FIDE COPY Report No

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FIDE COPY Report No. AF-68a

Public Disclosure Authorized This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized

CURRENT ECONOMIC POSITION

AND PROSPECTS

MALAWI Public Disclosure Authorized

November 20, 1967 \ Public Disclosure Authorized

Africa Department /0 CURRENCY EQUIVALENTS

Currency Unit - Malawi Pound (ML)

US$1 = ME 0. 357 US$ 1 million = ML 357, 143 ME 1= US$ 2.80 ME 1 million = US$2, 800, 000 This report was prepared by a Mission which visited Malawi in IMay-June 1967, consisting of Messrs. John A. Edelman, Paul Chen-Young,

Attila Karaosmanoglu and John Scott. TABLE OF CONTENTS

Page No. BASIC DATA i

SU1MARY AND CONCLUSIONS iv

I. RECENT ECONOMIC DEVELOPIENTS 1

Introduction 1 Trends in Production 2 Exports 5 Imports and National Expenditure 5 Capital Inflow and. Domestic Savings 7 Trends in Public Sector Finance 8 Monetary Developments and the Overall Financial Situation 12

II. DEVELOPIJENT PROBLEMS AND PROSPECTS 14

Introduction 14 The M4ain Productilre Sectors 16 .Agriculture 16 Manufacturing and Mining 18 Invisible Earnings Prospects 19 Summary of Output and Exports Prospects 20 The Main InfrastrTLctural Sectors 21 Transport 21 Power 22 Education and Health 22 Housing and Government Building 23 Overall Investment Prospects 23

III, PROSPECTS FOR NATIONAL EXPENDITURE AND FINANTCE 25

National Expenditure, Savings and Imports 25 The Outlook for Public Saving and Finance 26 The Need for Local Currency Financing 31 The Overall Outlook for External Finance and the Terms of Aid 32

IV. STATISTICAL APPENDIX Tables 1 - 32A

Map of Malawi BASIC DATA ON THE MAIAWI ECONOMY

AREA Including lakes 45,747 sq. miles Land area 36,448 sq. miles Iand suitable for cultivation 20,491 sq. miles

FOPUIATION Mid-1966 Total in country 4,042,412 Migrant labor working abroad 270,000 Ilon-African population 17,926 Estimated annual average growth rate 3 percent Urban population (as percentage of total population) 5 percent 1955 1960 1966

Density of population per square mile 77 90 111 Per square mile of land suitable for cultivation 137 161 197

GROSS DOYIESTIC PRODUCT Real Growth Rates % £M

1954-61 1961-64 1964-66 1966

Gross domestic product at factor cost 4.6 1.2 12.6 69.7 Monetary sectors 6.1 -0.4 19.5 41.0 Subsistence 3.0 3.0 3.0 28.7

Per capita GDP $52

DISTRIBUTION BY BRANCH % 1955 1960 1964 1966

Commercial smallholder agriculture 5.6 6.2 7.4 8.6 Estate agriculture 8.9 8.8 5.6 5.7 Manufacturing, construction and utilities 7.8 9.7 8.3 11.0 Transport and communications 4.1 4.8 4.5 6.2 Other monetary sectors 19.6 23.4 25.3 27.2 Monetary economy 46.o 52.9 51.1 58.7 Subsistence economy 54.0 47.1 48.9 41.3 INVESTMENT AND SAVINGS (percent of GDP at market prices) 1964 1966 Gross investment 7.7 20.2 public fixed 6.0 9.5 private fixed 4.3 8.0 stock changes -2.6 2.7 Gross domestic savings -2.0 2.6 Gross national savings (as percentage -1.2 1.8 of GNP at market prices)

RESOURCE GAP

As a percentage of investment 126.6 86.8

FINANCE OF GROSS INVESTMENT (percentage of groas investment) National savings -20.0 8.6 Public -73.3 -15.2 Private 53.3 23.8 Balance of payments 120.0 91.4

MONEY, CREDIT AND PRICES M4id-67 Annual increase % DEid-65 - Mid-66 Ni d-66 -

Total money supply 19.7 11.2 IIoney 19.6 11.0 Quasi-money 22.3 17.7

Bank credit, outstanding to private sector 28.9 30.4

CONSUMER PRICE INDICES (January) 1962 1963 1964 1965 1966 1967 8 High income index 100 102.5 108.4 111.1 .. 11 .9(April) Low income index ...... 101.4 96.9 100 PUBLIC SECTOR OPERATIONS (percentage of GDP at current market prices)

1962/63 1964 1966

Central Government

Current receipts 12.1 12.9 14.9 Current expenditure 22.8 20.0 19.5 Current savings -10.7 -7.1 -4.6 Development expenditure .. 4.1 7.8 External assistance 15.5 12.0

Government Enterprises

Current savings .. 1.7 1.7 Development expenditure .. 2.5 2.4 External assistance .. 1.0 0.8

Total Public Sector

Current savings .. -5.4 -2.9 Development; expenditure .. 6.6 10.2 External assistance .. 16.5 12.8

BAIIACE OF PAYMENTS

£ m.

1960 1964 1966

Exports .. 12.1 15.6

Ile rchandise 9.3 11.0 13.7 Non-factor services 1.1 1.9

Imports 17.8 28.7

Merchandise 11.4 13.5 23.8 Non-factor services 4.3 4.9

Balance on Goods and Services .. -5.7 -13.1

Net Factor Income Payments .. +0.3 -0.7

Deficit (on current account excluding transfers) .. -5.4 -13.8

Total net transfers received .. 6.1 6.5

Private .. -O.6 0.3 Government .. 6.7 6.2 (iv)

EXTERNAL TRADE 1960 1964 1966 las percentage of GDP at factor cost) Mlerchandise exports 18.0 19.9 19.7

Merchandise imports 22.4 25.9 38.6

Concentration of merchandise exports 79 69 66 -(tea and tobacco as percentage of total)

1954/57 - 1962/65 1964-66 Annual average growth rate Mqerchandise exports 63 11.6 Mlerchandise imports 2:7a/ 32.7 aL/ 1957-64

INTERNATIONYLL RESERVES 1965 1966 l'otal value £M 9.9 7.3 Nionths' imports of goods and services 6.7 3.1

I1MF POSITIOT Quota $14 11.25 11.25 Drawings - gross nil nil

EXTERNAL PUBLIC DEBT l'otal debt outstanding $M December 1966 Nlet of undisbursed 69.8 Including uidisbursed 90.6 Debt service ratio (1966 debt service as percentage of exports of goods and services) 9.6 (v)

Summwry and Conclusions

1. Since its Independence in 1964, Malawi's growth in output and investment has been impressive. During the three years 1965-67, total production has averaged one-third above the level of the previous three year period. This is explained partly by improved weather for agriculture, but mainly by improved political conditions following an uneasy situation 'which characterized the period just prior to and just after Independence. With the resolution of these difficulties, confidence of the private sector recovered sharply during l965, while expanded government develop- rent efforts helped to evoke a substantial increase in response from the farmers. Total investment recovered from a low point of 8 percent of GDP Ln 1964 to a peak of 20 percent in 1966, reflecting both important swings in inventories and a large rise in private and public fixed capital formation. During 1967 the economic situation has been less buoyant than the iprevious two years, but the main dynamic elements continue to be in evidence.

2. Nevertheless, the basic situation of Malawi remains quite difficult. Despite large increases in per capita income in the past three years, the level remains among the lowest in the world -- around $55 per head. No large mineral resources are available for quick exploitation. One-fourth of the male labor force is employed outside the country, but it is doubtful that any large expansion can be achieved in this source of employment over the long term. The main potential for growth lies in agriculture where the volume of commercial output has grown by six percent annually over the past decade, with a marked acceleration in recent years. Even here, an important long-run problem is posed by the relationship between the size of' the population, which is growing at around 3 percent annually, and the comnparatively modest amount of good farming land which still remains uncultivated. However, there are good possibilities for increasing yields. There is also a potential for expansion of the very small manufacturing sector, mainly for import substitution, but possibly also for export in some lines, Moreover, some prospects exist for expanding external earnings from tourism and transit trade. These possibilities, together with the progress actually achieved in the recent past, suggest that Malawi can maintain a healthy rate of economic expansion in the years ahead. Assuming that efficient administration is maintained, export growth of around 7 percent annually would seem feasible over the next decade, while total output could well expand at a 6 percent rate.

3. However, to achieve such growth rates will require continued large amounts of external aid and prudent economic management by the Malawi Government, particularly of external aid and of its limited domestic resources, including its foreign assets. There are indications that the latter were being utilized during 1966 and 1967 at rates which cannot be sustained for long without leading to foreign exchange difficulties.

4. With domestic savings averaging only about 2 percent of GDP during 1965 and 1966, the high rate of investment in those years led to a current balance of payments deficit corresponding to about 17 percent of GDP. During 1965, the deficit was more than covered by public foreign grants and loans, and foreign exchange reserves rose to the equivalent of (vi) over 4 months' imports of goods and services. However, in 1966 a decline in external assistance was accompanied by a large increase in use of local f'inancial resources including large borrowings from the banking system, with the result that exchange reserves dropped by about f2.7 million, or over one-quarter the end 1965 level. In 1967, gross investment is likely to be somewhat lower than last year partly because of a shortfall in the public development program, but mainly because of an expected reduction in the large stocks of groundnuts which were accuuiulated during 1966. However, national savings are also expected to fall because of an increase in the public sector's current deficit. This will probably mean that there will be no net improvement in total foreign assets this year in spite of contin- uied public inflows at the 1966 level and the exceptional receipts of Y2.4 million which will be received this year from the sale to Portugal of certain railway assets in Mozambique.

5alawi has long had a deficit in its current government account. P?rior to its Independence, this was financed by the federal government, whose current transfers reached a peak of around 12 percent of GDP in 1963. Since then, the United Kingdom has provided support for the budget on a declining scale, and good progress has been made in reducing the deficit, mainly as a result of rapid increases in revenue which have risen from less than 13 percent of GDP in 1964 to 16 percent in 1967. The decline in total public savings in 1967 is the result of reduced surp:Luses from government enterprises which, during 1964-66, offset about one-third of the government's deficit. This year, the enterprises total surplus w:ill be reduced by about half because losses are being suffered for the first time in years by the Farmers Marketing Board, the main purchasing and selling agent for smallholder crops. This was the result partly of unexpected declines in export prices for maize and certain tobaccos, and partly of increased producer prices and poor quality controls on some crops during the 1967 season. However, an improvement is expected in this situation during 1968.

6. Continued progress should be possible in reducing Malawi's current 'budget deficit. Assuming a growth in monetary GDP of around 7.5 percent, which seems feasible, current revenue growth of ovsr 9 percent would appear to be attainable on the basis of proposals for new tax measures now under consideration. At the same time, it should be possible to hold current expenditure growth to less than 6 percent, if sufficient restraint is maintained with respect to non-essential public services. This pattern would make it possible for Malawi to eliminate its dependence on budget support within the next decade. However, it is evident that if the basic requirements of public recurrent support for development activity are to be maintained at an adequate level, it will be difficult to achieve this goal in much less than 10 years. Thus, there is little prospect of any central government savings being available for investment finance for some time to come.

7. Yet an increase in the public sector development effort over the next few years would seem desirable and feasible. Indeed, the Government has drawn up tentative plans for a very large expansion in development spending during 1968-70. The draft program calls for an average outlay in this period of over 114.() million, as compared with an average of just about E7.0 million in 1966 and 1967. This program appears too ambitious. (vii)

Even if the necessary finance could be raised, the program is almost certainly too large to be implemented in an efficient fashion, given the physical bottlenecks it would create, and the limitations of administrative and technical capacity.

8. In practice, external finance is not likely to be available in this period for some of the major projects in the program, the main one being the new capital, for which annual outlays of about fl.8 million are tentatively projected. On the other hand, there is at present a pipeline of over E5.0 million of committed but unspent external resources for development, and negotiations are at an advanced stage for loans which might result in fairly firm commitments of another L25.0 million during the next 6 months. The main possibilities are: general development assistance from the United Kingdom, which has been averaging about E2.5 million annually but which might rise somewhat in the future; IDA projects for roads and agriculture totalling E7.0 million; U.S. assistance for a road project of about f2.0 million, and assistance from Germany and Denmark at perhaps 12.0 million each for projects in transport, agriculture and industry. In addition, a 14.5 million loan from Japan is being negotiated for a railway project. Furthermiore, it may be possible for Malawi to obtain other commitments over the next several years. Nevertheless, given the delays in implementation which are probable even for the projects now under negotiation, it does not seem likely that disbursement of external finance for development could average much more than 18.0 million over the next 3 years, as compared with an average of less than Z4.0 million in 1966 and 1967. With a maximum allowance of around L2.8 million annually likely for local finance, this would permit a total program of no more than 133.0 million in the 3-year period, or twenty five percent less than the Government's tentative program, but 60 percent higher than the recent annual rate. Assuming private fixed investment maintains the relatively high level of about 16.0 million achieved in 1966, a public program of this magnitude would mean an increase in the overall rate of fixed investment to around 19 percent of GDP by 1970, as compared with a recent average of 16 percent.

9. The availability of domestic financial resources to support such a program involves important questions of financial policy. The Govern- ment's draft projections for local finance call for average outlays of over E3.1 million. However, it is difficult to see how this could be managed without a further substantial use of exchange reserves during the period. Given continued coverage of the current budget deficit by external grants, it is estimated that Malawi could afford a domestic contribution to development of no more than I2.4 million annually in the next few years without requiring a significant further use of external assets. This assumes achievement of FMB's surpluses averaging about 20.35 million during the next few years, and surpluses of the other government enterprises (after amortization) averaging about fl.75. It also assumes that annual borrowings from the banking system of about Wo.65 million would be possible without competing unduly with the private sector or putting pressure on reserves, and that local resources of around Mo.6 million on the average could be raised outside the banking system. To the extent that the government's current budget deficit is not fully covered by external (viii) grants, the total of local resources available for development finance would be correspondingly reduced. Moreover, the allowance for government borrowings from banks and non-bank institutions might have to be reduced if experience showed that individuals were not willing to increase their holdings of financial assets at the rates assumed here, or if the private sector's demand for bank credit were to rise faster.

10. It might also be justified for Malawi to utilize, on Ea carefully phased basis, the final proceeds (a.4 million) from the sale of the Rail- way assets due in i968. If phased over the period 1968-71, this would permit a total annual contribution to development of 'up to I2.7 million or t 2.8 million in the period, without involving any drawdown in reserves below their end-1966 level of f7.3 million. By 1971, that amount would correspond to about two and a half months' imports of goods and services, which would seem to be about the minimum safety level consistent with the maintenance of relatively liberal exchange controls and the confidence of the private sector, which have proved to be important assets to Malawi's recent development. Present indications are that the goveriiment's financial policies will be adjusted to maintain reserves at about this level.

11. Aside from the problem of overall absorptive and financial capacity, there remain some questions about the economic priority of certain parts of the proposed 1968-70 program. These reservations would be reduced if some of the main projects for which external financing is not yet in sight are in fact postponed. However, there are a number of smaller projects for which domestic finance has been committed whose justification on strictly economic grounds might not be easy to establish. In total, the proportion of such projects does not appear exceptionally high compared with other countries. However, given the exceptionally small magnitude of domestic resources available for development finance in Malawi, it might well be desirable to stretch out some of these projects in order to reduce their impact on the financial position in the next few years, while per- mitting a higher proportion of available resources to be devoted to projects with good prospective economic returns.

12. Even assuming such a policy, it seems probable that between 10 and 15 percent of Malawi's development outlays during 1968-70 will not be considered eligible for external finance by foreign donors. This would mean that on the average about 85 percent of the cost of "eligible" projects would have to be financed by external assistance if total spending were to reach the Z33 million level without calling on further use of Malawi's modest external assets.

13. Given growth rates in GDP of 6 percent and in exports of 7 percent, over the next decade, it should be possible for Malawi to achieve a steady rise in its domestic savings, so that an average savings rate of as much as 8 percent might be projected by the mid-1970's, This is an ambitious target which might, however, be attainable if the efficiency of investment could be irnproved during the 1970-75 period by reducing the relative importance of low-yielding infrastructure projects as compared with that planned for 1968-70. Such an improvement would permit some reduction in the rate of imports of capital goods, so that total import growth might be kept below the growth rate of GDP. (ix) l4. Even on such an assumption, however, it is probable there would have to be at least a small absolute rise in Malawi's current account deficit on goods and services in order to permit a growth in imports adequate to support the expansion of GDP which seems feasible. An increase in private long-term inflows should be possible if the climate for private investment is maintained, but this would hardly be sufficient to offset the decline in public grants which seers in prospect. Thus, a substantial amount of new public loan capital will probably be needed for quite some time - perhaps in the order of Ell million annually, before taking account of debt service on this amount.

15. Service on existing external debt corresponds to about 10 percent of 1967 exports of goods and non-factor services, but the ratio should decline steadily after 1971 if exports rise as expected. The bulk of external loan finance now under negotiation is on quite favorable terms. For 80 percent of it, the average terms are: 0.5 percent interest and 35 year repayment period, including 6 years of grace. However, the remaining 20 percent is on harder terms, averaging 16 years at 5 percent, with shorter grace periods. If the terms implicit in this pattern were applied to new net public inflow of around MI1 million annually in the 1970-80 decade, it *would lead to an increase in debt service from about E1.8 million in 1967, to E4.2 million by 1975 and L8.5 million by 1980. Even if export growth of 7 percent could in fact be maintained over the next decade, the resulting debt ratios would be 12 percent in 1975 and 18 percent by 1980. The latter would appear to be an excessive burden for Mblawi, particularly given the uncertainties inherent in any longer run export projection. Thus, it would seem prudent for Malawi to seek an even softer set of average terms than those immediately in prospect. CHAPTER I

RECENT ECONOMIC DEVELOPMENTS

Introduction

1. It is now just over three years since Malawi achieved its independence. Tnis took place only six months after the dissolution of the Central African Federation which had been in existence since 1954 and had included Nlawi (then Nyasaland), Zambia (then Northern Rhodesia) and the present territory of Rhodesia. The past three years have witnessed striking changes in Malawi's economic and political situation. 1962-64 had been a depressed period, mainly because of political uncertainties associated with the transition to self-government. Shortly after independence, a major policy clash between the PrimEe Minister and six of the senior Ministers re- suilted in the latter's resignation or dismissal, and in the troubled months which followed the ex-Ministers, along with a number of African civil servants, left -the country. However, by early l965 political stability was largely restored and Dr. Banda's influence had greatly strengthened. Since then, the political leadership has been very effective in mobilizing support for measures to promote economic development. The confidence of the private sector in Malawi's future recovered sharply. Together with improved growing weather for most crops in those years, these factors led to a dramatic upsurge in both output and investment during 1965 and 1966.

2. Major issues behind the cabinet crisis of 1964 were the Prime Ministerts policies of cooperation with Malawils neighbours in Southern Africa, and his retention of many expatriates in key positions in the Malawi civil service. Since 1965, Dr. Banda has generally continued to pursue these policies, reflecting his repeatedly-stated view that because of its special geographical position, the economic development of Malawi must have priority over the general approach to the Southern Africa question ad- vocated in the O.A.U. In 1966, Malawi became a Republic within the Common- wealth and Dr. Banda assumed the executive presidency. At present, his administration is comparatively strong and has been able to achieve a rapid expansion of public development outlays since 1964. An increasing number of experienced African civil servants are moving into senior administrative positions in the civil service, and command the respect of their expatriate colleagues. However, the shortage of trained Malawians will require the continued employment of expatriates, particularly in professional posts, for a considerable period ahead,if efficient administration is to be maintained.

3. Recent progress should not obscure the underlying difficulties of Malawils position. The subsistence sector still accounts for over one- third of GNP, and per capita income is only about $5f. Domestic savings are very low, and the country is still heavily dependent on foreign external assistance, both for current budget support and for public capital expenditures. In 1965 and 1966, foreign public capital inflow, mainly from the thited Kingdom, averaged about &n. million or 17 percent Of GDP Moreover, during 1966 and early 1967, the rise in development spending was financed in part by a substantial increase in domestic borrowings and use of government cash balances which led to a significant decline in foreign exchange reserves. -2-

Trends in Production

b. During the 1954-61 period when Mblawi was a backwater territory of the Central African Federation, the annual increase in production in the monetary sectors of the economy averaged about 6.0 percent annually in real terms. During 1962-64, the political and administrative problems of the day, together with adverse weather conditions for agricultural production, resulted in virtual stagnation. However, with the resolution of these difficulties in early 1965, and improved weather conditions, there was a very substantial increase in the real output of thie monetary sectors, averaging nearly 20 percent annually in real terms between 1964 and 1966. In 1967, the growth rate is estimated tentatively at 10 percent. Taking as a base the 3-year period 1959-61, when conditions were more normal than in 1962-64, the average annual real growth rate over the following six years (i.A. through 1965-67) has been about 7 percent in the monetary sectors andl over 5 percent for the entire economy. The most dynamic sectors dur-ing this period have been smallholder commercial agriculture, manufacturing, construction activity, and transport.

5. Agriculture l 1is still dominated by subsistence production, mainly of miaze, beans and livestock. Virtually no direct data are available on trends of output. The absolute value is estimated (on the basis of out-of-date sample surveys) at E6 per capita, and growth since 1954 is arbitrarily assumed to have taken place at the same rate as population - now estimated at 3 percent annually. On these assumptions, the value added by this sector would have averaged about £24 million during 1965- 1967 or over two-thirds the total value of agricultural output. However, total commercial output (on which fairly good data are available) rose by an average of 5.5 percent annual]ly between 1956-58 and 1962-64, and then by nearly 8 percent annually on the average during the past three years.

Table 1:- AVERAGE VAIUE OF AGRICULTURAL PRODUCTION AbID_ k.SS DVCSTZ;1IG pRUUUL Al I9Oi ?IR ; (Rillion Xi,

1956-58 1959-61 1962-64 1965-67 Subsistence agriculture 18.4 20.2 22.1 24.2 Smallholder commercial agriculture 2.4 3.1 3.9 5.5 Estate agriculture 3.0 3.7 3 5 3.8

Total agriculture 23.8 27.0 29.5 33.5

All other sectors 21.7 24a.1 24.9 35.3

Total gerosS domestic 45^5 51.1 5h.4 68.8 product 6. By far the most important increases in commercial agriculture have come from African smailholders, whose output rose at an annual rate of 8.0 percent in the period 1956-64 and then by 12 percent in the next 3 years. This brought the value of cash crops grown by Africans up to 23 percent of the estimated value of subsistence farming (in which virtually all Africans who grow cash crops are also engaged), as against only 13 percent in 1956-58. Malawi workers have for a long time been keenly cash conscious, largely as a result of the early development of educational services in the country, and of their exposure to wage-labor abroad, principally in Rhodesia and South Africa where hundreds of thousands have found employment for varying periods of service over the past sixty years or more. This well-grounded economic instinct became quite evident in Yalawi itself during the federal period when rapid increases began to occur in agricultural production, as a consequence of increased public support for smallholder development, chiefly through expanded marketing facilities provided mainly by the Farmers Marketing Board, public investments in roads and rural water supplies, and extension efforts which have contributed to better yields. In addition, since 1965, there has been a concerted and successful effort on the part of the political leadership to encourage the farmers to adopt the improved cultivation practices suggested by the extension services, as contrasted with much of the federal period when resistance to the agricultural programs of the Government was sometimes encouraged by the political opposition.

