2.9 rF cAinA SUPPLY or CALORIKS (Z Olr r5UpIiI) 91.0 99.0 99.0 87.7 96.3 -mnn,s (Cum Prs DA) 62.0 71.0 68.0 51.9 55.4 OF YIWCU *5DI AM PULSE 13.0 19.0 19.0 /c 16.7 16.5 CIILD (AtZS 1-4) DEM MU 59.7 50.3 36.0 23.1 16.6 LlU EXPlCt. AT UIE (ClAS) 36.3 0.0 *4.2 47.3 52.0 [51ST MIL. RE (rEM saCs) 207.0 193.5 164.0 119.5 IDEA SSS T0 SCAE WATE (Rio,) TOAL .. .. 1.0 Id 27.1 42. DUIM .. .. 77.0 7T 63.5 67.5 RURAL .. .. W.0l; 19.3 35a A:C33 TO CRt D015osAL (S O POPULATIbN) TOTAL .. .. 33.0 /d 26.5 28.9 URAa 0. IO. 7i 65A 57.7 RURAL .. .. Ui.O77 20.8 20.7 -POPULATION PER ms[cun 36380.0 38630.0 40990.0 27901.7 1171.7 POP. PER 33N5 P53tS0 1320.0 If 9050.0 3 o30.07T 330. 2459.8 rTOA 390.0 650.0 740.0 /. 1273.6 961.1 0U3I3 120.0 If L60.0 80.0 71 426.2 368.J IDEAL