afrol News, 28 January - The European Union (EU) today approved a euro 70 million grant to maintain and improve Malawi's transport sector. As a sign of trust, the large grant was given as a loosely defined budget support.
Today, a new programme supporting Malawi's transport sector was signed in Lilongwe over a total amount of grant funding of euro 70 million by the Minister of Finance, Ken Kandodo, and the EU Ambassador to Malawi, Alexander Baum.
"The funding will notably help to reduce Malawi's transport costs and thereby contribute to economic growth and poverty reduction," according to a statement forwarded to afrol News by the EU delegation in Lilongwe.
The EU grant would "contribute to the improvement of Malawi's transport sector by supporting the maintenance of the existing road network and by providing adequate capacity building. The EU will also help the Malawi government to develop a multi-modal transport framework with a view to attracting funding from other development partners and the private sector," according to Ambassador Baum.
As a novelty in Malawi, the EU for the first time is granting a sector budget support to the Southern African country. This means that the EU as a donor will have less control over how the funds are spent, leaving it up to Malawian decision-makers to define concrete projects within the programme.
A budget support grant from the EU signals that this main donor has gained new trust in Malawi authorities, along with several bilateral European donors and the US. Only some years ago, corruption scandals involving development aid funds caused several donors to downscale their programmes in Malawi.
However, the EU statement makes it clear that the donor will maintain some control over how the grant will be used. Funds are to be spent after "policy dialogue between the Malawi government, development partners involved in the transport sector, civil society, and the private sector."
Also, the full grant will not be disbursed at once, but over four years, with the EU being able to assess the programme implementation from year to year. New funds would only "be released after a positive review of the transport sector by the Malawi government together with development partners, civil society, and the private sector."
Not only does the new transport sector grant represent greater donor trust in Malawi authorities, it also indicates that development aid volumes for Malawi are rising. 2010 was already a record year for EU development aid to Malawi, according to its Lilongwe mission, and grants in 2011 could become even greater.
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