7. The main small holder cash crops are dark tobaccos, groundnuts and cotton. Because of world market limitations for the dark tobaccos (Malawi supplies a large part of world exports of this specialized variety), the growth rate of tobacco output has been held down through licensing arrangements, so that the value of this crop declined from 45 percent of total smallholder commercial output in 1956-58 to 27 percent in 1965-67. However, cotton and groundnuts sales more than tripled in that nine-year period and together now account for nearly half of smallholder commerecial output. Commercial sales of pulses and maize have also gone up substantially in recent years, partly as a result of FMB encouragement following the development of expanded (but still somewhat uncertain) export markets for these CrIops. In the case of rice and cassava, commercial sales have stagnated or declined and these now account for under 6 percent of the total as against over 10 percent in 1956-58. 8. In contrast to the substantial progress achieved over the past ten years in smallholder agriculture, total estate production has grown rather slowly - averaging only 3 percent annually since 1956. The chief crops are tea and tobacco, along with small amounts of tung oil and, more recently, sugar. The main reason for the slow growth has been an absolute decline in estate tobacco production. In recent years, Malawi's large-scale tobacco farms have reduced their output of dark-fired tobaccos, and now - are concentrating almost exclusively on the production of burley and flue- cured tobacco, which require a greater application of skill and a higher level of imrestment than the other varieties. Burley output has grown steadily by over 11 percent annually over the past decade, while production of flue-cured declined until 1965, when sanctions against Rhodesian exports led to premium prices and a very substantial rise in output during the 1966-67 season. - 4-

9. Over the last 10 years, the production of nalawi tea, which is usied in the industry as a low quality filler, has increased at an annual rate of approximately 5 percent with an average export value of E3.8 million in 1964-66 or 30 percent of total exports. This has been the result almost equally of the expansion in the tea-bearing area and of a growth in yields. The current value of tung exports is only about £0.2 million, partly as a result of depressed prices. Sugar cane production was started in 1966 by a privately-owned estate with sugar output reaching 3,000 tons in that year and an estimated 12,000 tons in 1967, with an increase to 20,000 tons expected by 1970, which is the estimated demand on the local market.

10. Production in the manufacturing sector in Malawi is dominated by agricultural processing, based mainly on tea and tobacco, and since very recently, sugar and cotton. During the federal period, the value added by industrial production in Malawi grew comparatively slowly, as a result of relatively moderate increases in the production of tea and tobacco, and also because of the industrial location policies of the Federal Government and the limited size of the domestic market which led major manufacturing companies to supply Malawi from their Rbodesian subsidiaries. However, since the dissolution of the Federation in 1963, a nunber of new industries have been established in Malawi, and the national income value of the manufacturing sector has risen substantially, though it still accounts for only about 6 percent of total GDP. Of the industrial projects started since Independence, two are of major significance: a sugar estate and factory and an integrated textile mill. The sugar project with a capital cost of E3 million, is the largest private investment ever undertaken in the country, and the estate and factory with a production capacity of 30,000 tons provides employment for some 3,000 workers. The textile mill, representing an investment of f1.2 million, has a capacity of 6.4 million square yards and a labor force of around 600. Minor projects include a radio- assembly plant, a paint factory, a distillery and a shirt and knitwear factory. Complementing these new industries are a number of small food- processing, wood-working and clothing establishments.

11. In the construction industry, after a period of expansion in the mid-1950's, there was little growth until 1965-66 when the increase in investment resulted in a most substantial rise in building activity. There has also been a very marked increase in the value added 'ay the public utilities in the last three years. The number of units sold by the Elec- tricity Supply Commission rose from 42 million kilowatts in 1964 to an annual rate of 75 million by early 1967, with the major increases in demand coming from industrial and commercial consumers in the southern region. Freight handled by the rail system grew by little more than 4 percent annually between 1954 and 1964. However, the greatly increased economic activity of recent years has led to a rapid expansion in the tonnages carried by Mfalawi Railways - from 471,000 tons handled in 1964 to an estimated 900,000 tons in 1967. Of this increase, about 100,000 tons is accounted for by expanded transit trade to and from Zambia, resulting from Zambia's efforts to avoid reliance on Rhodesian transport outlets. -5

Exports

12. Between 1954-56 and 1962-64, the total volume of merchandise exports increased by around 6 percent annually, with tobacco and tea rising comparatively slowly, but with large increases taking place in, groundnuts, cotton an.d pulses. At current prices, the growth was only slightly lower, as world price declines for tea were largely offset by increases in the average tobacco export price. Total exports in 1964 were about £11 million or nearly 20 percent of GNP. During 1965 the value of exports rose by 20 percent, mainly because of large increases in.the volume of tobacco and groundnuts and because of a recovery in. tea prices. The 1965 export l.evel was only slightly exceeded in 1966, with a fall in sales of tobacco and groundnuts being more than offset by a record level of tea exports and sharply increased sales of maize. The decline in.groundnut exports in 1966 was the result of marketing difficulties created mainly by tight credit condi.tions in the United Kingdom which led buyers to delay in.their purchases, with the result that a large part of the record 1966 crop went into inventory. However, by early 1967 these inventories had been sold, with deliveries taking place in May-September of this year. Malawi marketing officials are confident that most of the 1967 crop (which is even, higher than 1966) can also be sold before the end of 1967, although the a.verage pric.e will probably be lower, since a large part may have to be sold as oil nuts, rather than for the confectionery trade, which is Malawi's n.ormal market and commands a premium price. Increased quantities of maize (100,000 tons) are available for export in 1967 although these are being sold at a loss by the Farmers Marketing Board because of a recent fall in. export prices and an increase in.freight rates resulting from the closure of the Suez Canal. In, total, 1967 exports might well reach £17.0 million.. The average growth for the three year period 1965-67 would then work out at about 11 percent annually over the average for 1962-64 or just about the same as the growth rate of total monetary GDP.

Thiports and National Expenditure

13. TIhe striking increase in production during 1965 and 1966 was accompanied by an even faster growth of national expenditure. Retained imports rose in that two year period by nearly 75 percent over their comparatively depressed 1964 level. The result was that merchandise imports increased as a ratio of GDP in 1965-66 to nearly one-third as against an, average of one-fourth in the 1954-64 decade. Part of this dramatic increase is attributable to a rebuilding of stocks, particularly in 1965, following the run. downi of inventories which took place during the unsettled condition. Of 1964. There was also a very large rise in. imports of investment goods in the course of 1965 and 1966. During the first half of 1967, total imports were slightly under the 1966 level, but they are expected to pick up in the second half.

]4. Between 196h and 1966, fixed investment in.the private sector rose very rapidly--from £2.5 million to £6 million. The bulk of this increase occurred in 1966 and was mainly attributable to the establishment of the sugar estate and textile mill. For 1967, a considerable number of smaller industrial schemes are under construction, and a large increase in urban housing is taking place, so that it seems possible the total level of private investment reac:hed last year will be maintained in 1967. The Malawi Government has played a significant part in encouraging the recent expansion of investment in the private sector by providing fiscal incentives and infrastructure support and through the participation of its Development Corporation in a fairly extensive range of projects.

15. Fixed investment in the public sector doubled between 1964 and 1966, rising to X*.l million, with a somewhat lower level forecast for- 1967. The most dynamic element in public investment has been the agricultural development program where expenditure rose from EO.7 million in 1964 to an estimated E1.7 million in 1967. There has also been a substantial increase in public expenditure on economic infrastructure. In- vestment in this sector has averaged nearly f3 million a year, with the development of hydroelectric power at Nkula Falls and the country's road system each absorbing approximately a third of the total outlay. The road program has been devoted to general improvements, particularly to the lake shore road, and more recently to bridge construction, and has resulted in a doubling of the mileage of all-weather roads over the past four years. On important sections of the road network, however, traffic remains relatively light.

16. Investment in social infrastructure has averaged slightly more than El million. Approximately half this has been allocated to the development of educational facilities with emphasis on post primary education and on teacher training. Outlays on urban housing and water supplies became significant in 1966 and 1967--averaging about £0.6 million--mainly as the result of expansion of industrial and commercial activity in Elantyre-Limbe. Expend- iture on government buildings including military and police accommodation also rose sharply in 1966 and 1967 - to about L0.7 million. The main justification for a good part of these expenditures, as well as for parts of recent road investment, lies more in social and administrative consider- ations than in their economic priority.

17. Expenditure on consumer goods and services rose at an annual rate of 11 percent between 1964 and 1966 while monetary consumption rose by 17 percent. This was reflected in a growth in imports of consumer goods at an annual rate of 22 percent. With rising agricultural production matched by higher levels of urban economic activity, the increase in consumption appears to have been widely spread throughout the monetary sectors of the economy. Between 1964 and 1966, Government consumption (current expenditure on goods and services) increased at approximately 11 percent annually, a trend which has continued into the present year. Including interest payments and other current transfers, total current expenditure by the central government now represents some 20 percent of the gross domestic product at market prices. Table 2: GROSS DOMESTIC PRODUCT (Million f)

1964 1965 1966 1967 Est.

GDP at market prices 58.1 65.9 74.7 81.7 Plus: Retained imports (G & S) 17.8 24.4 28.7 30.0 Less: Domestic exports (G & S) -12.1 -14.7 -15.6 -19.0 Domestic Expenditure 63.8 75.6 87.8 92.7

Gross Investment 4.5 10.9 15.1 11.5 Fixed public 37 57 7.1 6v5 Fixed private 2.5 3.2 6.o 6.o Stock changes -1.5 2.0 2.0 -1.0

Consumpti.on 59.3 64.7 72c7 81.2 Public 9.1 9 12 12.6 Private monetary 23.2 27=5 32.8 39.0 Private subsistence 27.0 27.3 28.7 29.6

Source: Appendix Table 4

Capital Inflow and Domestic Savings

18. The rapid growth of national expenditure during the past few years has been made possible, in part, by a large rise in foreign capital inflow. Even prior to Independence, Malawi (then Nyasaland) received important transfers from the Federal Government . which reached about twelve per cent of GDP in 1963. Since Independence the United Kingdom has continued to provide transfers in support of the Government's current budget. Together with special U.K. capital grants in connection with Independence and some loan finance from the U.K. and other sources, net public inflows reached a peak of over fl200 million or nearly twenty per cent of GDP in 1965e These flows dropped to around 10.0 million in 1966 and are estimated at about the same amounts in 1967. However in 1967 an exceptional receipt of about JM.3 million is expected from the sale of Malawits railway assets in Ilozambique. (The total proceeds to M-talawi from this sale which was arranged early in 1967 are expected to be about 12*7 million, of which the remaining 1l14 million will be received in the course of 1968). In addition to these public flows, private net long term investment has become of some importance, rising to fO.7 million in 1966. Moreover, in that year short term trade credit to Malawi amounted to £1.6 million. 19. Domestic savings remain very low. On the basis of rather uncertain national income estimates,-they appear to have averaged less than one per cent of GDP during 1962-64 , and just over two per cent during 1965 and 1966. This recent improvement is due almost entirely to a reduction in the current deficit of the public sector - from an - 8 - average of !4.0 million or seven persent of CDP in 1962-64 to just over f2.0 (3 percent of CDP) in 1965 and 1966. However, both public savings and total savings are expected to show a deterioration in 1967, mainly because of losses experienced by the Farmers Marketing Board. Private domestic savings have averaged about 6 percent of disposable income over the past several years. On a national basis, private savings have shown a downward trend in 1966 and 1967 because of a shift in net factor income receipts from a positive position in 1964-65 to a negative position in 1966 and 1967. Ihis is due in part to a moderate reduction in receipts from workers abroad, but mainly to a sharp increase in "miscellaneous services" to abroad, which tentatively is assumed to have been largely temporary in character.

20. In both 1964 and 1965, foreign capital inflow together with the small amount of national savings, were larger than gross domestic investment, with the result that the country's foreign exchange reserves rose by around E2.0 million in each year. In 1966, however, investment was greater than these sources of funds, so that exchange reserves were drawn down by X2.7 million, The present outlook for 1967 is that national savings will be negligible, but that capital inflow, including the proceeds from the sale of the railway assets will be just about equal to investment, so that reserves at the end of the year should be about the same as their end 1966 level, or about three months' imports of goods and services.

Trends in Public Sector Finance

21. Dluring the federal period 1954-63, Government outlays on current account increased by 150 percent while domestic revenue rose by only 75 percent. As a result Malawi's current deficit rose from £1.4 million at the beginning of federal period to E6.1 million in 1963 or 12 percent of GNP.1/ Largely as a result of the determined efforts which were made to secure economies in current expenditure in 1964, the recurrent deficit was reduced by approximately a third in that year. Then, during 1965 and 1966, a rapid growth in revenues led to a further reduction in the current deficit to £3.5 million. In 1967, recent information indicates that the deficit will remain at about that level rather than rising to around £4.0 million as estimated in the budget for the year.

2. With the expansion in revenue during 1964-66 exceeding the growth in national income, the ratio of recurrent revenue to gross domestic product went up from less than 13 percent in 1964 to around 14.5 percent in 1966 while the 1967 estimates imply a recurrent revenue ratio to gross

1/ See Table 15 . This presentation aprroximates a national income definition of government savings in that it excludes amortization and various outlays on pension commutation payments which are included in the standard Malawi definition of recurrent expenditures, but which are treated here as capital payments. -91 domestic product of approximately 15 percent. The most significant element in the expansion of the revenue in the 1964-66 period were customs and excise duties which accounted for 40 percent of the revenue in 1966. Import duties alone achieved an annual growth rate of 44 percent, with the ratio of revenue from customs duties to the value of retained imports rising from 14.7 percent in 1964 to 17 percent in 1966. This was due partly to the introduction of higher tariffs and partly to the application of duties to imports from Rhodesia at the end of 1965. Revenue derived from direct taxation increased by 18 percent annually during the 1964-66 period, and accounted for 33 percent of total current revenue in 1966. Between 19614 and 1966 total non-tax revenue increased annually at around 8 percent, with income from rents and Government services expanding at approximately this rate, and revenue from posts and telecormunications growing rather more rapidly.

23. In the 1964-67 period, the most rapid increases in recurrent expenditure have occurred in education (20 percent) and health (15 percent) where there has been a most necessary expansion of secondary and higher educational facilities and much needed administrative reforms in the country's medical services. The growth in recurrent expenditure on agriculture has proceeded at a slower rate, but an expansion of 12 percent on natural resources is forecast in 1967, the major part of this being in agricultural services. General administration, which accounts for about 40 percent of the budget has risen by about ten percent annually. Defense and police outlays which together comprise about a quarter of this category have risen at the same rate as the total, but still account for only 2 percent of GDP. In total, current Government outlays (other thai interest ancl pensions) correspond to about £3.6 per capita, which is among the lowest in Africa.

24. Whlile the Central Government's current account re mins negative, there have been significant surpluses from government enterprises in recent years. These rose from about +l.0 million in 1964 to around zL.2 million in 1965 and 1966. The most dynamic element in this increase has been the current surplus of the railways which rose from around *D.2 rnillion in 1964 to an estimated AD.8 million in 1967. While the sale of Mlalawi RailWays' assets in Mvbzambique has resulted in an annual loss of revenue of 63.3 million, this should be more than offset in the next year or two by continuing increases in total traffic which have been made possible by recent purchases of rolling stock. The Electricity Supply Commission has increased its current surplus from cJ%l million to more than £J.2 million in 1967 which could probably have been even higher if vrery sweeping tariff reductions had not been made in mid 1966. The Central African Airways and its subsidiary Air Malawi have maintained an annual surplus while the Mudi River Water Board which provides water for Blantyre- Limbe, has largely succeeded in eliminating its current deficit over the ]L964-67 period.

1/ The ratio of tax revenue to gross domestic product rose approximately 8.5 percent in 1965 to 10.5 percent in 1966, while the 1967 estimates imply a t;ax revenue ratio of over 11 percent. - 10 -

25. Offsetting these positive trends has been a steady decline in the surpluses of the Farmers i4arketing Board. In both 1964 and 1965 the FIB had surpluses of around £0.7 million. In part these were exceptional, since it is the Board's policy to adjust its prices in order -that, on the average, its current position be approximately balanced, taking one year with another. During 1966, the surplus did decline to ZO.25 million partly as the result of increased producer prices for groundnuts, and partly because of the lower average quality of this crop which was purchased in record quantities that year. During 1967, quality controls were considerably tightened for groundnuts, but there was a decline in quality of the dark fired tobacco crop which was nevertheless purchased in larger quantities than the external markets could readily absorb. The result has been a fall in export prices and rather large losses for the FIE on this crop. Losses are also being experienced on maize, because an unexpected drop in export prices coincided with a ten percent increase in the producer price for the 1967 season. The net result is likely to be an ove'rall loss to- the- F1B 0f 0.5 million or more in 1967. As a result, total enterprise savings are likely to be substantially lover this year.

26. Among the capital outlays of the public sector, the major part of its amortization payments and of its special capital transfers to retired expatriate civil servants are covered by grants and loans from the United Kingdom. These items showed a significant drop between 1964 and 1966, and a further decline is in prospect for 1967. However, as noted, public development expenditures rose sharply after 1964, reaching a peak of £7.2 million in 1966, with a moderate reduction expected during 1967. Overall, the deficit of the public sector has risen from around £10.0 million in 1964 to an average of £12.5 million in the past three years.

27. During 1964 and 1965, foreign grants and loans just about covered this deficit, but in 1966 they were £3.3 million less. As a result, during 1966 the government had to borrow substantial amounts locally for the first time. The bulk of this borrowing was from the banking system. There were also substantial borrowings from public enterprises, but part of these in turn had to be financed by bank borrowings, as in the case of the FIS's £0.4 million loan to the government. In addition, the government drew down its external assets by nearly £1.0 million. This latter drawdown can be attributed largely to a shift in the U.K. grant aid disbursements system which were made on advance payment basis in 1965 (leading to an over-financing of the current budget by £0.6 million and a consequent buildup of the external cash account) to a reimbursement basis in 1966 which led to an underfinancing of the current budget by £0.9 million. On the basis of the present outlook for development expenditure and external aid for 1967, it is estimated that some £2.8 million will be reqired from local sources to finance the development budget. However, as mentioned, there will be a special receipt this year of £1. 3 million from the sale of railway assets, -u l - a!

Table 3: OPERATIONS OF THE PUBLIC SECTOR 1964-67

(E million) 1964 1965 1966 1967 Mission Est. Current

Government current revenue 7e5 9J1 11.1 12.9 Government; current expenditure 116 12.6 14.6 16.5 Government current deficit -4T1 -37 7-375 Enterprises current surplus +1l0 +1,3 +1.3 +oD6 d/ Public sector current deficit -3.1 -2.2 -2.2 -3.0 Capital

Capital items in current government budget b/ 3.4S 3.7 3.h 2.9 Public sector development expenditure 3.8 6.2 7-3 6,6 Overall Deficit -10.3 -12.1 -12.9 -12,5 Financing: External Sources 9,6 12.2 9.5 9.7 Grants 7. lOe5 T5 77 Loans 1.8 1.7 3.8 4.0

Domestic Sources 07 -0.1 3.4 2.8 Central Government only: Domestic development revenues 0,2 - 0.3 0.3 Borrowing from banking system (net) - 005 1.7 UTse of external assets -0,3 -0.3 +Oe9 Borrowing outside banking system Ol 0.4 0.7

Met use of other assets (Government and enterprises) +0.7 -0.7 -0.2

a! Excluding crop finance and transfer payments between the Government enterprises. b/ Includes about EO.6 million annually in supplements to expatriate salaries, etc. financed by OSAS grants which are excluded from current expenditure in this presentation. The remainder consists of amortization payments and capitalized pensions. / Net of ; 1.2 million in exceptional revenue, mainly back payments on Federal income taxes.

d/ Based on October 67 estimates. More recent indications are that the 1967 surplus will be even lower than this. - 12 -

I$netary Developments and the Overall Financial Situation

28. Malawi's economy is quite an open one with imports of goods and services nowi corresponding to over 30 percent of GDP. Moreover there are n10 effective exchange controls for current transactions 1/ and a fairly low average external tariff level. As a result, changes in domestic monetary dermnd tend to have a greater impact on demand for imports than on the internal price level. As measured by the index for the high income group, consiuner prices have risen by only about three percent annually since 1962 (presumably reflecting increases in import prices), while the low income index shows no significant change for the shorter period which it covers - 1965-67. Wage rates have been generally quite stable, except for a 5 percent increase in government salaries granted during 1966.

29. Comprehensive monetary accounts are available only from mid- :L965 when a separate currency system was introduced. Developments since that period indicate that changes in the money supply have followed roughly changes in monetary GDP, while credit expansion in excess of the :Latter rate has tended to be reflected in a reduction of exchange reserves. Thus, between June 1965 and June 1966, the money supply rose by around 20 percent and in the following twelve months by about 10 percent - or by approximate:Ly the rates of monetary GDP growth estimated for these periods. In the same two year period, exchange reserves of the banking system declined by ai.7 million as domestic credit went up more than the money supply.

130. DLring the calendar year 1966, net credit to the Government rose by about c+.7 million, but then levelled off in the first half of L967. Credit to the Farmers Marketing Board went up by an equal amount in 1966, reflecting the financing requirements for the large increase in groundnut stocks and for a F4B loan of M-.4 million to the Government. Further substantial increases took place in credit to the FIMB through August 1967, as a result of seasonal purchasing requirements and the deterioration in the FMB's current position. It is however, expected that during the last four months of 1967, the FM3 overdraft (which is financed by Malawi's two commercial banks) will be reducedto about the end 1966 level 2/. Cn the other hand, it is likely that Government borrowings from the banks during the second half, will hav~e to rise by around £1.5 million over the mid-year level to meet the expected rise in development outlays.

_2 Exchange control regulations introduced in mid-1965 do require complete reporting, but approval for nearly all current transactions is granted automatically.

I/At the end of August, FMB stocks were larger than the normal end year level by about +2.0million, while net claims on creditors were larger by about OD.5 million. - 13 -

31. Domestic bank credit to the private sector during 1966 rose by about 12 percent and probably would have increased by more had there not been substantial reliance on external trade credit in that period. A shift away from such credit apparently did occur in the first half of 1967 when there was a further rise in private credit of about 30 per cent. However, it seems unlikely that there will be much more of a rise in the second half, judging by the 1966 pattern. The principle source of private demand for commercial bank credit in 1965-66 was import financing, while in 1'366-67 the working capital requirements of the new industrial enterprises have apparently become important.

32. With total credit rising by substantially more than the 13 per cent increase in the money supply during 1966, there was a drop in reserves of the banking system of .42.7 million. External public assets held outside the banking system were also drawn down by nearly Ži.0 million in that year. During the first eight months of 1967, net external banking assets were drawn down by another +2.0 million, mainly because of the very large increase in commercial bank liabilities needed to finance the FMB overdraft. While the latter will probably be substantially reduced by the end of the year, the foreign assets of the Reserve Bank will very probably show some decline, if Government borrowing increases to the extent expected. But assuming the incorporation into the official banking assets of the proceeds from the sale ofE the railway assets due in 1967, it is probable that overall exchange reserves will be roughly the same at the end of 1967 as at the end of 1966.

Table 4: I'OIETALRY SURVEY (X Tillion)

Sources June'65 Dec..'65 June'66 Dec.'66 June'67 Aug.'67 MIoney Supply 9.9 9.9 31.8 11.2 13.0 - Other liabilities (net) 2.9 3.4 4.2 4.4 4.5 Total 12.8 13.3 TJ 1. l7

Uses: Domestic Credit 5.8 5.6 7.8 9.6 12.1 Claims on Govt. (net) T.8 0.3 T17 2.1 2.0 Claims on the FI4 0.5 - 0.7 1.7 2.5 .2 Claims on private sector 4.6 5.3 5.8 5.9 7.6 a/

Net Foreign Assets 7.1 7.7 8.1 6.o 5.4 3.9 Reserve Bank 70 7 9 Z7 Kl Commercial Banks -0.9 0.1 -o.8 -0.8 -2.4 -4.2

Net Public External Assets (excluded from above) n.a. 2.2 n.a. 1.3 n.a.

a/ Including some Government enterprises other than FMB. - 1

CHAPTER II

DEVELOPPIENT PROBLEI'IS AND PROSPECTS

Introduction

33. Malawi's achievements in expanding investment and output during the past three years provide good grounds for believing that the country can continue to sustain a satisfactory rate of growth in per capita incomes during the years ahead. However, the task will not be an easy one. Rapid population growth poses one problem. If it continues at the present rate, estimated at 3 per cent, there will be increasing pressure on the country's limited resources of good land and rising demands for education and other social services which will make more difficult the necessary improvement in ISlawi's low savings rate. Pro- viding enough new jobs to keep up with the growth in the labor force may aLso prove a problem in the years ahead. About one-quarter of the male labor force is now employed in other parts of southern Africa. This brings substantial advantages to Malawi in the form of remittances corresponding to around 3 per cent of GDP and in the form of industrial work experience which has a lasting value when the workers return. However, these opportunities may eventually tend to contract as a result of the growth in the indigeneous labor force in South Africa and Rhodesia. In its natural resources, Malawi is favored with good agricultural land and ample fresh water but not much else. This leads to an inevitable dependence on agricultural exports which are subject to generally declining world prices, a problem which is compounded by the high transport costs associated with Malawi's landlocked position. The latter favors accelerated import substitution, both of some food requirements and a range of manufactured goods, but the speed at which this process can take effect is restricted by the limited size of the domestic market. In order to reach eventual financial viability, Malawi will have to take further measures to improve its national savings. But even with such efforts the country will require substantial financial and technical assistance for a considerable period of years if an adequate development program is to be sustained.

34. Since Independence the Government has considerably strengthened the administrative machinery for development, and has evolved a development strategy which by and large seems appropriate to the needs of the country. The Ministry of Natural Resources and the Farmers Marketing Board have played particularly important roles in this process and these institutions are now being strengthened further. The National Development Committee is responsible for dealing with all general aspects of development and economic policy. The Committee is presided over by the President, its membership includes the Ministers of Development and Planning and of Finance together with certain senior officials and persons appointed from outside Government by the President, and its executive agency is the recently established Ministry of Development and Planning. In its planning operations the Government is still following the outlines of the 1965-69 five year development plan, as modified after the visit of a 1965 United Kingdom economic mission to Malawi. However, a three year public - 15 - sector development program (1968-70) is now in the final stage of preparation and will provide the basis for the discussions between the Nalawi and the United Kingdom Governments in November 1967 on British development aid to Nvlalawi. It is intended that the three year program should be updated annually with the first year of each program forming the basis of' the Government's annual development budget. Thus far the Government's development programs have consisted primarily of lists of projects without much of an overall framework. However, during 1968 the Government will start work on a second five year plan (1970-74), which should provide a good opportunity for a more systematic review of the country's development policies and of its underlying economic problems, which the Planning M4inistry has not yet been able to undertake because of the pressure of more routine work. The preparation of detailed sectoral programs remains very largely the responsibility of the individual ministries. Thus the well-integrated agricultural program has b.en principally the work of the Ministry of Natural Resources. In other sectors, notably transport, industrial development and manpower planning, greater coordination and more systematic analyses would seem desirable.

35. The preliminary July 1967 draft of the 1968-70 public program calls for a very substantial increase in expenditure to an average of £14.5 million per annum as compared with £7.3 million actually spent in 1966 and an estimated £6.6 million in 1967. Of the £43.6 million approximately 34% is earmarked for communications, 20% of agricultural dLevelopment, 19% to administrative infrastructure, 17% to social infrastructure and 10% to investment in utilities. A large number of the projects included in the program are already the subject of preliminary negotiation

:36. It is not possible to determine with any precision the probable economic returns for all the major projects in the draft plan. However, it seems likely that the returns on most of the main agricultural schemes should be quite favorable. Certain parts of the large transport program are also priority requirements, while the economic case for other portions seems less certain. The allocation for public utilities appears reasonably ;justified by the prospective demands for electric power, and the education and housing programs would also appear to correspond with M'alawi's general needs in these fields. Perhaps the main reservation about the program lies in the allowance for government buildings. This includes £5.4 million f'or a new national capital at Lilongwe, as well as £0.5 million for a new state residence at Blantyre. Construction on the latter has already begun. - 16 -

However, as no external finance is yet in sight for the rmve of the capital, it is likely that expenditures on this will be much lower than now envisaged. The major program projects are discussed below against the background of the general prospects in each of the main sectors.

~~A. The Main Productive Sectors~~

~~Agriculture~~

37. The potential of Malawi's conwercial agricultural sector for further growth is good. There is still a fair amount of good to moderate quality land which remains unsettled, perhaps 2 to 3 million acres, as compared with 5.0 now cleared for cultivation (including 1.7 million in fallow). However to develop much of this will require significant investment outlays in transport and water supplies. An even greater potential lies in the possibility of improving yields in land already under cultivation. Most of this is quite fertile and has adequate rainfall, while certain areas may prove suitable for irrigation. For the period 1968-70 the draft public sector program proposes several major projects to help take advantage of this potential. Investment of some £3 million is foreseen in three major schemes, one to promote increased yields of groundnuts, maize and tobacco at Lilongwe, the others to develop cotton and maize output at Salima and in the Shire Valley. Outside these areas, a further £3 million is proposed for general agricultural programs, including nearly £1 million for a fertilizer subsidy. No major irrigation investments are allowed for in the three-year program, but studies have started on the possibilities for irrigation of rice, cotton and tea.

38. The successful implementation of these projects and the con- tinuance of a high rate of growth in agriculture will require not only the provision of external finance, but also the sustenance and strengthen- ing of the agricultural extension, research and credit and marketing services of the Ministry of Natural Resources and the Farmers Marketing Eloard. The necessary action in these fields would appear to justify the f'airly rapid increase presently envisaged in public recurrent expenditure on agriculture. The recent experience of the F.M.B. would seem to call f'or a more closely coordinated and systematic approach to agricultural pricing questions, which are affected not only by the F.M.B.'s own decisions, but also by fiscal and transport tariff policies. While it should be possible to mobilise a certain financial surplus in this way, the need to maintain reasonable financial incentives in the agricultural sector, and the tendency of export prices to decline set definite limits on the scope for achieving substantial surpluses. With respect to estate agriculture the continued maintenance of an attractive climate for private investment and the introduction of greater fiscal incentives will probably prove necessary to secure substantial new investment. - 17 -

39. Assuming conditions remain favorable for private investment, prospects for the development of MIalawi's tea industry seem reasonably promising. Under the present plans of estates and government, acreage should increase by at least twenty per cent in the next six years bhrough greater use of estate land and a moderate program of smallholder development. In the 1970-80 period there should also be important possibilities for expanding tea acreage in the northern region by estates, smallholders and possibly by combined efforts involving nucleus estates and outgrowers. Other factors which improve the outlook further are the present introduction of higher quality jats and the possible instal- lation of new machinery and equipment in the factories and plantations which could effect significant improvements in the quality of Yalawi tea raising the price by some 20 per cent. I-breover, serious consideration is now being given both by the industry and government to the possible introduction of overhead irrigation on approximately two-thirds of the tea-growing area, where production could be increased by some 50 per cent, and export values to an even greater extent, if further quality improvements were secured. Including irrigaticn, total investment in the tea industry over the next six to seven years might well reach an aggregate of -8 million. The value of tea exports might be expected to reach a.6 million by 1970 and as much as -8 to J9 million by 1980.

40. In estate-grown tobacco, there are reasonable prospects that production of flue-cured can be maintained at the present level and that continued expansion of burley output will take place. WJith the lixmited world demand for fire ancl air-cured tobaccos grown by smallholders, the M4alawi authorities intend. to severely restrict increased production of these varieties, but a significant expansion of smallholder output of turkish, flue and perhaps the lighter burley should be feasible. In total, the value of tobacco exports might be expected to increase slowly from their 1964-66 level of ci.5 million to t5 million in 1970 and around c6.0 million by the mid 1970's.

41. In the commercial production of groundnuts, a growth rate of approximately 9 per cent is envisaged for the 1967-80 period resulting from an extended acreage and higher yields. Because of the anticipated limitations in the market for the confectionery nut, it is intended to introduce an increasing proportion of the lower valued oil nut which could well account for a third of total groundnut exports by 1980. Even allowing for some decline in prices, the value of these could well increase from the 1966-67 average of z'2.8 million to about '-i million by 1970 and SE million in 1980.

42. With the implementation of two major cotton projects in the immediate future, a fairly significant increase is anticipated in cotton production by 1970, and further substantial growth should be possible over the next decade, particularly if irrigation proves feasible in the southern region. Allowing for increased local consumption and some decline in prices, it is considered that cotton exports could increase from their present level of LI million to some t2 million in 1970 and z:3 million in 1980. Good possibilities also exist over the next ten to fifteen years for the increased production and export of rice and of some arabica coffee. - 18 -

43. The foregoing crops are for the most part considerably more economical for Ialawi to produce for export than maize, which is the mrain subsistence crop. However, there still remains a good potential for increasing maize output at a faster rate than the probable increase in domestic consumption. The exportable surplus has already increased from around 25,000 tons in 1965 to 100,000 tons in 1967 and given the program underway to increase yields, the surplus could well exceed 300,000 tons by 1980. iMoreover, indications are that the wJhite maize produced in Dhlawi will continue to enjoy a preference with Scottish distillers in an income elastic mar-ket, provided the supply is relatively stable from year to year. Cn the other hand there are potential problems associated with maize development. Firstly, as a result of a temporary decline in international prices stemming from an exceptionally favorable growing season in many parts of the world, and of increased shipping charges resulting from the Suez closure, maize exports in 1967 can be effected only at a certain loss to the F.M.B. Therefore, producer prices which were increased in the more favorable market conditions of the 1966 season may have to be reduced. Secondly, with the improvement of agric- uatural techniques and the expansion of the monetary economy, competition may eventually arise between traditional and easily cultivated crops such as maize ancd higher value crops for resources of land, transport and clevelopment finance. Until this stage is reached, it would appear logical to expand maize production for export, assuming losses to the F.1H.B. can be avoided. But if and when such competition does emerge, priority should almost certainly be given to the other higher value crops either for import substitution or for export, which would promise a higher net return to the economy.

L4. - The main potential competitors of maize for scarce resources are tea, groundnuts, cotton and rice. In addition, it may prove economical t;o develop whleat for domestic use in the northern region and high value horticultural products for export. There also appears to be scope for expanding the country's fishing and livestock industries, with the possibility of developing some form of ranching scheme in the northern region. In forestry it is envisaged that Government plantings of industrial softwood for domestic consumption and of Vipya timber for pulpwood lfill continue. Further investimnts in the Vipya plantations may amount to some 62 million over the next ten to fifteen years and possibly to some 416 million in a pulp plant in the mid 1970's. Although the economic feasibility of this project is still sonewhat uncertain, favorable market opportunities may eventually emerge for M4alawi kraft pulp in Southern Africa, which could add some .5 million to the country's exports by :L980.

'lTanufacturing and VMining h5. In the industrial sector the three major areas in which further development seems possible are the diversification and expansion of agricultural processing, greater import substitution and a more intensive effort in production for export. Reference has already been made to the possibilities which exist for developing the tea and wood-pulp industries. There - 19 - mnay also be possibilities for the further processing of products such as groundinuts, maize, meat, fruit and vegetables before they are exported. As regards further impo:rt substitution possibilities, there are a number of prospects for new investment. In the 1967-69 period the major investment in this field will be a ;Q.75 million brewery. In cotton the present consumption of cloth would appear to justify furthier expansion in the textile industry at a fairly early stage with the possibility of subseq- uently going in for prints. Other investments which are likely to go ahead-include an enamelling plant, the manufacture of hollow-ware, farm carts, hoes, plastic products, matches, paper-bags and sacks, pharm- aceuticals, bicycle-tyres, tea chests and the processing of lubricating oil. IIoderate possibilities would appear to exist for developing the export of simple labor intensive manufactures (e.g. clothing to Southern Africa).The Government might well consider the provision of more generous fiscal incentives to manufacturers who are prepared to make a significant contribution to exports.

46. It is anticipated that the PIalawi Development Corporation will continue to play a significant role in the industrial sector, securing a substantial portion of its resources from the phased disposal of its older :investments to a refinance coimpany whose equity capital would be subscribed by the IDC and private banking and financial interests. Nevertheless, some newr public funds may well be justified to supplement these sources.

47. Thlere is no mine-ral production of any significance in Kalawi. ,4systematic geo-chemical survey is undenray and will continue until 1969. Ilhile substantial reserves of bauxite, phosphate, sulphur and rare earths have been proven and foreign mining interests continue to p soe dc ailed investigations,commercial exp]oitation so far seems feasible only for the development of the rare earths (for use in the electronic industries) which might yield aggregate exports of around t2.0 million over the next 4 to 5 yearsv

~~Invisible Earning Prospects~~

48. M4alawi's largest sources of visible earnings at present are remittances of Ivalawi workers abroad at approximately E2 million annually, and exchange earnings on foreign freight which rose -to EO.6 million in 1966, mainly as a result of the increase in Zambian traffic. There are some medium tern prospects for increasing the number of workers abroad, but the longer run outlook is rather uncertain, given the growth of the indigenous labor force in Southern Africa. In transit traffic, on the other hand, the completion of the Cahora Bassa scheme, and the possible extension of the railroad into north-western Mozambique could eventually provide Malawi with very significant increases in foreign exchange earnings. 1,1hile Malawi does not possess game reserves comparable to those in East Africa or Zambia, it has a significant tourist potential, and it should be possible for her to attract a growing share of the rapid increase in European and American tourists visiting neighbouring states. - 20 -

~~Summary of Output and Export Prospects~~

49. From the foregoing analysis it would seem plausible to project a growth of gross domestic product in Malawi of approximately 6 percent over the next decade or so. This assumes a continuing 3 percent average rise in the subsistence economy, and a growth rate of between 7 and 8 percent in the monetary sectors. In agriculture, commercial smallholder production might be expected to grow at 8 or 9 percent, and estate production at 6 percent. Together with subsistence outout at 3 percent, this would mean a total of aroiund 4.7 percent for agilculture. Given their low starting point (7 percent of GDP in 1967) manufacturing and public utilities might well grow by 9 to 10 percent on average. This would bring them up to 9 percent of (MP by 1975. Given such growth rates in the main productive sectors, transport and communications, and building and construction might be expected to grow at around 8 percent, while public services are projecte!d to grow at 5 to 6 percent.

50. Growth of export earnings should parallel that of monetary (MP increasing by around 7.5 percent over the 1966-67 average of 1;?.5 million to E20 million in 1970, to perhaps r29 million by 1975 and to nearly T40 million by 1980. Projections for the major exports are summaris- ed in Table 5. Of the major agricultural exports, the fastest growth rates are indicated for cotton, groundnuts and maize. The growth of maize exports shown here might turn out to be on the high side, especially if faster growth could be achieved in higher value crops competing with maize for development resources. On the other hand, tea exports are rather con- servatively projected and could be somewhat higher if possible improvements in quality :Lead to better prices.

Table 5: EXPORT EARI\ITS (E) Actuals Est. Projections 1915 1966 967- 1970 975 1980 ]Nerchandise Exports Tea 3.8 4.4 3.9 4.6 6.5 8.0 Tobacco 5.1 4.5 5.0 5.0 5.8 6.6 Grourdnuts 1.6 1.3 4.3 3.9 h.8 6.o Cotton 1.1 1.1 0.7 2.1 2.5 3.2 M4aize 0.3 0.8 1.3 1.8 h.o 5.4 Rice 0.1 0.1 0.1 0.3 0.9 1.5 Beans and Pulses 0.8 0.5 0.5 0.8 1.0 1.2 Coffee 0.04 0.02 0.1 0.2 0.5 o.8 All other exports o.8 1.0 1.2 1.5 3.0 6.0 Merchandise exports 13.5 13.7 17.0 20.2 29.0 38.7

~~Invisible Earnings 4.5 4.9 5.0 5.5 7.0 9.0 Non factor services 1.2 1.9 2.0 2.2 3.6 5.7 Factor services 3.3 3.0 3.0 3.3 3.4 3.5~~

~~Total Export Earnings 18.0 18.6 22.0 25.7 36.0 47.7 - 21 - B. l'he Main Infrastructural Sectors~~

~~Transport~~

51. The high proportion of total resources proposed for transport in the 1968-70 program is attributable to the introduction of certain basic changes and improvements in Iialawi3s road and rail system. The major scheme in the £8.5 million road program for 1968-70 is the reconstruction and bituminisation of the 180 mile Zomba- Lilongwe road, which would provide improved communications betwTeen the rich agricultural areas of the central region with the - country's main industrial and commercial-centre. This is under consideration for IDA finance at a-cost of 94.7 million. Another - sizeable element consists of a S2 million road link from the Zoomba Lilongge route to Salima and Monkey Bay, which may be financed in part by the U.S.A.I.D. The constnrction of the northern section of this road over the River Linthipe would have considerable importance for initial progress on the Salima cotton scheme. ?ith the completion of this road and the proposed Zomba -Lilongwe route, it should probably be possible to phase out the high cost section of the railway north of Balaka. The present plan also includes other major routes in the north- >zrn and southern regions, which it is anticipated may be financed by the U.K. and Germany. In addition the Government is now giving greater consideration and financial provision to the improvement and extension of the crop extraction roads.

52. Major investments in the railway are also planned for 1968-70. In March 1967 the Governments of Malawi and Portugal entered into a convention which provides for the construction before the end of 1969 of a railway-linking the Malawi system with the Nova Freixa-iacala line in north eastern ilozrambique. The length of the proposed link is approximately 120 miles, of wh±ch 70 would be in Nalawii; the estimated cost of the Malawi section is f4 million, In addition about £i million of rolling stock wll1 be needed over the next several years. A loan from Japan has been arranged to finance both the construction and the rolling stock. While the economic case for proceeding with the lMacala link rather than improving the existing line to Beira has never been explicitly established, it should in principle be possible for Malawi to obtain at least a moderate economic return from the project in the forn of reduced transport costs,if the Government can negotiate substantially lower railwyay tariff and port charges on the new route with the Mozambique authorities. However for the economic return on this project to prove really attractive would probably require a further extension of the line into the hinterland of north-western Mozambique (a possibility now under investigation),and the development of tranrsit trade whkich could derive from the construction of the large Cahora-Bassa hydro-electric project near Tete and from the subsequent evacuation of minerals in that region. It is probable that these shipments and those resulting from a possible exploitation of Malawi bauxite could be exported more efficiently from Nacala than from Beira, at least in large ore-carriers. In the absence of such transit traffic, however, the capacity of the Ialawi railway line is unlikely to be reached - 22 -

until the late 1970's even though traffic arising from i4alawi's own foreign trade could well rise from its present level of 0.9 million tons to around 1.5 million by 1975. Since there is as yet no guarantee that substantial transit traffic will develop, the construction of the eastern Link must therefore be regarded as speculative, and probably somewhat premature from an economic and financial standpoint.

53. In the Government's overall transport strategy the constraction of the Nacala line is linked with the development of water communications on the Lake, and a small provision for the initial stages of this scheme is included in the 1968-70 program. Capital expenditure on civil aviation facilities is also likely to be comparatively limited during the 1968-70 period, but larger outlays are tentatively envisaged for the national air company.

~~Power~~

54. The demand for electric power has been increasing rapidly and the 1968-70 program, in addition to general development outlays and the expansion of diesel stations, envisages the initial stages of a second hydro-electric scheme. However, the latter is tentative and 2night be postponed. For the later 1970's, the possibility has recently emerged of MIalawi's utilising the exceptionally low cost Cahora-Bassa power for the exploitation of Maanje bauxite.

~~Education and Health~~

55. Whilst the Government's development strategy accords priority to the directly productive sectors of the economy, it is recognized that the provision of skilled manpower from local resources is a necessary pre-requisite for satisfactory long-term development. Of a total allowance of some '4 .6 million on education in the 1968-70 program, approximately two-thirds is earmarked for secondary schools and teacher training colleges with the bulk of the remainder for development of the university. In the case of primary education the Government appears determined to contain any expansion of recurrent expenditure, and consequently its objectives in this field are more limited. The Education IlLnistry rightly emphasises the need to improve the quality of primary education, but there may also be a case for extending more widely the vocational training of the Ihlawi youth movement, which places heavy emphasis on agricultural subjects.

56. The 1968-70 health program is presently estimated at approximately la million, and is intended mainly for the reconstruction, extension and improvement of hospitals. From an economic standpoint, it might be justified to give preventative medicine greater weight than now allowed for in the program. In any case studies now underway of the effect of various endemic diseases on productivity should be continued and where it can be established that improved medical facilities would contribute to increased production or that the implementation of a particular project may encourage the spreading of disease, consideration might be given to incorporating preventative health schemes within major projects requiring external finance. - 23 -

~~Housing and Government Building~~

57. After education, expenditure on housing (£1.5 million) represents the most significant item of social infrastructure investment in the 1968-70 program and includes a MIalawi Housing Corporation (MHC) scheme for upper and middle income groups in the urban areas, general government housing and an MDC project for senior industrial executives. Explicit economic rents have been established for accommodation provided by the MHC, which has permitted an appreciation to be made of the total size of government housing subsidies.

58. Plans for the construction of government buildings over the next three years are presently estimated at £6.5 million. Of this proposed expenditure, the Government's regular building program for the forces, customs and embassies accounts for £0.6 million, the new Blantyre state-residence for £0.5 million and the construction of the proposed capital for £5.4 million. It is, however, understood that no external funds on soft terms are presently available for the latter project, and that the Government has wisely decided not to use medium term finance for this proposed scheme, In the circumstances it is likely that the transfer of government departments to Lilongwe will be quite limited during the 1968-70 period and the expenditure should not exceed iDn.5 million, most of which would probably be required in any case to provide additional accommodation for ministries.

~~Overall Investment Prospects~~

59. ks noted, the proposals for public sector development expenditure included in the Government's draft program for 1968-70 totalled £h3.6 million. The proposed allocation and phasing is summarized below along with data on past spending. Further details are shown in Appendix tables 17 and 19A. As noted earlier it does not seem likely that the total program can be implemented at the rate projected because of administrative delays and lags in the availability of external finance. A more plausible estimate of the total outlays which might prove feasible would be about £33 million with the annual total rising from around £9.5 million in 1968 to perhaps £12 million by 1970. A temporary levelling off of public investment would seem likely after 1970, since it should be possible to reduce the proportion of investment going into infrastructure if the construction of government buildings can be kept within moderate limits. Since it should be possible to realize much of the country's agricultural potential with comparatively low levels of fixed investment, even allowing for irrigation possibilities, the overall capital output ratio might well be significantly improved by then.

60. During the next year or two at least a moderate decline in private investment below the exceptionally high level of £6 million reached in 1966 seems likely as a result of the recent completion of the sugar mill and textile factory. The main medium term project for an expanded level of private investment lies in tea, where investment of over £1 million annually may be forthcoming in the next six years, if the program for irrigation and modernization is started. Further import substitution projects - 24 - in manufacturing and a continued expansion of road transport, housing and commerce and a moderate-scale mining operation are also likely in the next few years. By the mid or late 1970's the projected puiLp mill and/or development of Malawi's bauxite seems possible. T'hus, in total it might be plausible to project private investment at something under E6 million in 1968 with a recovery to around T6.5 million by 1970 and perhaps £9.0 million by the middle of the decade. Adding a moderate allowance for increases in stocks, these assumptions about public and private investment yield a gross total of 119.0 million for 1970 or just under 20 percent of the GDP projected for that year - (L99.0 nillion) as compared with the previous peak of £15.1 million (including a 12.0 million stock increase) reached in 1966.

~~Table 6: SUI*fLRY OF PUBLIC SECTOR DEVELORFIENT EXPEIIDITURE. ACTUAL,AND PROPOSED Government's 2/ Actuals Est. Draft Program - 1964 1965 1966 19671/ 1968 1969 1970~~

Natural Resources 0.8 1.2 1.5 1.7 3.5 2.7 2.6 Industrial development - 0.3 0.7 0.8 - 0.2 0.1 Power 1.0 1.3 o.8 o.-4 0.5 1.1 1.0 Roads 0.2 0.8 1.4 - 4.o 3.6 2.6 Railways 0.1 0.2 0.3 0.5 1.3 1.7 2.0 Other transport and communications 0-5 0.7 o.6 o.9 1.1 o.8 0.9 Education (inc.Univ.) o.6 0.7 0.5 0.5 1.7 2.0 1.0 Housing and water 0.5 0.3 o.6 o.6 1.0 0.7 0.5 New Capital _ - - - 1.6 1.7 2.2 Other Government Build- ings (incl.health) O.1 o.6 1.2 o.8 1.1 0.8 0.7

~~Total 3.8 6.1 7.3 7.4 ]14.8 15.3 13.6 Of which: Central Government 2.4 3.8 5.7 5.6 12.7 12.3 10.5 Enterprises 1.4 1.9 1.2 1.1 2.1 3.0 3.1 IDCc - 0.3 0.5 0.7 - - -~~

~~L/ June 1967 estimate; total outlays are now estimated at &bi,Ut A6.6 million.~~

~~2/ July 67 version. Chapter III~~

~~PROSPECTS FOR NATION4AL EXPENDITURE AND FINANCE~~

~~National Expenditure, Savings and Imports~~

61. With a very low domestic savings level and with development expenditure heavily dependent on external finance, the ability of Malawi to maintain growth rates of investment and output of the magnitude indicated as feasible in the previous chapter will clearly be determined in large part by the extent to which foreign lenders - both public and private - decide to provide support for Malawi's development effort. These decisions in turn are likely to depend to a substantial degree on Malawi's efforts to expand its own savings, and on the effectiveness with which it uses the total resources available to it. As indicated earlier, the pattern of resource use in the recent past seems to have been generally well directed in support of Malawi's most important economic needs and potentials. A certain part of recent spending - particularly on public buildings - is not easy to justify on strictly economic grounds. To date this does not appear to have been exceptionally large. However, given the very limited domestic financial resources available to Ilalawi, it would appear to be in I,allawi's interest to hold such spending down to even lower levels, and to devote a higher portion of its resources to projects likely to yield positive economic returns. There are also possibilities for improving the savings effort. Given the growth rate in total output of six percent which seems attainable, it should be feasible to devise policies which keep total consumption growith to a somewhat lower rate. The main possibilities would seem to lie in expanding government revenues, limiting growth of non- essential current services, and improving pricing policies of public enterprises. In the medium term, however, the foreign exchange constraint will set definite limits on the speed with which this potential can be realized. Much will depend on the evolution of exports and the effectiveness of projects to promote import substitution. Very tentatively, it might be estimated that these factors would permit the rate of domestic savings to be increased to around five percent of GDP (say by 1970) as compared with an average of two percent in 1965-66. By the mid 1970's the achievement of an eight percent domestic savings rate might be possible. These average rateswould imply a marginal domestic savings rate of around 124 percent which is perhaps on the ambitious side in the MIalawi context, but which would represent a reasonable target if in fact total growth can be expanded at the rate which seems feasible.

62. Assuming a growth rate in exports of goods and services of Seven percent as projected earlier, such a savings rate would require holding the growJth rate of imports down to about six percent annually between 1966 and 1970, despite a growth in fixed investment projected of around eight percent in that period. The limited period, 1964-66, for which - 26 - reliable import statistics are available, together with the exceptional changes which occurred in these years makes it very difficult to determine a "normal" average import coefficient with any degree of precision either for investment or for consumption. Nevertheless over the 1966-70 period, a six percent growth on imports would appear plausible, particularly taking into account the leveLling off of imports which has occurred in 1967, the reduced ratio of equipment to total investment indicated by the com- position of the 1968-70 development program, and the substantial amount of import substitution which will take place during the next few years in textiles, sugar and alcoholic beverages. For the period after 1970, the maintenance of a growth rate in imports of less than five percent along with a total GDP growth of six percent would in all probabilitiy require some decline in the atio of capital goods imports to GDP. This may well be possible at least in the 1970-75 period, if, as seems likely, the comparatively large investment in infrastructure planned for 1968-70 provides sufficient capacity to permit the total investment ratio to be reduced somewhat without affecting GDP growth.

63. A rise in factor income payments abroad must also be assumed over the next decade as a consequence of expanded private investment and public borrowing, even assuming quite favorable average terms for the latter. Thus, the marginal rate of savings on a national basis would be less than the domestic rate - perhaps on the order of 12 percent. The implication of these assumptions for the balance of payments deficit on current account would be a moderate absolute increase over the average 1966- 1L967 level of A22.5 million, but a decline in the ratio of the deficit to GNP - from an average of 16.0 percent in 1966-67, to less than 13 percent by 1975. The table on the following page summarises the overall pattern of expenditure and savings which might follow from developments along these lines.

The Outlook for Public Savings and Finance 6h. Earlier this year an IMF Fiscal 1iTssion to Malawi presented a set of recommendations which suggested modifications in tax administration, the adoption of new fiscal measures, and increases in some of the rates. If the proposals are implemented, and supplemented by higher charges for certain dlepartmenta'L services, there would seem to be prospects of securing revenue equivalent to around a28.5 million by 1971, representing an annual increase over the 1967-71 period of over nine percent. This would raise the ratio of current revenue to gross domestic product from 16 percent in 1967 to nearly 18 percent of that projected for 1971. This would represent a very substantial effort on Malawi's part, but it is one which the Govern- inent is apparently prepared to make. It has already decided to adopt some of the I1F recommendations while others are being studied further. - 27 -

~~Table 7: PROJECTIONIS OF NATIONAL EXPENDITURE (£ million) Est. Mission Projections 1966 1967 1970 1975~~

GDP at Market Prices: Subsistence 28.7 29.6 32.3 37.5 Mbnetary 46.o 52.1 66.5 98.6 Total 7fT 81.7 98.8 13&.1 Factor Income (net) 0.7 0 -1.3 -2.5 GNP at Market Prices 81. - Current External Deficit 13.8 1.5 15.6 1336.

~~National Expenditure 87.8 92.7 113.0 150.1~~

~~Investment 15.1 11.5 19.5 24 .0 Public 7.1 6.5 12.0 13.5 Private 6.o 6.0 ' 5 9.0 Stocks 2.0 -1.0 1_0 1.5~~

~~Consumption 72.7 81.2 93 5 126.1 Public 11.2 12. 1,U Private 61.5 68.6 78.5~~

~~Savings Domestic 2.0 0.5 5.2 10.0 National 1.3 - 3.9 7.5~~

65. In current expenditure an overall rise of about six percent annually would appear needed over the next four or five years in order to provide adequate recurrent support for the development program. The most substantial growth, possibly 10 percent, is likely to be required in natural resources with the general expansion of agriculture and the impact on the recurrent budget of certain major projects already discussed. A considerable -increase in current expenditure will also be needed in education where an average growqth of 8 percent might be anticipated, resulting from the general expansion of post-primary schooling. Expenditure on road maintenance may have to rise by around 6 percent annually or more. Interest and pension payments would probably rise only moderately. All other items, including health services, might be limited to around 4 percent on an .average. In the aggregate this would represent a relatively austere expenditure policy, but it is difficult to see how Malawi can afford much more if it is to achieve a significant reduction in its current budget deficit over the next several years, as the Government wishes to. 66. Assuming revenues and expenditures grow along these lines, the current budget deficit, before amortization payments, should fall from an estimated £3.6 million in 1967 to around £2.0 million by 1971. Since - 28 - amortization payments will rise rather sharply in 1971, the decline would be less after takrin3 such payments into account - frorn E4.3 million in 1967 to around £3.4 million in 1971. Bugetary grants from the United Kingdom are expected to fully cover the deficit in 1967. It is assumed that further budget support will be forthcoming from the U.K. on a declining scale over the next few years. There would appear to be some possibility that future grants may be fixed in amount, and that Malawi might be able to use the whole of any currBnt surplus thus secured for development purposes. Howqever, an arrangement of this kind would also carry the possibility of the Government having to finance part of the current deficit through domestic borrowing in any year it exceeded the budgetary grant. On balancb, it would not; appear to be prudent to count on any net surplus for development from the current bludget in this period. Indeed, it might well prove wise for Malawi to reserve part of the proceeds expected from the sale of its Railway assets to cover the sharp jump in amortization payments due in 1971.

67., On the other hand, there should be possibilities for increases in the surpluses of government enterprises over the next several years. Expected growth in traffic on the MIalawi Railways is likely to lead to a further increase in its surplus, over the E800,000 estimated for 1967 in spite of the loss in earnings on its IMozambique assets. On the assumption that Zambian traffic falls off moderately after 1968 the annual surplus before amortization might be in the neighborhood of EO.9 million by 1970. Amortization paymnts will continue at around E0.25 million in the next few years, as the result of supplier's credits incurred in early 1967 and planned for 1968 for additional rolling stock.. Then, by 1972, service on the proposed construction loan from Japan will bring the total up to around EO.5 million. Moreover, earnings are likely to level off after 1970, since use of the new route would involve a shorter mileage within Malawi. On balance, a Railways; surplus after amortization at around E650,000 would seem to be the best that can be expected through 1971, after which it might even dip temporarily unless substantial new transit traffic can be generated by then. According to the projections of the Electricity Supply Commission, its surplus should rise from IO.2 million in 1967 to 1460,000 by 1970. However, about half of this increase will be absorbed by debt repayments on the loan for the Ncul-a Falls project. Sorne expansion in Air Malawi's surplus should also be feasible over the next several years.

68. The main possibility for an improvement in the enterprise surplus position over that expected in 1967 clearly lies in the elimination of the losses by the FIB and the achievement of at least a moderate surplus. This should not be too difficult to realize. Improvements are already being effected in the grading of groundnuts which should permit the realization of a commercial surplus on transactions in this crop. Yioreover, plans have been made to introduce quality and quantity controls for tobacco in 1968 which should serve to eliminate the losses suffered during 1967. Finally, for maize, there are reasonable prospects that export prices will recover soon from their exceptionally low 1967 level, and that freight rates will decline with the open- ing of the Suez Canal. However, if losses continue to be incurred on maize, some reduction in the producer prices will be necessary. Indeed some reduction in the majority of FIB prices, would appear necessary, if as the Government enrisages, a significant surplus is to be secured on the Board's operations over the next few years. - 29 -

69. The Government will continue to be able to borrow moderate amounts outside the banking system. The main source is likely to be the Post Office Savings Bank. Domestic insurance companies might gradually also increase their holdings of government securities, but only moderate amounts can be expected at the start. There is also the possibility of introducing a national provident fund. It is understood that such a step would have the support of a number of the larger employers in the country. If the latter step is taken it might be reasonable to project net government bond sales to such institutions arising from an estimated £300,000 at present to as much as £500,000 or £600,000 by 1970-71.

70. From the banking system itself, there should be scope for roughly £0.6 million of annual borrowing under present circumstances without putting pressure on prices or foreign exchange reserves. This assumes that the money supply and time and savings deposits will rise at roughly the same rate as monetary GDP - around 7.5 percent annually, which should permit total annual credit creation of approximately £1.3 million without infla- tionary consequences. At present, annual increases of roughly £0.7 million in credit to the private sector (10 percent of the amount now outstanding) would seem to be a plausible estimate for this sector's normal requirements., By 1970 the same reasoning would suggest that if monetary GDP grows, as presently anticipated, annual borrowings by the public sector of around £0.7 million would be feasible without involving a drain on reserves. Clearly changing circumstances would require significant modifications in these amounts from year to year, and even as a general guide these allowances might need to be changed considerably if the real growth were slower or if the private credit demands turned out to be higher.

71. The question remains as to whether Malawi could not also draw still further on its foreign exchange assets to support its development efforts. As noted, there was a substantial use of reserves during 1966. Total external reserves at the end of 1966 stood at £7.3 million, as compared with £9.9 million at the end of 1965.- The former corresponds to about three months .....

1/ Between mid-1965 and mid-1967, bank credit to the private sector went up on the average by £L.5 million a year. However, this was associated with a very large build up of inventories (involving a rapid growth in imports) which is not expected to recur on anything like that scale.

2/ See Appendix Table 25 for the computation of these assets. - 30 - imports of goods and services at current rates. In addition, as noted earlier, Malawi will be receiving £2.7 million in liquid assets over the next two years from the sale of its railways assets in Mozambique. Of these resources, it is estimated that about £1.3 million will be used during 1967 as the result of government borrowings from the banking system and Malawi Railways. 3/ Continuation of use at this rate would seem to be excessive in view of the need for the country to maintain an adequate safety cushion of reserves for contingency purposes. However, it would not seem imprudent to allow for the use of as much as £L1.4 million altogether during the next four years (1968-71), provided that this draw-down takes place on a carefully phased basis. This would leave reserves at the end of 1971 at approxidmately their end-1966 level, but they would then correspond to only about two and a half months imports, assuming growth in the latter is around five percent annually. This would seem to be the minimum safety level consistent with maintenance of 14lawits present liberal exchange policies and of the confidence of the private sector which have proved to be important assets in INalawi's recent development.

72. On these assumptions, domestic resources available for financing the public sector development effort might at the very maximum average about £2.8 million over the next several years, as compared with nearly £4.0 million used in 1966 and £3.6 million in 1967 wxhen the FIS losses are included. The most recent draft (July 1967) of the 1968-70 public sector development program calls for an expenditure from local resources of £3.2 million in 1968 and 1969, with a drop to £3.0 million by 1970. Spending at the latter rates would probably involve a reserve draw-down of about I1 million below the end-1966 level in the three-year period which would leave reserves in 1970 below the level regarded as prudent. However, indications are that budgetary policies will be adjusted to ensure that such a draw-down will not be required.

73. The annual average allowance for external finance in the July draft of the 1968-70 development program is £1l.5 million. This is definitely on the high side. As noted, no external finance for the capital is yet in sight Moreover, implementation of the main projects for which external finance does seem likely may well take somewhat longer than projected in the progTam. The most important prospective source of external finance for development is the United Kingdom which undertook to provide an average of £2.7 million annually for the period 1966-68. Assuming suitable projects are available, U.K. development aid might rise moderately above this level in the next few years. In the case of IDA, one education credit for £2.5 million has been made and another £7 million in credits is under consideration for roads and agriculture. However, it is likely to take four years to disburse these amounts fully even if all the credits are granted soon. In the case of the United States, finance of around £2 million for a road project is possible, but after that the present intention of the United States is to phase out its aid program to Malawi. Germany and Denmark are presently considering commitments up to £2.0 million in total, which might also take four years to disburse. AUl these credits are likely to be forthcoming on quite favorable terms. In addition, more conventional finance is presently under

3/ Ibst of the proceeds of the sale of the railways assets accrue diTrectly to Malawi Railways. - 31 - negotiation for the railroads - about E4.5 million from the Japanese, Government and Japanese manufacturers. Thus, in total, about £30.0 mi-Llion in commitments of external finance are in sight for projects contained in the 1968-70 prograrri. However, even t'hough additional commitments from these and other sources might be made during the period, it is unlikely that total disbursements during 1968-70 (including funds for projects now in the pipeline) will be much in excess of 125 million in the three year period. As compared with E3.8 million of such finance estimated i'or 1967, it seems improbable that actual disbursements in 1968 would exceed f7.0 million. By 1970-71, however, the disbursement rate might plausibly be projected at as much as E9 million or more, assuming that significant further commitments are obtained within the next two years. 74. The Mission's estimates of a plausible pattern of public development expenditures and finance are compared below with the projections of the draft three year program.

~~Table 8 PUBLIC SECTOR DEVELOPMENT FIqANCE: 1967-70 (£ minllion) Est. Pro,. 1967 19 1969 1970~~

~~Malawi Government Draft Proposals for 1969-.70 Plan (July 1967) Total devrelopment spending 6.6 14.7 15.3 13.6 External sources 3.8 11.5 12.1 10.6 Domestic sources 2.8 3.2 3.2 3.0~~

~~Illustratile Rephasing~~

Total development spending 6.6 9.6 11.4 12.2 External sources 3.7 7.0 T 9.2 Domestic sources 2.9 2.6 2.8 , Enterprises surplus after amortization 0.3 .0.9 1.1 1.3 Drawing do%m on foreign assets ( 0.5 0.4 0.3 "Safe" borrowing from banking ( 2.0 system ( 0.6 0.65 0-7 Other :Local borrowing 0.3 o.4 0.45 0.5 Domestic contributions 0.3 0.2 0.2 0.2 - 32 -

~~The Need for Local Currency Financing~~

75. During 1966, Malawi financed over haLf of its total public sector development spending from local resources, which led to a sizeable use of exchange reserves in that year. As indicated in the table above, the L967 contribution of local resources is expected to be about 45 percent, but is also expected to require use of external assets at a rate i%hich cannot safely be sustained. For 1968-70, even assuming total actual spending of some 30 percent less than the Government's July estimate for total public sector development, the indications above suggest that I-alawi can prudently finance no more than one-quarter of the total from its own resources. MIoreover, a part of these resources is likel-T to be required for projects not regarded as eligible for external finance by the nia±n donors, such as primary schools, health facilities and Government buildings. No precise estimate of this portion of the program is feasible, but it would probably amount to between 10 and 15 percent of the total. This uould mean that for those projects which are considered elizible for external finance about 85 percent of total project costs would have to be met bv external donors if total development outlays are to reach as much as £32 million during the period. The need for local currency financing for public sector development arises essentially from the foreign exchange constraint. As noted, at least a moderate use of exchange reserves is likely to be necessary during 1968-70 in order to finance a program as large as £.32 million. Any larger program would probably call for an even hligher percentage of local currency financing or the use of exchange reserves on a scale that would be imprudent. The overall balance of payments prospects and their external debt implications are considered below.

~~The Overall Outlook for External Finance and the Terms of Aid~~

76. If exports and imports during 1968-70 develop along the lines discussed earlier, the current deficit on goods and services would rise from the £11.0 million estimated for 1967 to something over the £13.0 million level reached in 1966. lWith U.K. budgetary grants declining as envisaged, total net transfer receipts would probably drop to around £5.5 million bv 1971 as compared with M1.0 million in 1965 and £6.4 million in 1966. However, as noted, a substantial inflow of public loan capital is expected in the nexl; few years. Gross inflows might rise from the £3.5 million secured in 1966 to around £9.5 million by 1970-71. In addition, the net private cap)ital inflow could well continue to increase (for tea development and other private investments) to over £1.0 million by the earl- 1970's. On the other hand, net factor income pavrents are expected to rise by about £1.0 million in the next several years, while amortization payments on existing debt will remain stable for the next three years and then go up rather sharply during 1971. These medium term prospects are summarized in the table on the following page.

77. Malawi's total reported external public debt at the end of 1966 amounted to about £35 million, including £7 million still undisbursed. Service on this at present is estimated at nearly £L.8 million. In - 33 -

~~Table 9 SIThMARY BALANCE OF PAY1INTS PROJECTIONS -~(>E llion)~~

~~1966 1967 1970~~

~~Exports 15.6 19.0 22.7 Merchand:ise 13.7 17.0 20. Non factor services 1.9 2.0 2.2~~

~~Imports 28.7 30.0 "7.0 Merchandise 23.*8 24.7 31.0 Non factor services 4.9 5.3 6.0~~

~~Balance on Goods and Services -13.1 -11.0 -14.~~

~~Net Factor Income Payments -0.7 -°.5 -1.30 Interest on public debt a/ -1.1 -1. ,/ Other (net) 0.1 0.6 -~~

~~Balance on Current Account -13.8 -11.5 -15.6 Financed by:~~

~~Grants and other Transfers (net) 6.4 6.3 5.6~~

~~Public Loan Capital (net) 2.7 3.1 8.8 Gross inflow 53.9 Amortization -0.8 -0.8 -0.8~~

~~Sale of External Assets (net) - 1.3 -~~

~~Private Long Term 0.7 0.8 1.0~~

~~Private Short Term 1.6 - -~~

~~Use of Reserves 2.8 - 0.2~~

~~Errors and omissions -0.h - - a/ Includes allowance for interest on new debt. - 31, -~~

addition, there is a moderate amount of medium-term debt owed by the Railways which is not yet included in the data reported to the Bank on which service is estimated at around £0.2 million, so that total service will be around 10 percent of estimated exports of goods and non-factor services for 1967. A rise in service on existing debt to £2.2 million is scheduled to take place by 1971, but if exports rise as projected, the ratio would remain about the same as for 1967. As the absolute Ic-;Gel of service on existing debt will continue to average about £2.2 million for most of the 1970's, the ratio would decline significantly during that decade. However, it is evident that Malawi will require substantial new net public capital inflows over the next decade both in support of i-ts current budget and its development efforts.

78. Even if the current deficit on goods and services can be steadil;r reduced as a percentage of GDP after 1970, as would seem plausible, it is unlikely that it could be decreased in absolute terms below the level now foreseen for the 1968-70 period, without leading to a slow down in economic growth. If this is the case, then the addition of the service on existing external debt and a probable rise in net factor income payments for other services, would mean a need for new capital inflow averagina about £16.0 or £17.0 million for much of the next decade. However, it seems reasonable to assume that grant aid will continue to decline steadily after 1970, so that only moderate net transfer receipts would be available by the end cf the decade, say £2 or £3 million annually (e.g. private donations and grants for technical assistance purposes). Assurming a continued good climate for private investment, net private long term inflows might rise to as much as £3.0 million annually by the second half of the 1970's, particularly if some of the large potential projects such as pulpwood and bauxite development materialize by then. This would still leave a require- ment for new net public loan inflows of around £11 million annually.

79. The average terms for the moderate amount of loan capital received by Nalawi during 1964-66 were 3 percent interest, 214 year repayment term and 4 years of grace. On balance, the terms of loans now under negotiation are substantially better than this. For about 80 percent, the average terms are 0.5 percent interest and 35 year repayment including 6 years of grace. The only significant hard loans in prospect consist of a continued £0.5 million annually at 6 percent interest for part of the IJ.K. financing c,f commutation payments, and the Japanese loan for the railway. The construction loan of around £3.6 million has an interest rate of 6 percent and an average repayment term of about 15 years including a 4 vear period of grace. The £1.O million in rolling stock calls for 5 percent interest and 7 vears repayment with no grace period. If the average terms implicit in this prospective pattern were applied to new net public loan inflow of around £11.0 million annually in the 1970-80 decade, it would lead to total public loan requirements of £16.0 million on the average in order to cover the additional debt service. Debt service would rise to about £h.2 million byr ].975, and nearly £o.5 million by 1980. Even if export growth of 7 percent - 35 - could in fact be maintained over the next decade, the resulting debt ratio would be 12 percent in 1975 and 18 percent by 1980. The latter would appear to be an excessive burden for lialawi, particularly given the uncertainties inherent in any longer run export projection. Thus, it would seen prudent for Malawi to seek an even softer set of average terms than those immediately in prospect. LIST OF TABLES

~~Table No,~~

1 Public Debt Outstanding at December 31, 1966 2 Estimated Contractual Service Payments on Public Debt Outstanding at December 31, 1966 3 Land Usage and Potential 1966 4 Expenditure on Gross National Product at Current Prices 1964-71 4a Investment and Savings in Malawi 1964-67 5 Gross Domestic Product at Current Prices by Industrial Origin 1954-67 6 Gross Domestic Product at 1963 Prices by Industrial Origin 1954-67 7 Value of Commercial Agricultural Output at 1.963 Prices 1954-67 8 Agricultural Production in the Nlonetary Sector by Crops 1954-67 9 Cash Paid to Growers by F.M.B. for Purchase of Crops 1954-66 10 Estimated Livestock Population and Recorded Slaughters 1954-66 11 Fish Production and Exports 1954-66 12 Ianufacturing Industries 1964-65 12a Consumption of Electricity produced by the Electricity Supply Commission 1960-66 13 Gross Value of Construction 1954-66 - 14 Value of Building Plans Approved in Blantyre-Limbe 15 Rec:urrent Revenue---and Expenditure of the Central Government 1954-67 - 16 Current Revenue of the Central Government 1964-67 16a Current Expenditure of the Central Government 3964-67 17 Development Expenditure of the Central Government 1964-70 18 Operations of the Central Government 1964-67 18a Residents' Heldings of Malawi Government Treasury Bills 1964-67 18b Increase in Residents' Holdings of Malawi Government Stock in 1966 19 Revenue and Expenditure of Government Enterprises ].964-67 19(i) Revenue and Expenditure of Air N4alawi 1964-67 19(ii) Revrenue and Expenditure of the Electricity Supply Commission 1964-70 19(iii) Revenue and Expenditure of the Farmers Marketing Board 1964-66 19(iv) Revenue and Expenditure of 1alawi Railways 1.964-67 19(v) Revenue and Expenditure of Mudi River Water Board 1.964-67 19a Development Expenditure of the Central Government and Government Enterprises 1964-70 List of Tables (Cont'd.)

Table No. 20 Reserve Bank of Malawi 1965-67 21 Commercial Banks' lMain Assets and Liabilities 1965-67 22 Advances by the Commercial Banks 1961-67 23 Bank Deposits and Advances 1961-67 24 Survey of Ibney and Credit 1965-67 25 Foreign Assets 1963-67 26 Production and Export Value of lvHain Crops 1954-67 27 Exports of Main Crops 1954-80 28 Balance of Trade 1950-66 29 Principal Trading Partners 1954-66 30 Imports Classified by Economic Category 1964-66 31 Value of Recorded Remittances sent to Malawi by Migrant Workers 1954-66 32 Balance of Payments 1957-67 32a Balance of Payments 1964-67 Table 1: ?4ALAA',I - EXTERNAL MEDIU14- AN3D LONG-TERM /1 PUBILIC DEBT OUTSTAiTDING lNICLUDING UNDISBIUSED AS OF DECEMBER 31, 1966

~~Debt Repayable in Foreign Currency~~

~~(In thousands of U.S. dollar equivalents)~~

~~Deb-t outstandincg Iteir, December 31, 1966 Net of Including undisbursed undisbursed TOTAL EXTERNAL PUELIC DEBT 69,8h1 90,625~~

~~Publicly-issued bonds /2 29,533 29 533 Externally-issued 18,059 Locally-issued, externally held 11,047 11,M7~~

~~Privately-placed debt 6 L96 7,196 Supplierst credits h76 .7 Other 6,020 6,720~~

~~IDA credit 77 L90~~

~~Loans from governments 33,235 53,172< Denmark: 21lx 2,172 Geranny 2,018 ,025 Rhodesia 1,820 1,820 United Kingdom /3 29,683 h5,189 ULnited States - AID - 200~~

1 Debt with arn original or extended maturity of one year or more. 2 Net of accu.ulated sinking funds of _ 1,787,000 for externally issued and £ 4t59,O00 for locally-issued, externally-held bonds. /3 Does not include British Government loan of $272,997 (equivalent) which is under negotiation.

Statistical Services Division Economics Department July 2h, 1967 Table 2: MALAWI - ESTIMATED CONTRACTUAL SERVICE PAYMENTS ON EXTERNAL MEDIUM- AND LONG-TERM PUELIC DEBT OUTSTANTDING INCLUDING UNDISBURSED AS OF DECEMBER 31, 1966 A

~~Debt Repayable in Foreign Currency~~

~~(In thousands of U.S. dollar equivalents)~~

~~Page 1~~

~~GRAND TOTAL~~

~~CEBT CUTST (BEGIN OF PERICD) PAYMENTS CURING PERIOD INCLUDING AMCRTI- ______YEAR UNCISBURSED ZATICN INrEREST TOTAL~~

1967 84,622 1,714 3,111 4,525 196- 82,499 1,63373,047 4,684 1969 8( ,347 1,55E _ ,989 __ 4,548 197 78,233 1,757- 2,934 4769.' 1971 75,872 3 2e2_ 2,876 6,158 172 71,944 2,7S1 2,749 5,541 1973 6E,469 3,42q 2,672 6__1 1974 64,423 5,C34 2,494 7,525 1975 587rg9 3,26E 2,27C 55,533 S7I 6 54,675 4,1717 2,198 6,365 1977 49,64e 4,15_ 2,C43 6,'2C1 44,57S ,537 1,880 7,811 1979 37,682 4,736 1,523 6,259 1982 32,324 4,1$2 1,235 5,426 1981 27,786 4,rE2 1,C83 5,336

~~PU3LICLY-ISSUED BNGNiS -EXTERNALYL-ISSUED__ DEoT OUTSTA"idI NG YEAR (BEGIN OF PERIOO) PAYMEN-j_OURING I GRCSS hrET/ AMORTI- INTEREST TCTAL ZATIGN~~

196S7 23,r62 18,C59 443 1,',57 1,5. 19658 22,541 17,282 456 1,930 1,436 196 9 22,1f25 16,5C1 48., 1,C04 1,484 197._ 21,499 15,71: _ 5C0_ 977 1,476 1571 2 I7J 14,876 514 95C 1,464 1972 22_,441 _ 14,C61 528 _ 922 _ _ I_L 4 5_ 1973 19,9rc) 13,232 512 895 1,407 1974 12,547 2,369 803 39172 197t5 12,615 1C,C13 463 637 11C" 1976 12,163 9,364 482 613 1_Q96 1577 11,7 1 8736 502 589 1091 1978 1 .i 227 8 C7C _ __ 565937 ____ 197'9 4,969 4, -69 1,954 28) 2,234 I198C 3 Cr-4 3 04 1,447 166 1_613 1981 1,554 1,554 1,554 93 1t647 Table 2: MALAWI - ESTIKATED CONTRACTUAL SERVICE PAYNTS ON EXTERNAL MEDIUM- AND IJNG-TERM PUBLIC DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DECEMBER 31, 1966 / (CONT.)

~~Debt Repayable in Foreign Currency~~

~~(In thousands of U.S. dollar equivalents)~~

~~Page 2~~

~~LOCALLY-ISUE,_DXTERNALL! r,~~

~~DEBT OUTST tBEGIN OF PERIODI PAYMENTS DURING PERICO INCLUDING AMURTI- _ YEAR UNCIS-'JFkSED ZATICN INTEREST TOTAL~~

1967 119432 19S 737 93_ 1SU68 11,156 ZC5 737 942 1969 1V,,764 1SS 737 __ 936 197w0 10,329 199 737 936 1971 9,E41 1I2Er 737 2I017 1972 8,226 -e16 673 858 1973 7,-~58 635 673 1.3 ,8 1974 6,578 17e 644 822 1975 5,986 178 644 822 1976 5,107 551 644 1,195 1977 3,872 844 610 1454 1978 2,282 130 543 673 1979 1,356 36 543 5!)6 19S8 782 3r 442 412 1991 469 41'2C 442 842

~~______PRIVATELY-PLACED DE6TS-TCTAL~~

~~OEaIT OUTST (IBEGIN OF PERIOD) PAYMENTS DURING PERICO INCLUDING AMURTI- YEAR UNDISBURSED ZATICO INT1`EST TOTAL~~

1967 1,235 356 61 457 1S68 839 172 41 213 1969 667 1e 36 54 1970 649 4 36 40 _1971 645 4 36 _ 4. 1972 641 4 35 39 1973 637 4 35 39 1974 633 - 35 35 1975 ___633 ____ - 35 35 1976 633 454 35 486 19717 179 S1 7 98 197'8 e6 2 91 Table 2: MALAWI - ESTIMATED CONTRACTUAL SERVICE PAtWNTS ON EXTERNAL HEDIUM- AND LoNIG-TERM PnIC DEBT OUTSTAO INCLUDING MIMSURSD AS OF DECEMER 31J 1966 A (ODNT.)

~~Debt Repayable in Foreign Currency~~

~~(In thousands of U.S. dollar equivalents)~~

~~Page 3~~

~~SUP P I E RS CREDITS~~

~~DEBT OUTST (BEGIN OF PERIOO) PAYMENTS OURING PERIOD INCLUDING AMORTI- _ YEAR UNDISBURSED ZATICN INTEREST TOTAL~~

~~1967 255 63 14 77 1968 192 172 6 178 196_ _ 2C 4 1 5 19 7! 16 4 1 5 1971 12 4 1 5_ 1972 8 4 1 5 1973 4 4 - 4~~

~~PRIVATELY-PLACED JE3TS CTHERS~~

~~DEBT OUT ST IBEC-IN OF PEkIUD) PAYMENTS DURING PERICD~~

~~INCLUDING AMORTI- _ - YEA3 UNC1SBURSED ZATICN INTEREST TOTAL~~

1967 S8(' 333 46 38•) 1963 647 - 36 36 1969 647 14 35 49 197.' 633 - 35 35 1971 633 - 35 35 1972 633 - 35 35 1973 633 - 35 35 1974 633 - 35 35 1975 633 - 35 35 1976 633 454 35 488 1977 179 S1 7 98 1978 88 66 2 91 Table 2:sMPALAWI - ESTIMATED CONTRACTUAL SERVICE PAYMETS ON EXTERNAL MEDIUM- AND LONG-TERM PUBLIC DEBT OUTSTANDING INCLUDING UNDIS3URSED AS OF DECEMBER 31, 1966 A (CONT.)

~~Dobt Repayable in Foreign Currency~~

~~(In thousands of U.S. dollar equivalents)~~

~~Page ls IDA CREDITS~~

~~OEBT OUTST (BEGIN CF PERIOD) PAYMENTS DURING PERIOD _ _' C UIONCLUDING A MGgR TI- YEAR UNOISBURSED ZATICN INTEREST TOTAL~~

~~1967 490 - 1963 49n 31 4 34 1969 459 61 _ 3 65 197f, 398 61 3 64 1971 337 61 2 64 1972 276 61 2 63 1973 214 61 1 63 1974 153 61 1 62 iL975 92 61 1 62 1976 31 31 31~~

~~GOVERNMEhT LOANS - TOTAL~~

~~DEBT OUTST (BEGIN OF PERIOD) PAYMENTS DURING PERIOD INCLUDING AMDRTI- YEAR UNDISBURSED ZATION INTEREST TOTAL~~

1967 53,40 6 676) 1,255 1,931 1968 52,730 77h 11,235 2,009 1969 51,956 800 1,209 2,009 1970 51,156 993J 1,181 2,17h 1971 50,163 1,423? 1,152 2,574 1972 h8,T71 2,013 1,116 3,129 1973 46,728 2,217 ( 1,067 3,28h 197h 44,511 2,#26.. 1,012 3,438 1975 h2,086 2,56Y 954 3,519 1976 39,520 2,6607 896 3,556 1977 36,e60 2,721 837 3,558 1978 34,139 2,7821 771 3,553 1979 31,357 2,8191 701 3,520 1980 28,539 2,77Y 627 3,402 1981 25,763 2,849 51 7 3,397 Table 2: MALAWI - ESTIMATED CONTRACTUAL SERVICE PAYMENTS ON EXTERNAL MEDIUM- AND LONG-TERM PUBLIC DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DECEMBER 31, 1966 /1 (OONTo.)

~~Debt Repayable in Foreign Currency~~

~~(In thousands of U.S. dollar equivalents)~~

~~Page 5 LOANS FROM DENMARK~~

~~DEAT CUTST (BEGIN OF PtRIOD) PAYMEcNTS DURING P-RICO INCLUDING AMCRTI- YEAS UNCISBUiRSO ZATICN NTEr-EST TOTAL~~

1_96_7 _2,172 _ 196 3 2,172 _ _ 1;69 _ 2,172 ______1'i7'. 2,172 - _ 1971 2,172 145 _ 145 197? 2,!F27 145 _ 145 1973 1,282 145 _ 145 1(t74 1,737 145 - 145 I975 1,593 145 - 145 1 _76 - 1,448 145 - 145 19,77 1,3-3 145 - _ 145 1978 1,158 145 _ 145 1979 1,r13 145 _ 145 11',c3.'-_869 145 _ 145 1931 724 145 _ 145

~~______LCANS FRCM GERMANY __~~

~~DEBT OUTST __ _ - (BEGIN OF PEPRIOO) PAYMENTS DUPING PERICD IINCLUDING _ AMORTI- __ ___ YEAk UNCISFUURSED Z4TICN INTEREST TCTAL~~

1967 4, '25 - 42 42 1963 4,'.25 - 50 50 1 96 9 _ 4__ 25 _ 58 ___ 58 197'? 4s.25 - 66 66 1971 _- 4 2 5 - 74 74 1"72 4.'25 225 79 3(e4 1973 3,91', 225 75 3 i- 1S74 3,575 225 7C. 295 1 ?7 - 5 - 351 ___ 225 66 291 1976 3,125 225 61 286 1'77 2, 9_Wr 225 57 __ 282 1'976 2,675 225 52 277

1979 2,75r _4 _ _, 2 2 5 48 _ 273 1922 2, 225 225 43 268 193 1 _ _ , `_ 225 _ 39 254 Table 2: MALAWI - ESTIMATED CONTRACTUAL SERVICE PAYMfTS ON EXTElNAL MEDIUM- AND LONG-TERM PUBLIC DEBT OUTSTANDING INCLUDING UNDISBURSEM AS OF DECEMBER 31, 1Q66 /1 (CONT.)

~~Debt Repayable in Foreign Currency~~

~~(In thousands of U.S. dollar equivalents)~~

~~Page 6~~

~~LOANS FRCM RHCDESIA~~

~~DEBT OUTST (BEGIN OF PERIOrJ) PAYMENTS DURING PERIOD INCLUOING AMORTI- YEAR UNDTSBURSEO ZATICN INTEREST TCTAL~~

_167 1,32f 33 91 124 1968 1,787 35 89 124 1569 1,752 36 87 124 1$7' 1,716 38 85 124 1971 1,678 4C 83 124 1972 1,9638 42 81 124 1973 1,595 44 7$ 124 1574 1,551 4 7 77 124 1975 ___ 1,504 4S 75 124 1976 1,455 51 72 124 1977 _1,4?4 54 7 ( 124 1S78 1,35rC 57 67 124 197^_ 1, 293 _ 64 124 198 2 1,9234 63 61 124 1931 1,171 66 58 124

~~LOANS FRCM U'NITEO KINGOCM_~~

~~DEBT OUTST _- (BEGIN UF PERIOD) PAYMENTS DURING PERICD ____ INCLUDING AM__.. T. __._. YEAP U C,IS URS D ZATIGN ltITEREST TOTAL~~

1967 45,189 643 1,122 1,765 1968 44,546 735 1,,S5 1,834 1969 43,10 7 763 1 63 _18261__ 1970 43,'"44 955 1,f226 1,983 1971 4 2 Yp8 9 1t238 992 2 29 1972 40,851 1,62l 953 2,554 1973 35,2 5C l,8'2 911 29713 1974 37,448 2piOS 663 2,S72 1975 5t43c95____ 812 _ 2___2,95S 1976 33,292 2,23E 765 29999 1977 _ 3,552 2,z53 725 _ 29958 1978 26,761 2935w; 647 29997 1979 26y41C 2 3E4 584 2,9629 193, 24,026 2,33e 518 23,856 1981. 21,63E 2,4CE 447 2,855 Table 2: MALAWI - ESTIMATED CONTRACTUAL SERVICE PAYMENTS ON EXTERNAL MEDIUM- AND LONG-TERM PUBLIC DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DECEMBER 31, 1966 / (CONT.)

~~Debt Repayable in Foreign Currency~~

~~(In thousands of U.S. dollar equivalents)~~

~~Page 7~~

~~UNITED STATES - AID LOANS _ DEBT OUTST (BEGIN SF PERI001 PAYMENTS LURING PERICO INCLUDING AMORTI- ___ iYEAR Ut'DISGi .URSEu ZATICI INTEREST TOTAL~~

~~1967 2o~~

~~19631.67 ______2'-2? - __ __ _ 1 _ __ i._____~~

~~1969 2 _ _ __ _ 197-: 12~~

~~1971 2C ___ - __ 2 ___ 2 .972 2 f - 2 2 1973 _____2_ , __ 2_ _ 2 1974 2 2 2~~

1577 25 5 _ ___ 1978 155 5 5 1 ) 197S_ 193 5 5 ___ _ 193" 1F6 5 5 12 1981 18's __5_____ 4 ___ 1 -j Includes service on all debt listed in Table 1 prepared July 2u, 1967, except for the following loans for which terms of repayment are incomplete: (U.S. dollar equivalent) a) $2h8,500 from United Transport Overseas Ltd., ($221,000 outstanding as of December 31, 1966). b) $5,7b0,000 from Commonwealth Development Corporation, Barclays Overseas Development Corporation and the Standard Bank Ltd., (the whole amount outstanding as of December 31, 1966). c) $h2,000 locally-issued, externally held bond. 2 Net of accumulated sinking funds.

~~Statistical Services Division Economics Department July 2h, 1967 Table 3: LAND USAGE AND POTENTIALs ('000 ACRES) 1966~~

Possible for Clear Field Total Unused Quality.2/ Population by Population C.F.P. Acres District Total Area Cultivation Patternl/ Land Available Good-i Moderate4i ?oor2/ Districts and Regions Density sq.m. per Family

Chitipa 1,057 378 110 268 59,463 36 9.2 Karonga 827 287 101 186 78,635 61 6.4 Rumpi 1,175 336 113 223 46,619 25 12.1 Nkhata Bay 1,009 282 94 188 83,898 53 5.9 Mzimba 2,572 1,771 704 1,067 229,9 57 13.3 Northern Region: 6,640 3,054 1,122 1,932 144 667 1,121 498,515 48 Kasungu 1,944 1,140 169 971 98,154 33 9.1 Nkhotakota 1,050 612 66 546 62,961 38 5.3 Ntchisi 408 310 122 188 66,612 104 9.1 Dowa 800 488 246 242 181,178 150 6.7 Salima 491 457 167 290 85,046 111 9.8 Lilongwe 1,519 1,023 577 446 499,730 211 6.3 Mchinji 828 495 211 284 92,331 71 11.9 Dedza 893 565 227 338 229,884 165 5.0 Ncheu 844 468 190 278 164,017 124 5.9

~~Central Region: 8,777 5.558 1,975 3,583 480 1,190 1,913 1,480,003 109 _~~

Fort Johnston 1,547 998 250 748 231,827 96 5.5 Kasupe 1,471 1,205 300 905 225,422 98 6.9 Zomba 636 345 225 120 281,806 28b 4.4 Mlanje 851 510 335 175 398,762 300 4-4 Cholo 412 116 1o6 _ 245,508 381 2.5 Blantyre 1,032 408 230 178 279,820 173 7.1 Chiradzulu 189 77 70 7 141,870 181 2.5 Chikwawa 1,212 575 250 325 157,805 83 8.2 Nsanje 481 268 100 168 101,074 135 5.1

~~Southern Region: 7,831 4,502 1 2,636 624 728 1,284 2,063,894 169~~

~~National Totals: 23.248 13,111 4,963 8,151 1,248 2,585 4,318 4,042,412 132~~

~~1/ Clear Field Pattern is cultivated land which includes recent fallow visible on air ohotos. It is most easily seen on sandy soils where shifting cultivation is practiced.~~

~~2/ These estimates of quality are very crude and are subject to change once a land-use survey is completed.~~

~~3/ "Good" is land which will be settled when the infrastructure of domestic water supply and roads is provided.~~

~~4/ "Moderate" is land which requires infrastructure and some population pressure to be settled.~~

5/ "Poor" includes about 1.467m. acresof hills and swamps in the "good" and "moderate" acres. "Poor" land will be settled only under very extreme population pressure, and even then may not be permanent.

~~Source: Ministry of Natural Resources Table h: GROSS NATIOiNAL PRODUCT AT CUR-RENT PRICES 1964-67Y~~

~~Estimate 1964 1965 1966 1967~~

~~Consumption 59.3 64.7 72.7 81,2 Government 9.1 9.4 11.2 12.6 Private Monetary 23.2 27.3 32.8 39.0 Private Su:bsistence 27.0 27.8 28.7 29.6~~

~~Investment 4.5 10.9 15.1 11.5~~

~~Gross Fixed Capital Formation 6.o 8.9 13.1 12.5 Central Government 2.1 3.6 5.3 5.3 Government Enterprises 1.4 2.1 1.8 1.2 Private 2.5 3.2 6.o 6.0 Change in Stocks -1.5 2.0 2.0 -1.0~~

~~Exports 12.9 15.2 18.7 22.2~~

~~Domestic Exports 11.0 13.5 13.7 17.0 Non-factor Services 1.1 1.2 1.9 2.0 Re-exports 0.8 0.5 3.1 3.2 Less Imports 18.6 24.9 31.8 33.2~~

~~Retained imports 13.5 19.9 23.8 2h.5 Non-factor Services 4.3 4.5 4.9 5.5 Re-exports 0.8 0.5 3.1 3.2 Gross Domestic Product at market prices 58.1 65.9 74.7 81.7~~

~~Net Factor Income +0.3 +0.5 -0.7 -0.5 Gross National Product at market prices 58.4 66.4 74.0 81.2~~

1/ The figures in this table for 1964-67 are based on preliminary official estimates of the gross domestic product and the balance of payments as revised by the Mission. They do not take account of the Provisional National Accounts Report - 1964-65 issued in September 1967.

~~Sources: National Statistical Office and Reserve Bank of Malawi. Table 4A: INVEST.1]EWŽI AID SAVI.GS I. 7AIAI: 1964 -~~

~~£IM~~

~~Estimate 1964 1965 1966 1967~~

~~Fixed Investment 6.0 8.9 13.1 12.5~~

~~Inventory change -1.5 2.0 2.0 -1.0~~

~~T'otal Investment 4.5 10.9 15.1 11.5~~

~~Balance on goods and services -5.7 -9.7 -13.1 -11.0~~

~~Domestic Savrings -1.2 +1.2 +2.0 0.5~~

~~Plus net factor income-/ +O 3 +0.5 -0.7 -0.5~~

~~National Savings -0.9 +1.7 +1.3 -~~

~~Public Savings -3.3 -2.3 -2.3 -3.1~~

~~Central Government -4.1 -3.5 -3.5 -3.6~~

~~Government Enterprises3/ +0.8 1.2 1.2 0.5~~

~~Private domestic savings 2.1 3.5 4.3 3.6~~

~~Private national savings 2.4 4.0 3.6 3.1~~

~~Gross domestic product at imarket prices 58.1 65.9 74.7 81.7~~

~~Less tax revenue and and Government enterprise surplus -6.9 -7.4 -9.3 -9.7~~

~~Disposable income 51.2 58.5 65.4 72.0~~

~~Ratio of private national savings to disposable income (percentage) 4.7% 6.9% 5.5 4.3%~~

1/ See note 1 to Table 4. 2/ The principal components of net factor income are profits and interest payments, receipts from migrant workers. 3/ Surplus on current account less amortization payments to Government's current account.

Source: National Statistical Office, M1inistry of Finance and IPission Estimates. Table 5: INDUSTRIAL ORIGIN OF OROOi DOMESTIC PliwUtr*

~~Clrrent Prices (6million)~~

~~(Eat..) 1954 1955 1956 157 1958 195y 1960 1961 1962 1963 1964 1965 1966 1967~~

Subsistence Agriculture 16.o0 17.30 17.90 18.40 19.00 19.60 2n.20 20.o0 21.50 22.10 22.8 23.5 24.2 25.0 Smanlholder Commercial Agriculture 2.11 2.12 2.30 2.48 2.83 3.31 3-13 3.11 6.46 3.90 6.1 5.4 6.0 6.2 Esl.ateSmlhodri Agriculture 3.30 ,.,'9 -.L1 3.70 3.33 3.8.3 6.47IuIue-n3 L6.5 3.97 3.5d 3.1.1 363.o 4604 L..3433 22.21 22.81 23.61 26.58 25.16 26.74 27.80 28.16 29.93 29.58 30.0 32.5 36-2 35.5

Malufac Luring and Mining 1.45 1.61 1.80 2.07 2.62 2.57 2.59 2.81 2.99 2.52 2.1 2.5 3.2 Electricity and Water .08 .08 .14 .22 .27 .2( .38 .58 .46 .55 O.b 0.6 0.Q Building and Ccnstructiurn 1.15 1.28 1.69 2.02 2.08 2.18 1.96 1.82 1.78 1.86 2.0 2.8 3.7

~~2.68 .98 3.62 4.31 .78 5.0 6.v3 b.20 5.23 4.94 4.6 5.9 7.7 10.0~~

~~Transport and Communications (Total) 1.38 1.54 1.87 1.94 2.24 2.22 2.6 2.62 2.81 2.81 2.5 2.9 4.3 4.6~~

Commerce (distribution) 3.o6 3.48 3.54 6.23 .664 4.26 4.75 5.65 5.61 6.06 6.0 7.6 9.0 Real Estate .07 .o6 09 .13 .14 .1Y .22 .24 .26 .29) JOecilirigs .19 .24 .32 .37 .41 .63 .40 .46 .49 .50) 0.8 1.0 1.2 Domestic and other services 1.18 1.28 1.52 1.68 1.77 1.84 1.87 1.85 1.92 1.94 0.6 0.8 1.0 Eanking and insurance .05 .o6 .07 .08 .05 .08 .06 .07 .o8 .08 1.6 1.7 2.0

~~Commercial and other services (Total) 4.55 5.13 5.53 6.50 6.83 6.78 8.31 8.26 8.35 8.87 8.8 11.1 13.2 15.2~~

Public Administration and Defense 1.19 1.37 1.48 1.64 1.767 1.89 2.00 2.22 2.45 2.69 3.0 3.1 3.6 Fducatiur .49 .51 .57 .61 .79 .83 .94 1.02 1.09 1.15 1.5 1.6 1.8 health .29 .37 .40 .44 .50 .61 .60 .63 .68 .58 o.6 0.6 0.7

~~Public Services (Total) 1.96 2.25 2.46 2.70 3.03 3.-32 3.54 3.87 4.22 4.42 5.1 5.3 5.8 6.2~~

~~Subsistence Services 3.12 3.22 3.32 3.612 3.52 3.63 3.76 3.86 3.98 4.10 4.2 4.3 4.5 4.6~~

~~GOP at factor cost 35-91 37-93 40.41 43.45 45.56 47.10 50 77 51.97 54.52 54.72 55.2 62.0 69.7 76.1 indirect taxes .80 1.00 1.20 1.50 1.50 1.70 1.90 ?.00 2.20 2.30 2.9 3.9 5.0 5.6~~

~~0DP at. Market Prices 36.71 38.93 41.61 44.95 67.o6 68.60 52.67 53.Y7 56.72 57.02 58.1 65.9 74.7 81.7~~

* Notes to this table are shown on the following page. Also see note 1 to Table 4. NOTES TO TABLE 5

1. For 1954-1963 all items, except "Subsistence Agriculture and Subsistence Services", have been taken from National Accounts and Balance of Pay- ments of Northern Rhodesia, Nyasaland and Southern Rhodesia, 1954-63. (CSO Salisbury.) Subsistence production has been revised by the Mission, using the same per capita estimates for 1954 as the CSO series, but increasing the level to reflect higher population estimates (3.690 million) for 1963, derived from the 1966 population estimate of 4,o42,ooo and an estimated 3% growth, (as against 3.0 million for 1963 and a 2.27 growth rate in the CSO series). l4oreover, no effort has been made by the Mission to adjust for price changes on the subsistence crops as is done in the CSO series.

~~2. For 1964-67, subsistence production derived as for 1954-63. Commercial Agriculture was estimated by the mission and differs from the N.alawi Government official estimates as follows:-~~

~~(Values in f million) 1964 1965 1966 1967 (Est.) Mission Official Mission Official Mission Official Mission Official~~

~~Smallholder 4.1 3.6 5.4 5.8 6.0 6.6 6.2 ) Estate 3.1 3.8 3.8 4.1 4.0 4.6 .3 11.6~~

~~7.2 7.4 9.2 9.9 10.0 11.4 10.5 11.6~~

Differences in the estimates are explained by the fact that the Mission's figures for smallholder commercial include the value of main crops at FMB current prices (except for coffee, rice, pulses and cassava, for which export values were used), plus the value of livestock and fish, where the official Government figures apparently excluded the value of fish and livestock in 1964. In any case, sales to F14B were used as the sole indicator for estimating GDP contribution for 1965-67. To obtain the GDP contribution of the commercial value of the main crops, livestock and fish, the mission took the ratio of the 1963 value of commercial production to the CSO 1963 GDP value and applied it to subsequent years. Similarly, for estate agriculture, the Mission estimated commercial production at current prices and used the 1963 relationship to CSO GDP figures for adjusting in subsequent years. It is not Ikoizm how the official HIalawi estimates for 1964 were derived. (The basic esttimates are shown in "Treasury Document No. 5" ent-itled "Budget 1966-Background Information". These estimates were later adjusted slightly upwards - from L3.6 million to f3.8 million - on the basis of a GDP estimate for 1964 made from the expenditure side.) These estimates do not appear to be consistent with the 1963 Salisbury estimates in that they indicate a small increase over the 1963 gross value, whereas Mission calculations at current export price show a sharp decline between 1963 and 1964. From 1964 onward, official estimates are derived by applying an index of export value for the main crop to the 1964 base. Notes to Table 5 Continued

3. The Mission's estimates of the contribution of other sectors differ also from some of the official 1964 to 1967 figures because of the different indicators which were used. Those used by the ITalawi Government are shaon in "Summary of Revised. Estimates of Mlonetary GDP 1964-67" (M-iay 17,1967), prepared by the National Statistical Office. The indicators used for the various sectors by the IIission are as follaws:-

~~a) Building and Construction: an index derived from the gross value of construction shown in Table 14.~~

~~b) Total of Manufacturing, Electricity, Building, etc.: 1967 estimates assume a rate of increase similar to 1966.~~

~~c) Transport and Communications: Official estimates accepted for 1964-66. The 1967 figure assumes an increase equivalent to the increases in agriculture and industry.~~

d) Commerce, Real Estate, : Average (weighted) increase in African Dwellings, Domestic and Commercial Agriculture, non-African agri- other services, Banking, etc. culture and Total Industry is used as an index.

~~e) Public Services: 1964-66 official figures accepted. The total increase for 1967 is assumed to be equivalent to the increase in current expenditures over the budget for 1966.~~

4. The overall differences between the official estimates of monetary GDP at factor cost and those of the Mlission are as follows:- (Current values in £ million) Official Mission 1964 28.2 28.2 1965 34.4 34.2 1966 42.1 4100 1967 (Est.) 50.6 46.5

* Latest official estimates shown in "Estimates of GDP - Revised" (16/6/67) prepared by the National Statistical Office. Table 6 GROSSG DOMESTIC PRODUCT AT 1963 PRICES'/

~~Est. Sectors 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967~~

1. Commercial Agriculture2/ 4.94 4.66 5.24 5.08 5.72 6.17 6.66 7.28 7.90 7.48 7.28 8.99 9.58 10.12 Estate 2.70 2.56 2.93 2.69 3.14 3.38 3.60 3.91 3.83 3.58 3.43 3.74 4.18 4.34 Smal)holders 2.24 2.10 2.31 2.39 2.58 2.79 3.06 3.37 4.05 3.90 3.85 5.25 5.40 5.78

~~2. Industry, Constr ction and Utilities_/ 3.48 3.94 4.61 5.05 5.45 5.62 5.38 5.52 5.21 4.94 4.55 5.84 7.55 9.80~~

~~3. Transport and CommunicationsY' 1.83 2.04 2.38 2.27 2.56 2.49 2.55 2.78 2.80 2.81 2.47 2.87 4.21 4.51~~

~~4. Commerce and Non-Public Servicesl/ 5.98 6.80 7.05 7.61 7.80 7.62 8.97 8.76 8.32 8.87 8.71 10.99 12.94 14.90~~

~~5. Public Services_/ 2.58 2.98 3.14 3.16 3.46 3.72 3.84 4.11 3.86 4.42 5.05 5.25 5.69 6.08~~

~~6. Subsistencek" 19.92 20.52 21.22 21.82 22.52 23.23 23.94 24.66 25.48 26.20 27.00 27.80 28.70 31.20~~

~~GDP at Factor Cost 38.73 40.94 43.64 44.99 47.51 48.85 51.34 53.11 53.57 54.72 55.06 61.74 68.67 76.61~~

~~of which GDP monetary sector 18.81 20.42 22.42 23.17 24.99 25.62 27.40 28.45 28.09 28.52 28.06 33.94 39.97 45.41~~

~~1/ See note 1 to Table 4.~~

2/ Based on volume index of the commercial crops (shown in Table 8) weighted at 1963 FMB,auction,and export prices. The implied price index which presumably reflects a combination of marketing board prices and export prices is as follows:

~~1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 =1 =1T =97 =77 =55 =:6 =1: =0 157- =5 99W =Z 1- =3~~

3/ 1954-63 deflated with price index for national expenditure (consumption and investment) implied in official CSO estimates in constant and current prices. National Accounts and Balance of Payments of Northern Rhodesia, Nyasaland and Southern Rhodesia, 1954-1963 (CSo Salisbury. July 1964).

~~4/ Subsistence assumed to grow at 3% from 1954 base, as adjusted to take account of recent population estimates. Table 7: VALUE OF COMMERICAL AGRIGULTURAL OUTPUT AT 1963 PRICES: l914-1967* (Z.'ooo)~~

~~Est. 195_ 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967~~

~~A. Smallholder Crops -~~

Maize 489 178 303 52 115 53 180 164 4 117 277 190 564 562 6 Groundnuts 274 386 366 519 480 480 774 979 1,359 1.035 731 945 1,71414 1,875 Tabacco 844 527 960 930 1,118 1,213 857 681 964 1,153 1,046 1,663 1,350 1,251 Seed Cotton 348 415 145 208 265 485 604 575 920 512 717 1,096 688 898 Coffee - - - 10 10 20 20 20 30 30 30 30 40 50 Paddy Rice 149 336 194 166 189 292 334 460 236 236 187 257 208 222 Pulses 59 154 192 178 154 92 145 173 169 436 448 726 492 605 Cassava 29 5 20 91 31 53 53 186 194 31 56 69 60 62

~~Sub-total 2,192 2,001 2,180 2,154 2,362 2,688 2,967 3,238 3,876 3,550 3,492 4,976 5,146 5,525 6/~~

~~Livestock and Fish:/~~

Cattle 336 335 387 417 423 380 427 461 520 585 574 575 616 644 Pigs 44 50 51 56 75 78 67 72 78 79 96 109 112 121 GoaLs and Sheep 37 41 45 47 50 48 51 59 57 55 67 73 81 86 Fish 94 108 122 208 197 166 173 234 345 410 395 562 521 565

~~Sub-total 511 534 605 728 745 672 718 826 1,000 1,129 1,132 1,319 1,330 1,416~~

~~Total 2,703 2,535 2,785 2,882 3,107 3,360 3,685 4,064 4,876 4,679 4,624 6,295 6,476 6,941~~

~~National Income Value 3 2,243 2,104 2,311 2,392 2,579 2,789 3,059 3,373 4,047 3,897 3,845 5,244 5,395 5,782~~

~~B. Estates~~

Tea 2,270 2,310 2,746 2,389 3,076 3,076 3,445 4,158 3,881 3,472 3,604 3,765 4,476 4,160 Flue-cured tobacco 594 512 567 415 304 318 1401 318 360 373 373 373 373 553 Fire-cured tobacco 383 2148 301 398 1436 1496 406 263 421 316 75 150 83 - Air-cured tobacco 198 141 160 160 141 330 292 151 151 160 19 94 38 - Burley tobacco 236 248 286 273 397 348 360 447 484 559 584 720 658 745 Seed Cotton 45 69 14 24 42 49 73 73 ------Tung Oil 186 177 177 242 158 279 233 251 288 307 316 335 307 325

~~Total 3,912 3,705 4,251 3,901 4,554 4,896 5,210 5,661 5,585 5,187 4,971 5,437 5,935 5,783~~

~~National Income Value 2,699 2,556 2,933 2,692 3,142 3,378 3,595 3,906 3,854 3,580 3,430 3,752 4,095 - 3,990 -~~

~~Total Nationial Income @ 1963 Prices 4,942 4,660 5,244 5,084 5,721 6,167 6,654 7,279 7,901 7,477 7,275 8,996 9,490 9,772 6/~~

* See next page for foot notes and also note 1 to Table 4. Notes to Table 7: 1/ Tonnage of smallholder crops as shown in Table 8 have been valued at 1963 FMB prices, except for coffee, rioe, pulses and cassava for which export prices were used. The prices used are as follows:

Maize f 9.0 per ton (FMB) Groundnuts 37.5 " " " Tobacco 85.7 " " " Seed Cotton 48.3 n n " Coffee 202.5 " " (Export) Paddy Rice 46e7 " " Pulses 24.2 " " Cassava 13.3 " " " 2/ Livestock values were estimated from slaughters as shown in Table 10. The average live-weight price for cattle in 1963 was fl4.5 per animal. No liveweight prices were available for pigs, goats and sheep. Instead, 1964 Cold Storage prices were used for mutton and lamb (2.8 shillings per lb.) and 1965 Cold Storage price for pork (3.04 shillings per lb.) to estimate total dressed weight value per slaughtered animal, the 1963 average weights being 88 lbs. for pigs and 28 lbs. for sheep and goats. A crude estimate of liveweight price was then made by reducing the dressed weight value by 70( (the ratio of liveweight to dressed weight for cattle).

3/' National income value derived by applying to all year the ratio between the total commercial value in 1963 as derived here and the national income estimates for these items given for 1963 In the Salisbury series ("National Income and Expenditure" 1954-63; CSO Salisbury). 4/ Tonnage of estate crops shown in Table 8 have been valued at 1963 export prices used for tea, tung and cotton, and auction prices for tobacco. They are as follows: Tea E264.l per ton Flue-cured tobacco 276.7 " " Fire-cured tobacco 150.3 " Air-cured tobacco 188.3 " " Burley tobacco 24 8 .3 Tung 185.8 " " Seed-cotton 209.1 " "

5/ These values should be Increased by E83pO0O in 1966 and E331,000 in 1967 to allow for estimated value of sugar. 6/ Should be increased by about E400,000 to reflect revised estimate of commercial maize sales in 1967.

~~Source: Conmuted from Table 8 Table 8: AGRICULTURAL PRODUWCTION IN THE MONETARY SECTOR BY OCFPS (lbs. milion)~~

~~Est. 195h 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 A. Smallholder V/~~

1. TobaccC 19.y7 12. 3 22.21 .8 26.1 8.3 20.0 .9 22.5 2 ., 2 38. 31.5 29. Fire-cured Tlo 5 rn 73 12.1 T21. 19W7 23.7 fl.Ii 2 Air-cured 1.2 0.8 1.0 1.3 1.0 1.9 3.9 3.7 2.7 3.5 2.9 9.1 5.7 2.6 Turkish ------0.1 0.1 0.1 0.1 0.2 0.2 0.2

~~2. Seed Cotton 14.4 17.2 6.5 8.6 11.0 20.1 25.0 23.8 38.1 21.2 29.7 45.4 28.5 37.2 3. Groundnuts 14.6 20.6 19.5 27.7 25.6 25.6 41.3 52.2 72.5 55.2 39.0 50.4 93.0 100.0~~

~~h. Maize 108.7 39.5 67.4 11.6 25.6 11.7 40.0 36.5 0.9 26.1 61.6 42.2 125.4 125.0 31 Cassava 5. 4.3 0.7 3.1 13.7 4.7 8.0 8.0 28.0 21 29 1gi 4.7± 8.4 10.4 n.a. n.a.~~

~~6. Beans and Pulses 4.9 12.7 15.9 14.7 12.7 7.6 12.0 14.3 14.0 36.0 37.0 60.0 40.7 50.0 7. Rice 6.4 1h.4 8.3 7.1 8.1 12.5 14.3 19.7 10.1 10.1 8.0 11.0 8.9 9.5~~

~~8. Coffee - - - 0.1 0.1 0.2 0.2 0.2 0.3 0.3 0.3 0.3 0.4 0.5 B. Estate~~

1. Tobacco 13.4 10.5 12.1 12.0 12.7 15.2 14.3 11.0 13.7 13.1 8.6 11.5 9.5 10.0 Flue-cured h.3 3.7 4.1 3. r2.3 2. 3 2. r2.727 2.7 77 o Fire-cured 5.1 3.3 4.0 5.1 5.8 6.6 5.4 3.5 5.6 4.2 1.0 2.0 1.1 Air-cured 2.1 1.5 1.7 1.7 1.5 3.5 3.1 1.6 1.6 1.7 0.2 1.0 0.h Burley 1.9 2.0 2.3 2.2 3.2 2.8 2.9 3.6 3.9 4.5 4.7 5.8 5.3 6.o

~~2. Tea 17.2 17.5 20.8 18.1 23.3 23.3 26.1 31.5 29.4 26.3 27.3 28.5 33.9 31.5~~

~~3. Seed Cotton 1.3 2.0 o.4 0.7 1.2 1.4 2.1 2.1 - - - - -~~

~~4. Tung Oil 2.0 1.9 1.9 2.6 1.7 3.0 2.5 2.7 3.1 3.3 3.4 3.6(est) 3.3 3.5~~

2/Production figures represent sales through the Farmers' Marketing Board and Grovern Co-operatives, except for tobacco, which is based on production estimates 2/ of the Ministry of Natural Resources. - Sharp increases reflect the temporary organization of a market which was discontinued in 1963 because of technical problems in storing product. Source: Quarterly Digest of Statistics (I771966) and Ministry of Natural Resources. 3/ Later revised to 200Q5. lbs. Table 9

~~CASH PAID TO GRO/ERS BY F,IM.B. FOR PURCHASE OF MOPS 125-66~~

~~(£ million)~~

~~1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966~~

~~Cotton .25 .30 .10 .18 .24 .46 .57 .54 .92 .51 .76 1.1 .63~~

~~Groundnuts .21 .30 .33 .46 .43 .43 .86 1.05 1.50 1.06 .77 1.1 2.26~~

~~Tobacco~~

~~Fire-cured .61 .43 .83 .95 1.22 .82 .47 .46 .98 1.25 .64) 1.20) ) 1.9 ) Sun/Air-cured .04 .03 .04 .06 .06 .11 .20 .12 .17 .19 .13) .22)~~

~~Nazie, beans and pulses .35 .45 .29 .03 .07 .05 .12 .13 - .52 .82 1.3 1.53~~

~~Total: 1.48 1.51 1.59 1.69 2.02 1.87 2.22 2.30 3.57 3.53 3.12 5.4 5.84~~

~~Source: FIB Accounts Table 10: ESTTi4ITh2D LIVESTUCK POPUILATION AND RECORDED SLAUGHTERS 1954 - 1966~~

~~CATTLE SFEEP GOATS PIGS .Iuropean African Slaughters ~31aughters Slaughters Slaughters Year Owned Owned Total European African Total European ;:frican Total European African Total~~

~~1<4 * ,6F0 282,700 23:146 2,(20 5,622 2,070 726 322,012 11,860 1,913 80,565 4,844~~

~~1955 10,038 296 988 23,140 2,720 75,989 1,380 981 325,132 13,371 1,953 75,192 5,484~~

~~1956 10,408 308,041 26,660 2,692 63,951 2,926 890 353,671 13,795 1,670 75,488 5,582~~

~~1957 10,973 316,656 28,744 3,059 54,660 2,078 1,228 359,580 15,433 2,557 86,568 6,128~~

~~1950 13,807 329,252 29,149 2,254 60o,095 3,152 644 412,042 15,421 2,613 79,541 8,234~~

~~1959 14,780 341,734 26,2h0 2,758 72,538 2,431 71T 459,889 15,264 2,607 117,306 8,582~~

~~196) 17,043 339,634 29,440 3,192 65,oo6 3,o67 954 441,668 15,773 2,310 70,160 7,390~~

~~1961 15,L25 359,210 31,766 2,993 79,107 3,192 973 523,485 18,656 1,782 98J,67 7,941~~

~~1962 15,000 365,000 35,853 3,000 73,000 2,833 1,000 492,000 18,233 2,000 103,000 8,521~~

~~1963 13,592 382,553 40.350 2,405 79,513 2,452 793 437,695 18,103 2,148 125,749 8,695~~

~~1264 10,232 401,187 39,613 2,321 /1,818 2,355 394 479,901 22,535 2,174 133,221 10,557~~

~~1965 10,244 422,049 39,670 2,035 69,302 2,026 232 464,314 24,934 2,139 121,634 11,975~~

~~1966 10,255 444,690 42,459 29639 78,175 1,923 253 625,834 28,121 2,385 140,266 12,273~~

~~Source: MiTistry of Natural Resources Table 11: FISH PRODUCTIOiN ADM EXPORTS 1954 TO 1966~~

~~Total Catch in Fish Exports (short tons) Year Short Tons Value in E Fresh Smoked Salted~~

~~1954 3,500 94,500 _- No exports - - - 1955 4,000 108,000 It~~

~~1956 4,500 121,500 tt 1957 7,705 208,035~~

~~1958 77290 196,830 62 33 93~~

~~1959 6,150 166,o50 134 110 105 1960 6,400 172,800 280 211 153~~

~~1961 8,654 233,658 173 108 133 1962 12,766 3L4,682 68 65 108~~

~~1963 15,180 410,000 29 40 1.33 1964 14,621 390,000 3 123 1965 20,800 500,000 21 114~~

~~1966 19,300 480,000 15 16 101~~

~~Source: Ministry of Natural Resources Table 12: MANUFACTURING INDUSTRIES~~

~~1964 - 1965~~

~~Industries 1964 1965 Agricultural Processing~~

~~No. of units 28 29 Gross output p000 3 345 4h300 Net output ELOOO 1,062 1,835 Net output/person f 324 562 Total employed 3s,272 3,267 Capital. expenditure ' 000 135 11~~

Other 4inufacturing No. of units 51 55 Gross output L'OOO 5,688 6,686 Net output E'OOO 2,115 1,848 Net output/person f 353 281 Total employed 5,996 6,568 Capital expenditure E'000 201 276 Total Industry

~~No. of units 79 84 Gross output LOOO 9,033 109986 Net output LtO00 3,177 3,683 Net output/person f 343 374 Total employed 9,268 9,835 Capital expenditure CtOOO 354 387~~

~~Sources National Statistical Office 'able 12. Con.u-wnptlon v ;318ctricity Proc1ucec- by the z2ectricity Surly Coruiiissicn 1960-66~~

~~(Million Units)~~

~~Domestic and Incustrial ComrnrciJal General Toita1~~

~~19601'61 15.2 4-.9 29.12 1.1/62 17.9 .39 33.1~~

~~1962/63 19. 6.1 1O. 5 36.2~~

~~19$'4 21.8 6.7 1O.- 39.0~~

~~1 9c,- 5';'Z 7. z ,6Z45, Z~~

~~19c16 36. 0 10.1 15.1 1 . 2~~

~~.ource .lectricity 'irply Co.%imssion. CompcnlpZ.iur o $'3tatistic;. Table 13~~

~~GROSS VALUJE OF CONSTRUCTIO1I (£ million)~~

~~Private Contractorst Work Total Departmental For For Construction Works Government Private Output~~

~~19',4 1.2 o.6 0.5 2.3~~

~~1955 L.3 0.9 0.2 2.4 1956 1L.7 1.3 1.0 4.0~~

~~19',7 1L.6 2.0 1.0 4.6 19',8 2.0 1.6 1.9 5.5~~

~~1959 1.9 0.8 2.6 5.3 1960 1.9 1.8 1.0 4.7~~

~~1961 2.1 2.4 0.6 5.1~~

~~1962 2.0 1.0 0.7 3.7 1963 2.8 0.9 0.4 4.1~~

~~19614 ;2.4 o.6 0.4 3.4~~

~~1965 :2.6 1.1 1.1 4.8 1966 3.0 1.8 1.5 6.3~~

~~Source: Idinistry of Finance. Table 1b: VALUE OF BUILDING PLANS APPROVED IN BLANTYRE-LIMBE~~

~~(in £'OOO)~~

~~Year Industrial Comrrercial Residential Other Total 1961 55 90 166 160 b71~~

~~1962 103 49 122 340 611~~

~~1963 99 73 51 543 766~~

~~196) 38 O9 23 50 160~~

~~1965 52 188 218 3)1 799~~

~~1966 na na na na 1,L86~~

~~1st Quarter~~

~~196h 5 33 6 27 71~~

~~1965 32 12 - 13 57~~

~~1966 267 32 71 6 376~~

~~1967 99 38 150 8 245~~

~~Source: 1i.nTistry of Finance. Table 15 RECURRENT REVENUE AND EXPENDITURE OF MALAWI GOVERNMENT 1/ (fM.)~~

~~(Revised Govt. gst.) 1954/55 1958/59 1962/63 1964 1965 1966 1967~~

~~Tax Revenue 2.8 3.6 4.6 4.9 6.2 8.1 9.5 Other Revenue 1.2 1.7 2.2 2.6 2.9 3.0 3.3~~

~~Recurrent Revenue 4.0 5.3 6.9 7.5 9.1 11.1 12.8~~

~~Expenditure 5.2 7.7 12.0 10.5 11.4 13.2 14.9 Interest Payments .2 .6 1.0 1.1 1.2 1.4 1.4~~

~~Recurrent Expenditure 5.4 8.3 13.0 11.6 12.6 14.6 16.4~~

~~Recurrent Deticit -1.4 -3.0 -6.1 -4.1 -3.5 -3.5 -3.6~~

The recurrent revenue and expenditure figures for 1964-67 are derived from Tables 15 and 16. They represent adjusted Government figures, and exclude non-recurrent items in the current budget. The recurrent expenditure figures used in this table further exclude expenditure of t.0.5 million each year between 1964 and 1967 on overseas additions, education allowances and passages which are financed out of special grants from the United Kingdom not included in recurrent revenues.

Sources: The figures for 1954/55, 1958/59 and 1962/65 are estimates based on Malawi Govermuent and Central Statistical Office Salisbury statistics, including the National Accounts and Balance of Payments of Northern Rhodesia, Nyasaland and Southern Rhodesia 1954-63 (July 1964). NOTES:

~~The revised table onthe current expenditures and deficits o. %hc '.alawi Governrrent 1964-67 contains the following amendments.~~

~~(i) t1orks and Housing~~

~~Addition of subventions of £35,000 from the President's Office -o e iNational Housing Corporation in 1966 and of 220,000(net) in 19L'.~~

~~(ii) Eational Assembly and Office of the President~~

Subventions of rC35,ooo to the National Housing Corporationi in i166 and M.20,000 (net) in 1967 transferred to Works and Housing. The f£2rt1er clOO,000 of the gross subvention in 1967. The N.H.C. is item2ized under revision in accounting arrangements. In 1966 and 1967 provisiom Xor scholarshipsare transferred from this heading to a separate item; these provisions amount to 0112,000 in 1966 and £95,00O in 1967. Prior to 1966 these expenditures were included in the development vote o2 the 1Mdnistry of Education. In 1966 and 1967 provision for the Youngf Pioneers continues to be included under Other Administration, an, not under its new budgetory classification in the President's Office.

~~(iii) Pensions~~

~~Pensions include only the annual pension provisions. Special capital items i.e. gratuities, commutation, and compensation payments are listed separately.~~

~~(iv) Other administration~~

Various adjustments are made in Other Administration. In l965,1l,!'; and 1967 subscriptions to international monetary institutions are listed separately. In 196L,, expenditures on independence arrangements are listed separately under major non-recurring items and in 1966 the expenditure on the acquisition of !Ulawi Railwaysl equity is treated similarly, while specific provision is made for the increase in inventories. T&bla 16: current Revenues of the lawi Governments196 4-67 (CM '000) Revised Government 1964-67 Estimate % Growth 1964 1965 1966 1967 Rate

~~Direct Taxes 2662 30249 702 M 1~~

~~Compaiy and income tax 889 912 1319 2C00 30.5 F.A.Y.E. 439 653 807 950 29.3 Minimum, graduated and assessed taxes 941 987 1000 1100 5.4 Estate duties, stamp duties ptc. 393 497 577 487 7.4~~

~~Indirect Taxes 2228 3198 4378 5041 29.5~~

~~Customs duties 1/ 1957 2902 4038 4646 31.4 Exccise duties 271 296 340 395 13.4~~

Total Tax revenue 2oin 73-3r Other recurrent revenue 2603 2869 3013 3260 7.8 Pents and services -7t1 -75 -B -7r7 Posts and teLecommunications 620 766 809 914 13.3 Reimbursements Debt repayments ) 1242 1312 1328 1369 3.3 Mi1scellaneous items )

~~Total recurrent revenue 7m93 -I19 7TI 12tin9~~

~~Non-recurrent revenue and accounting adjustments 1265 56 _ 100~~

~~Total Current revenue (exclud- -91 ing loans andc grants on curr- 9172 T3I end account.) Irants and Lafans 1 •5 6122 6084 -~~

~~Domestic loans - - 400 -~~

~~Cont/.... Table 1.6: Cont/.... Revised 1964-67 Government % Growth~~

~~19614 1965 1966 Estle7 Rate~~

Current budget 8 xpenditure related grants and loans financed by the U.K. Govern- ment. 2185 1626 11478 '174L: Grants and loans for ) compensation and ) commutation of pensions ) 1306 1029 897 11114 Over seas service aid scheme) 504 537 628 Other grants 879 93 4 42 U.K. Budgetary Grants-in-Aid 5000 59149 42b14 4300

~~TotalCrt Budget Reve 53 167148 17215 19022 (including grants and loans)~~

~~1/ Customs Duties include the motor fuel tax and fiscal payrents froa nie iThodesian Governnmnt (1964-66.)~~

~~2/ Non-jiecurrent Revenue includes the following items:~~

~~(i) Back payments of Federal Income Tax and other dissolved pools of revenue in 196.4 and 1965.~~

(ii) Gross revenue received from the National Housing Corporation under the internal public sector accounting rearrangements made in 1967. Source: Ministry of Finance Table 16A: Current Expenditure of the Ib1lawi Government 1964-67

~~(£i 000) Revised Government 1964-66 EStimate 'Growth 1964 1965 1966 1967 Rate lIatural Resources and Surveys 1187 1033 1276 i4-29 6.!~~

~~Industry & Conmmrce 107 171 159 J189 15.3~~

~~Economic and Social Infrastructure 5505 6741 7 1 4 .0~~

Co=nunications and Transport 830 824 923 991 6.1 Education 1823 2056 2475 3205 14.2 Health 905 1068 1242 1388 15.3 Housing and works (including road maintenance) 513 1459 1718 1995 9.7 Labor 94 98 113 166 15.2

~~Administration 4582 5272 5905 6213 10.7~~

District and local Government 451 524 513 632 11.9 Defence 345 406 458 586 19.3 External Affairs 176 317 304 323 29.5 Information 110 123 242 122 3.5 National Assembly and Office of the President 583 588 717 602 5.4 Pensions 349 447 504 540 15.7 Police 1013 1112 1179 1245 7.1 Prisons and Justice 459 513 542 625 8.0 Other administration 1096 1242 1446 1q98 8.5 Interest Payments 1053 1167 1240 1357 8.8 Recurrent Expenditures 12094 13148 15051 16933 11.7 Other Expenditures: Non-recurring items 116 - - - Accounting adjustTmnts - - 112 125 Total 116 - 112 195

~~Current Expenditure 12210 13148 15163 17128 11.7~~

~~Cont/.... Table 16A: Cont/.... Revised Government 1964-66 Estimate % Growth 1964 1965 1966 1967 Rate~~

~~Special Capital Expenditures:~~

Debt redemption and sinking funds 2189 1139 726 628 Compensation, pension commutation payments and gratuities 1602 1198 1226 1318 Subscription to inter- nataional monet,ary institutions - 650 18 36 Special capital and inventory payments - - 600 -

~~Total 3791 2987 2570 1972~~

~~Total Expendit,ure in the Current Budge!t 16001 16135 17733 )9100 5.8~~

~~Source: Ministry of Finance Table 17: DEVELOPMENT EXPENDITURE OF THE CENTRAL GOVERNMENT 1964-1967-~~

~~(£ 2000)~~

~~Revised Government EstimateW' Draft Development Program 1968-70c/ 1964 1965 1966 196 19 191969 1970 1968-70~~

~~Natural Resources~~

Agriculture 113 295 682 922 2,567 1,935 1,905 6,407 Fisheries 11 34 27 51 36 24 19 79 Forestry and game 206 352 368 397 502 423 449 1,374 Surveys and lands 229 116 84 88 125 112 16 253 Veterinary 37 51 45 49 115 108 141 364 596 848 1,206 1,507 3,345 2,602 2,530 8,477

~~Industry Commerce Finance and Statistics Government expenditure 13 60 258 68 10 150 110 270 Transfers to Development Corporation 25 428 339 709 - - - _ 38 488 597 777 10 150 110 270~~

Economic Infrastructure Civil Aviation 11 207 215 44 228 20 38 286 Pbsts and Telecommunications 83 133 221 415 300 398 400 1,098 Power 167 432 283 308 - - - - Railways - 2 150 109 - - - - Roads 207 796 1,376 1,227 3,045 3,607 2,621 9,273 Waterways 4 4 83 67 30 50 200 280 Works Organization 281 201 148 201 464 367 279 1,110 753 1,775 2,476 2,371 4,067 4,442 3,538 12,047 Social Infrastructure

Education 426 581 301 300 1,034 1,213 829 3,076 University 162 119 228 1.75 642 810 210 1,662 Health - 49 103 100 384 373 285 1,042 Housing 100 141 283 341 651 501 401 1,553 Water supplies and sanitation 359 155 285 293 369 213 153 735 1,047 1,045 1,200 1,209 3,080 3,110 1, 8,78O -2-

~~Revised Government Estimateb/ Draft Development Program 1968-702/ 1964 1965 1966 1967 1968 1969 1970 1968-70 Aciri'nistration~~

Law and order 17 170 396 335 172 175 162 Other Government 509 buildings 81 210 381 319 502 205 45 752 Miscellaneous servicesd/ 153 151 97 32 92 70 New capital 65 227 - 17 27 42 1,565 1,665 2,195 5,425 251 548 901 728 2,331 2,115 2,467 6,913

~~TOTAL 2,685 4,704 6,380 6,592 12,833 12,419 10,523 35,775~~

a/ Transfers from the Central Government to Government enterprises are included in this table under development expenditure. b/ June 1967 estimate of Malawi Treasury. Present estimate (October 1967) of total outlay for the year is now c/ July 1967 version of development program 1968-70. E5.5 million. d/ Miscellaneous services are largely a residual item.

~~Sources: Ministry of Finance Ministry of Development and Planning Table 18: OPERATIONS OF THE PIAhLArWI GOVERTIENT~~

~~A. Revenue and Expenditure (£M '000) Revised Govt.Est. 1964 1965 1966 1967~~

~~Current~~

~~Revenue (other than grants and loans) 8,758 9,172 11,093 12,938 Expenditure 12,210 13,148 15,165 17,128 Current deficit 3,452 3,976 4,070 4,190~~

Capital Revenue (other than grants and loans)l- 236 27 66 95 Expenditure 6,476 7,691 8,950 7,472 Development 2,685 4,704 6,380 5,500i/ 'SpecialS/ 1,602 1,848 1,844 1,344 Debt redemption and sinking funds 2,189 1,139 726 628 Capital deficit 6,240 7,664 8,884 8,419

~~'otal Budget~~

~~Revenue 8,994 9,199 11,159 13,033 Expenditure 18,686 20,839 24,113 24,600 Deficit 9,692 11,640 12,954 11,567~~

1/ Capital revenue represents domestic revenue credited direc-tly to the Developrment Fund, but excludes reimbursements from domestic sources, which are listed as contributions in the second section of this table which deals with the financing of the deficit.

Special capital expenditure consists of compensation, pension commutation payments and gratuities, subscriptions to international monetary institutions and special capital and inventory payments as specified in the current expenditure table.

~~3/ October estimate by Malawi Treasury. - 2 - Table 18: Operations of the Malawi Government (continued)~~

~~B. Financing the Deficit (~2I '000)~~

~~Revised Govt. Est. 1964 1965 1966 1967~~

~~1. I'TlTERNAL SOURCES 8981 11431 8955 9914~~

~~(i) External Grants 7776 10545 5685 5725~~

~~Grants (current) 5871 6544 4824 4970~~

U.K. Overseas Service Aid Scheme 625 503 537 627 U.K. Colonial Development and Welfare 246 5 - - Other U.K. Grants - 88 44 43 U.K. Budgetary Grants 5000 5948 4243 4300 Grants (Special Capital) 468 406 412 475

~~U. K. Compensation Scheme 468 406 412 475~~

~~Grants (Capital Development) 1437 3595 449 280~~

~~U.K. Capital Grants 825 1378 122 150 U.K. Independence Gift - 2014 161 - Other U.K. Grants 264 25 - - U.S.A.I.D. 57 148 73 115 Other Grants 291 30 93 '15~~

~~(ii) External Loans 1205 886 3270 4039 Loans (Special Capital) 846 625 485 639~~

~~U.K. Compensation and 846 625 485 639 Pension Loan~~

~~Loans (Capital Development) 359 261 2785 3400~~

~~United Kingdom 359 4 1700 2400 Denmark - - 71 3CO Germany _ 7 721 500 I.D.A. - - 27 lCO other - 250 260 100~~

~~(iii) Sale of external assets - - 150 - 3 -~~

~~Table 18: Operations of the Malawi Governaent (continued)~~

~~B. Financing the Deficit (L14 '000) Provisional Estimate 1964 L965 1966 1967~~

~~II DOMESTIC SOURCES 711 209 3999 1653~~

~~(i) Contributions 2/ - - 247 158~~

~~(ii)Domestic Borrowing 101 1007 3526 1495~~

~~(a) Outside Banking System 101 483 1786 -~~

~~Long-term Government Stock 1/ 2& 223 756 Loan from Marketing Board - - 400 Treasury Bills (net) 73 260 630 _~~

~~(b) Banking System 524 1740~~

~~Borrowing from Reserve Bank - _753 1552~~

~~Long-term Government Stock 1/ (137) (342) Treasury Bills (net) - ( 90) ( - ) - Loans and advances (net) - (-980) (1210) _~~

~~Borrowing from Commercial Banks - 1277 188 _~~

~~Long-term Government Stock 1/ - (700) (-38) T'reasury Bills (net) (550) (100) Loans and advances (net) - ( 27) (126) -~~

~~(iii)Government's External Account _ (increase -, faUl +) -326 -345 +753~~

~~(iv)Use of other Assets (including--cash balances, - - _ increase -, fall +) +936 -453 -527~~

stock issues are 1/ Figures for borrowing through long-term Government under gross; repayments of Government stock are listed separately on a net basis. capital expenditure. All other borrowings are presented

~~2/ Domestic reimbursements for development expenditure.~~

~~Source: Ministry of Finance Reserve Bank of Malawi Table 1BA: Residents' Holdings of MalaT,d Government Treastuy Bills (V. 000)~~

end J-a YEAR ENDING: 1964 1965 1966 1967 Total Outstanding 370 - 1,270 1/ 2,000 i 200 Bankin System - 640 740 800 Reserve Bank - 90 90 100 Commercial Banks - 550 650 700 Post Office Savings Bank - .1l5 295 325 Other Institutions:

Public Sector - 15 545 625 Air Maiawi - - 25 - Central African Ainjays - - 50 75 City of Blantyre - - 20 Electricity 50 Supply Comnission - - 40 1X0 Farmers Mlarketing Board - - 5 15 Railways Malawi - 5 255 370 Malawi Housing Corporation - - - L0 Mudi River lWlater Board - 10 130 - University of Malawi - - - 15 Others (liquidating agency sinking funds etc.) - - 20 20

Private Sector 370 500 420 L50 British American Tobacco Co. - 90 7 -7 Clhurch of Central Africa Presbyterian - - 10 10 Insurance Companies - 5 20 40 New Building Society 130 165 110 120 Tea Growers Association - - - 75- L. W. N. A. 240 240 240 200

1/ The total for 1964 and 1965 includes 370 in 6-month bills (the rest are 3-month) of which 130 were held by the New Building Society (N.B.S. ) and 240 by the Witwatersrand Native Labour Agency (W.N. L. A. )

~~2/ The total for 1966 includes 300 in 6-month bills (the rest are 3-month) of which 60 were held by the N.B.S. and 240 by W.N.L.A.~~

~~Source: Reserve Banlk of MIalawi. Table 18B: Increase in Residents' Holdinas of Milawi Governrant Stock in 1966 (* 000) Sales Net Issues of stock or Purchases increase taken up redemption of stock~~

~~(+) (-) (+)~~

~~Baniking System 30 631 -646 319~~

~~Reserve Bank 342 631 -458 169~~

~~Commercial Banks -38 - -188 150~~

~~I'ost Office Savings 187 200 -125 112 ,thier Institutions 843 629 -90 304~~

~~Central Africa Airways 60 60 -~~

~~Farmners iarketing Board 440 44 0 --~~

~~lie;r Building Society 100 - - 100~~

~~Insurance Companies -21 25 -46~~

~~Others 264 104 -44 204~~

~~Total 1334 1460 -861 735~~

Thiese statistics are based on issues of .e1.46 million (Local Register ,-1 million, F.NI.B. 0.M4 million, Central African Airways £.06 million), plus stock transfers from abroad of X62,000, less stock redemption of 8138,000 giving a total net increase of {Mt.334 mi.llion.

~~Source: Reserve Bank of Malawi and 1,inistry of Finance. Table 19: Revenue and Expenditure of Government Enterprises 1/1964-66~~

~~(£OOO)~~

~~Consolidated Account~~

~~1964 1965 1966 I. Cuirrent Revenue h885 6169 6784 Expenditure 3894 46 5525 u nperaTing MI 333 17-2 Interest Payments 348 413 533 Taxation 102 110 240 Current surplus/deficit +991 +1313 +_T27~~

II. Canital Revenue - - - FExpenditure 931 3091 3831 Development 1375 1942 TI1 Amortisation 186 212 237 Loans to Government - 65 865 F.MI.B.stocks (net -630 +872 +i543 increase +) Capital surplus/deficit -931 -3091 -3831 III. Total 'Levenue 4885 6169 6784 Expenditure 4825 7947 9356 Total surplus/deficit +177 --2572 Surplus/deficit (exclud- -570 -306 -164 ing stock finance, loans to Government and capital revenue) Table 19 (continued)

~~Consolidated Account £M~~

~~1964 1965 1966~~

IV. Fi;nAnn ng thp rioficit External 638 765 563 Government 267 471 374 Use of other assets -965 +5h2 +1635 (including cash balances rise -, fall + of' which - - +1719 net borrowing by the F.M.B. from the cornanercial banks)

~~Use of other assets -335 -330 +92 (exclusive of crop finance)~~

1/ Govermenlt enterprises included in this table are Air Malawi, Central African Airways, Electricity Supply Cor-ission, Farmers Marketing Board, Malawi Railways, Mudi River Wdater Board. Detailed notes are attached to the individual tables.

~~Sources: Ministries of Finance and Development Planning and Government Enterprises. Table 19 (i): Revenue ar.d t.cnditure of Government FPnem rises 1964 - Central African Airways - Air Malawi 1/~~

~~l964 1965 9166~~

~~I. Current Reve-nue 458 508 521 Expenditure 387 430 434 Operating 387 430 434 Interest payments - - - Current surplua/deficit 71 _77 87~~

~~II. Capital expenditure 60 165 150 ,)evelopment expenditure 0 101 Amortisation payrents - - - Loans to Government - 60 135~~

~~III. Total evernue 458 508 521 Expenditure 447 595 584 Total siirplus/deficit +1 7 +Z3~~

~~IV. Financing the deficit External Government - - Use of other assets -11 +87 +63 (includes cash balances increase -, fall +)~~

1/ The statistics presented in this table assume that approximately 15 per cent of the revenue and expenditure of Central Africa Airways is attributable to Malawi. There is no legal or accounting basis for this ratio, but it would appear that when Air Malawi is constituted as a separate company, its operations will be conducted at approximately this level.

~~Source Central African Airways-Air Malawi Table 19 (ii): Revenue and Expenditure of Government Enterprises 1964 - 1970~~

~~Electricity Supply Commission ('i000) Missiont EscorT Projection 1968-70 Estimate 1964 1965 1966 1967 1966 1969 1973~~

I. Current Revenue 588 683 743 698 785 875 983 Expenditure 497 547 562 494 521 525 526 Operating 397 l3 -73 206 2/ 216 239 Interest payments 99 96 177 288 305 298 287 Current surplus/deficit 91 136 181 204 264 350 457

~~II. Capital expenditure 1035 1439 899 484 414 497 636 Development 969 1337 -3W6 27 357 700 Amortisation 66 102 73 96 136 140 236 Loans to Government - - 40 - - - -~~

~~III. Total Revenue 588 683 743 698 785 875 983 Expenditure 1532 1986 1461 978 935 1022 1162 Total surplus/deficit 944 -1303 -7 0 -150 7147 T77~~

~~IV. Financing the deficit External 638 765 563 - 128 157 150 Governrmnt 167 432 283 308 - - - Use of other assets +139 +106 -128 -28 +22 -10 +29 (including cash balances rise -, fall +)~~

~~1/ Figures for 1964 represent two-thirds of the i8 3/ Projections to 1970 based on estimates of Electricity month accounti ng period, July 1963-December 1964. Supply Commission.~~

2/ Reduction in operating costs due to the intro- Sources: Ministry of Development and Planning duction of hydro-electric power. Electricity Supply Commission. Table 19 (iii): Revenue and Expenditure of Government Enterprises l964-1266

~~Farners Marketing Board~~

1964 1965 1966 I. Current Sales proceeds l/ 5140 8197 8246 Crop purchases 3121 541o 5843 Net sales proceeds 2019 7S7 7003 Other revenue 2/ 20 18 33 Total current revenue 2039 2b05 2b7 Overhead expenditures 333 40o 462 Operating expenditute 1013 1591 1681 Payment for Malawi- Government Services 48 48 48 Total operating expenditures 1394 2039 2191 rnterest payments - - Total current expend- ti2re 1394 2039 1191 Cu.rrent surplus/deficit 766 --2

~~II. CaDital expenditure *-467 1192 2227 Development 3/ -; 320 -714 Amortisation - - - Stocks 4/ -630 872 1543~~

~~Loans - - 4/40 5/~~

~~cont/.... -2-~~

~~Table 19(iii) continued....~~

1964 l965 1966 III. Total Revenue 2039 2805 2436 Expenditure 927 3231 4418 Total surplus deficit +11i2 -4 -12982 Surplus deficit +482 +446 + 1 (excluding stocks and loans) IV. Financing the deficit External Government - - - Use of other assets -1112 +426 -1982 (including cash balances rise -, fall +) Of which net borrowings from the commercial - banks (increase +, - - +1719 decrease -)

1/ Sales proceeds figures represent sales proceeds realised in the course of the calendar year, less stocks on hand at end of previous year at estimated net realisable value, plus crop stocks on hand at end of current year at estimated net realisable value.

~~2/ Other revenues represent rents from property etc.~~

~~3/ Development expenditure includes expenditure on markets, storage facilities, subsidy payments.~~

~~4/ Change in inventories.~~

~~5/ Loan to Governnent for acquisition of equity holding in Malawi Railways.~~

~~Sources: Ministries of Finance and Development and Planning, and Farmers Marketing Board. 67 Table 19(iv) Revenue and Renditure of Government Enterprises 196- M4alawi Railways 1/ (L '000)~~

~~Pro- visienal 1964 1965 1966~~

~~I. Current~~

~~Revenue 1575 1911 2800 Operating 155 TU8T 777 Other 2/ 20 20 30~~

~~Exrenditure 1356 1557 2053 Operating Tri TM 'I5607 Interest payments 100 167 206 Taxation 102 110 240 Current surplus/deficit +219 +35h +747~~

~~II. Capital~~

Revenue net - - Expenditure 227 -264 8l Development 119 17 122 Amortisation and 1o8 94 109 sinking funds Loans to Governments - 5 250 Capital defidt -227 1W Table 19(iv) continued.... Pro- visional 1964 1965 1966

~~III. Total~~

~~Revenme 1575 1911 2800 Experditure 1583 1821 2534 Total surplus/deficit -8 +90 2-9 IV. Financing the Deficit~~

~~3cternal _ - Government - - - Use of other assets +8 -90 -266 (including cash balances: increase -, fall +)~~

~~Notes:~~

~~1/ Malawi Railways are assumed to have been a Government enterprise throughout the whole period although the Government did not secure full control of the company until 1966.~~

~~2/ Other income includes dividend payments received by the Malawi Railways' group of companies, but excludes income received from Malawi Railways road services.~~

~~Sources: Ministries of Finance and Development and Planning Malawi Railways. Table 19(v): Revenue and Expenditure of Government Entqrises 1964-1967~~

~~Mudi River Water Board~~

~~Mission01 Estinate 1964 1/ 1965 2/ 1966 1967 I. Current~~

~~Revenue 225 262 234 - Expenditure 260 283 285 _ vr,erating ill 133 135 - Interest payments 149 150 3/ 150 3/ - Current surplus/deficit 3 -21 - 1 -~~

~~II. Canital expenditures 76 31 74 60 Development 67 1 19 10 Amortisation 12 16 3/ 55 3/ 50~~

~~III. Total Revenue 225 262 284 Expenditure 336 314 359 Total surplus/deficit -111 2 77 :§:~~

~~IV. Financing the deficit External - - _ Goverrmant 100 39 91 60 Enterprises - - - _~~

~~V. Use of other assets +11 +13 -16 - (including cash balances increase -, fall +)~~

1/ 1964 figures relate to the accounting period which consists of the last three quarters of 1964 and the first quarter of 1965. 2/ 1965 figures are based on adjusted statistics for the last three quarters of 1965. 3/ Estimate.

~~Sources: Ministries of Finance and Development and Planning and Mudi River Water Board. Table 19A: DEVELOPMENT EXPENDITURE OF THE CENTRAL GOVERNMENT AND GOVERNMENT ENTERPRISES 1964-1967a/ (£ '000)~~

~~Governmentb/ Estimate Draft De7clopment Program 1968-70c/ 1964 1965 1966 1967 1968 1969 1970 1968-70~~

~~Natural Resources~~

Agriculture 113 295 682 922 2,567 1,935 1,905 6,407 Fisheries 11 34 27 51 36 24 19 79 Forestry and game 206 352 368 397 502 423 449 1,374 Marketing board 163 320 244 220 115 115 115 345 Surveys and lands 229 116 84 88 125 112 16 253 Veterinary 37 51 45 49 115 108 141 364 759 1,168 1,450 1,727 3,460 2,717 2,645 8,822 Industry Commerce

~~Finance and Statistics~~

~~Government 13 60 258 68 10 150 110 270 Development Corporation 25 323 456 711 - - - _ 38 383 714 779 10 150 110 270 Economic Infrastructure~~

Airways 60 105 15 100 - - - _ Civil aviation 11 207 215 44 228 20 38 286 Posts and telecommunications 83 133 221 415 300 398 400 1,098 Power 969 1,337 786 388 548 1,091 977 2,616 Railways 119 167 272 509 1,260 1,650 1,950 4,860 Roads 207 796 1,376 1,227 3,045 3,607 2,621 9,273 Waterways 4 4 83 61 30 50 200 280 Works Organizations 281 201 148 201 464 367 279 1,110 1,784 2,950 3,116 2,951 5,875 7,183 6,465 19,523 -2-

~~Governrnentb/ Estimate Draft Development Program 1 9 6 8 -7 0 -/ 1964 1965 1966 1967 1968 1969 1970 -77965-70 Social Infrastructure~~

Education 426 581 301 300 1,034 1,213 829 3,076 University 162 119 228 175 642 810 210 1,662 Health - 49 103 100 384 373 285 1,042 Housing 100 141 283 341 651 501 401 1,553 Water supplies and sanitation 363 167 289 300 369 213 153 735 1,051 1,057 1,204 1,216 3,080 3,110 1,878 8,068 Administration

and order Law 17 170 396 335 172 175 162 509 Other Government buildings 81 210 381 319 502 205 45 752 Miscellaneous services 153 151 97 32 92 70 65 227 New capital - 17 27 42 1,565 1,665 2,195 5,425 251 548 901 728 2,331 2,115 2,467 6,913

~~Total 3,833 6,105 7,385 7,401 14,756 15,275 13,565 43,596 Of which~~

Central Government 2,433 3,841 5,743 5,562 12,698 12,314 10,473 35,485 Government Enterprises 1,375 1,942 1,186 1,118 2,058 2,961 3,092 8,111 Malawi Development Corporation 25 322 456 711 - - - Governrentt/ Estimate Draft Developm.ent Program 1968-702/ 1964 1965 1966 1967 1968 1969 1970 1966-70

~~Transfers from development budget 250 863 637 1,020 190 20 - 210~~

~~Enterprises 25 435 298 311 190 20 _ 210 M.D.C. 225 428 339 709 - - -~~

~~Total Central Government Outlays 2,683 4,704 6,380 6,582 12,888 12,33h 10,h73 35,695 Public Sector development expenditured!/ 3,831 6,211 7,268 7,399 14,756 15,275 13,565 43,596~~

~~a/ See note 1 attached. b/ June 1967 estimate of Malawi Treasury. c/ July 1967 version of development program 1968-70. d/ Including transfers to M.D.C. See note 2 attached.~~

~~Sources: Ministries of Finance and Development and Planning, and Government Enterprises. Notes on Table 19-A: Development Expenditure of the Central Government and Government Enterprises 1i_99W1970~~

1/ This table contains the development expenditure of the Central Govern- ment (excluding transfers from development account to Government enterprises) and of the Government enterprises. The latter are taken to comprise Air Malawi, Central African Airways, the Electricity Sxpply Commission, the Farmers Marketing Board, Malawi Development Corporation, Malawi Railways and the Mudi River Water Board. The figures for the 1968-70 period are those contained in the July 1967 draft of the three-year public sector development program. No explicit provision is made in the program for the M.D.C., while oInly part of the proposed expenditure for Air Malawi is classified under civil aviation. The recently reorganized Malawi Housing Corporation has not been treated as a separate Government enterprise, and all development expenditures on housing are assumed to be included in the Central Government account. Trans- fers from th,3 Central Government to Government enterprises are listed below.

~~Transfers From the Central Government to Government_Enterrises 1964-70~~

~~Est. Draft Pro ram 1968-70 1964 1965 1966 1967 1969 1970 1 -70 (i) Transfers from Government's Developent Budget~~

Air Malawi, Central African Ail-ways - - - - 150 - - 150 Electricity Supply Com. 167 432 283 308 - - - - Farmers Marketing Board ------Pialawvi Railways - - - - Mudi River Water Board 60 3 15 3 - - 227 4352 311 150 - - 150 (ii) Government Advances (net increaseT Mudi River Water Board 40 36 76 57 40 20 - 6o Total (i)+(ii) 267 471 374 368 190 20 - 210 (iii) Transfers to Development Corporation from Governiment's Development Budget Malawi Development Corp. 25 428 339 709 - - - - Total Transfers (i)+(ii)+(iii) 292 899 713 1077 190 20 - 210

~~Sources: Ministry of Finance, Ministry of Development Planning and Government Ente3prises.~~

2>/ Public sector development expenditure represents development expenditure 1By the Central Government and Government enterprises (excluding the NI.D,C.) less transfer payments by Government to enterprise (excluding the M.D.C.) RESERVE BANK OF AIALAWI. 1965"-967 (£ million)

~~1965 1965 1965 1966 1966 1966 1966 1967 1967 Jun-e Sept. Dec. 10-cGh Jun-e Sept. Dec. March J-un-e 30 30 31 31 30 30 31 31 30~~

~~A. Assets 8.78 9.22 7.98 6.46 9.88 9.07 7.90 7.54 9.21~~

Foreign Assets (net) 8.01 8.35 7.59 6.01 8.88 7.56 6.80 L?A1 7.80 Balances with Banks 0.59 0.66 0.27 0.22 0.44 0.44 0.21 0.48 0.45 Bills 5.09 4.41 4.04 2.51 4.47 3.15 2.38 0.98 2.74 Other Securities 2.33 3.28 3.28 3.28 3.97 3.97 4.21 4.35 4.61 Domestic Credit 0.19 0.33 0.23 0.26 0.84 1.36 0.92 1.64 1.31 (i) to Goverrnment (investments) 0.19 0.33 0.23 0.20 0.84 0,56 0.57 0.71 0.81 (ii)to Government (loans) - - - 0.06 - 0.80 0.35 0.93 0.50 Other Assets 0.58 0.54 0.16 o.19 0.16 0.15 0.18 0.09 0.10 B. Liabilities 8.78 9.22 7.98 6.46 9.88 9.07 7.90 7.54 9.21 ======5======z======_ ======I Capital (paid in) 0.50 0.50 0.500. 0 5 0. 0.5 0.50

General Reserve Bank 0.35 0.35 0.38 0.38 0.38 0.38 0.52 0.52 0.52 5urrency in Circula- tiox 6X35 5.56 4.64 4.42 6.62 6.54 5.54 16 7.09 (Cash held by Com- mer:ical Banks) (0.45)(0.24)(0.20) (0,23)(0.23)(0.18)(0.25) (0.20)(0.29)

~~Dep3its 1.09 2.30 2.06 0.83 2.04 1.23 0.95 1.09 0.78~~

(i) Government 0.23 1.71 0.98 0.11 o.66 0.11 0.12 0.11 0.18 (ii) Bankers 0.84 0.55 1.00 0.S54 1.13 0.62 0.70 0.80 0.52 (iii) Others 0.02 0.04 0.08 0.18 0.25 0.50 0.13 0.18 0.08 Other Liabilities 0.49 0.51 0.40 0.33 0.34 0.42 0.39 0.27 0.32

~~Source: Reserve Bank of Malawi TABLE 21~~

~~COI'-ERCIAL BANKS - 1965/67 MAIN ASSETS AND LIABILITIES (V'million)~~

~~1965 1966 1967 Mar. June Sept. Dec. Mar. June Sept. Dec. Miar. June Assets~~

~~Foreign Assets 2.00 -0.90 -0.62 0.09 1.81 -0.78 -1.62 -o. -o.87 -2.39 Cash & Deposits with Reserve Bank 0.73 1.29 0.79 1.20 0.78 1.37 0.79 0.96 1.00 0.81~~

Domest:ic Credit 4.93 6.00 7.04 6.54 6.38 7.77 9.48 8.88 9.25 11.64 a. To Govern- ment 0.51 0.95 1.32 1.27 1.13 1.34 1.33 1.33 1.33 1.58 b. Farmers Mark- etiing Board 1/ - 0.54 0.38 - - 0.64 1.85 1.72 1.75 2.50

~~c. Private Sector 2/ 4.42 4.51 5.34 5.27 5.25 5.81 6.30 5.83 6.17 7.56 Other Assets (net) 0.38 0.58 0.51 0.90 0.39 0.57 0.57 0.85 0.68 -0.17 3. Liabilities~~

~~Deposits: 8.04 6.97 7.72 8.73 9.36 8.93 9.22 9.89 10.06 10.22~~

~~Demand deposits 3.74 4.17 4.72 5.60 4.80 5.51 5.50 5.99 6.06 6.20 Savings deposits 1.57 1.61 1.68 1.71 1.86 1.90 2.08 2.20 2.23 2.33~~

~~Time deposits 2.73 1.19 1.32 1.42 2.70 1.52 1.64 1.70 1.77 1.69~~

~~1/ From F.M.B. accounts.~~

~~2/ Includes minor lending to public enterprises other than the F.M.B.~~

~~Source: Monthly Statement of Assets and Iiabilities of the Commercial Banks. Table 22~~

~~ADVAWC:ES BY TIE COIlERCIAL BAl'JKS, 1961-IhmRCH 1967~~

~~(in 1 '000) March March End of Period 1961 1962 1963 1964 1965 1966 1966 1967~~

~~Advances to:~~

~~Agriculture 267 470 698 730 723 598 8141 1,033~~

~~%anufacturing 558 968 742 939 1,434 1,509 1,170 1,093~~

~~Construction 30 34 31 32 33 19 49 14~~

~~Distribution 368 428 512 625 1,224 1,618 1,073 1,1437~~

~~Transport 3 8 156 209 143 151 139 155~~

~~Services 43 36 69 91 186 176 98 97~~

~~Financial Organizations 79 117 27 93 7 85 1146 136~~

~~Private Accounts 190 151 263 364 163 173 1714 320~~

~~Public Bodies 7 2 439 431 8 1,376 - 1,543~~

~~Non-residents 20 514 14 50 162 101 151 53~~

~~Miscellaneous 5 2 1 2 3 8 214 83~~

~~Total: 1,570 2,270 2,952 3,566 4,o86 5,814 3,865 6,o44~~

~~Source: Reserve Bank of MIalawi Table 23: BANK DEPOSITS AND ADVANCES, 1961-1967~~

~~(in £fmillion)~~

~~Cormiercial Banks/l POSB°/A~~

~~Ratio of Deposits Advances to Loans &/3 Demand Time & Savings Demand Advances Delosits Deposits F'ebru ary~~

~~1961 2.0/2 3.5 1.7 48.6~~

~~1962 2.4 3.7 1.5 40.5~~

~~1963 2.7 3.7 2.14 64.9~~

~~1961 3.0 3.5 3.2 91.14 0.7~~

~~1965 1.3 3.7 3.5 91.6 0.8~~

~~1966 1.3 5.1 4.2 82.h 1.1~~

~~1967 3.9 6.o 6.2 103.3 1.3~~

~~/1 Residents only~~

~~/2 Estimated by Bank Mission~~

~~/,, Excludes bills of exchange which constitute the other main part of bank credit to the public sector.~~

~~Ab Post Office Savings B.ank~~

~~Source: .,>onthlyr Statement of Assets and Liabilities of the Commercial Banks and POSB. Table 24: SURVEY OF MONEY AND CREDIT~~

~~% '000)~~

~~1965 1966 1967 June Sept. Dec. March June Sept. Dec. March June A. Sources~~

1. Money supply 1/ 9,874 9,820 9,857 8,942 11,803 11,790 11,220 10,945 13,009 2. Time and Savings Deposits 2,797 2,097 3,125 4,556 3,421 3,728 3,899 4,006 4,025 3. Reserve Bank: Other Deposits 22 39 80 179 250 502 125 178 86 4. Other Liabilities (net) 224 .i25 231 637 488 637 382 525 397 Total 12,817 13,181 13,293 14,314 15,962 16,657 15,626 15,654 17,517 B. Uses

1. Domestic Credit2/ 5,803 5,453 5,615 6,487 7,862 10,708 9,634 10,714 12,108 a. Claims on Government (net) 752 -275 341 1,235 1,425 2,549 2,081 2,791 2,047 from: Reserve Bank 186 334 227 256 839 1,356 919 1,634 809 Commercial Banks 999 1,323 1,272 1,134 1,336 1,359 1,334 1,334 1,584 less: Govt. Deposits with Reserve Bank 232 1,707 980 107 653 104 120 109 179 Govt. Deposits with Commercial Banks 201 225 178 48 97 62 52 68 166 b. Claims on Private S c,tor by Commercial Banks- 4,513 5,336 5,284 5,252 5,796 6,301 5,834 6,171 7,561 c. Claims on F.M.B. by Commercial Banks 538 392 - - 641 1,858 1,719 1,752 2,500 2. F'oreign Assets (net)W/ 7,14 7,728 7,678 7,827 8,10C 5,949 5,992 4,940 5,409 a. Reserve Bank 8,012 8,346 7,489 6,013 8,878 7,564 6,798 5,810 7,803 b. Commercial Banks -898 -618 -089 1,814 -778 -1,615 -806 -870 -2,394

1/ Does not include Government demand deposits. 2/ Excludes Reserve Bank lending to the commprcial banks, 3/ Including Government enterprises with the exception of the F.M.B. 4/ Excludes accounts abroad held by Government; the figures for December 1965 and December 1966 were £1.96 million and £1.04 million, respectively.

~~Source: Monthly Statement of Assets and Liabilities of the Reserve and Commercial Banks. Table 25~~

~~FOREIGN ASSETS~~

~~December 1963 - August 1967~~

~~Dec.31 Dec.31 Dec.31 Dec.31 June August 1963 1964 1965 1966 1967 196L~~

~~A. Monetary Institutions - - 7,678 5,992 5,409 3,798~~

~~1. Reserve Bank - 4,066 est. 7,589 6,797 6,797 7,852 2. Commercial Banks (net) n.a. n.a. 89 -805 -2,394 -4,054~~

~~B. Government Account with Crown Agents 374 456 935 365 399 493~~

~~C. Other Public Sector Holdings 391 675 831 487 n.a. n.a. 1. Central Governmentl/ 218 462 534 189 n.a. n.a. 2. Public Enterprisesb/ 173 213 497 298 n.a. n.a.~~

~~D. IMF Subscription - - 490 490 490 490 Total Reserves - - 9,934 7,334 - -~~

a/ Includes external assets of Post Office Savings Banks but excludes about, LO.6 mi-lion external assets of various pension funds whose liabilities are mainly external. b/ Mainly working balances of the M.B0

~~Sources: Reserve Bank of Malawi Finance Ministry Table 26: PRODUCTION AiND EXPORT VALUE OF MAIN CROPS~~

~~Average Average Average Estimate 1954-57 1958 1959 1960 1961 1958-61 1962 1963 1964 1965 1962-65 1066 1967~~

~~Tea~~

Production (lbs. million) 18.4 23.3 23.3 26.1 31.5 26.0 29.4 26.3 27.3 28.6 27.9 33.9 31.S Export (lbs. million) 1.T4 20.9 22.4 24.4 30.1 -2175 28.2 24.8 27.0 28.4 17T 33.6 31-3 Average local export value pence/lbs. 41.0 33.9 30.5 37.7 35.2 34.6 30.5 31.7 29.7 31.8 30.9 31.8 30.0 Export value (£000) ___ 2955 2842 3836 4411 _3__ 3580 3276 3338 3769 -TTO 4447 3912

~~Tbbacco~~

Production (lbs. million) 31.0 38.8 43.5 34.3 27.3 35.9 36.2 40.0 32.9 50.3 39.8 41.1 39.2 Export (lbs. million) 7___ 26.7 27.0 28.6 26.4 ____ 26.9 32.0 29.3 38.0 ____ 35.3 35.o Average export value pence/lbs. 27.7 29.8 38.6 30.1 29.1 29.4 35.8 35.9 34.5 32.2 34.6 30.8 33.0 Export value (£'000) 2___ 3313 3214 3584 3195 33 4018 4787 4218 5102 173T 4513 5000 Oroundnuts

Production (lbs. million) 20.6 25.6 25.6 41.3 51.8 36.0 72.5 55.2 39.0 50.4 54.2 93.0 100.0 Export (lbs. million) 15.d 12.1 22.5 21.2 13.0 17.2 68.0 66.1 34.7 42.1 52.7 32.2 130.0* Average local export value £/ton 60.8 56.9 56.8 55.2 53.7 55.6 50.7 53.7 64.1 77.8 61.5 7B.4 65.0 Export value (£'000) -W7_ 343 639 586 352 1472 1777 1113 1640 l 5w :1:63 4225

* Represents an assumed export volume of 80 million lbs. from the 1967 crop and 50 million lbs. out of the stocks accumulated in 1966. T,;blc 26 (contirucd)

~~Average Average Average Estimate 1954-57 1958 1959 1960 1961 1958-61 1962 1963 1964 1965 1962-65 1966 1967 Cotton~~

Seed cotton production (lbs. million) 12.8 12.2 21.5 27.1 25.9 21.6 38.1 Lint production/export 21.2 20.5 45.4 31.4 26.5 37.2 (lbs. million) 3.7 3,4 6.2 7.5 7.2 6.1 11.3 7.1 Ginnery outturn % 9.1 10.2 9,. 10.8 7.2 (trust land grown) 32 30 31 30 30 30 ... 33 Grade I local export price 29.3 24.8 23.7 2h.6 25.9 2h.7 25.5 25.5 Grade II local export price 23.3 20.1 17.5 13.5 18.9 lo.o 19.0 22.0 Average local export/ value pence/lb. 27.6 23.6 22.6 22.9 25.1 23.3 23.9 25.1 25.4 25.4 24.9 24.4 24.0 Export value (Z'000) -7__ 334 582 705 7hl1 5791 1123 743 964 1079 977_ 1095 720 3eans and Pulses (est.) Production (lbs. million) 12.0 12.1 7.8 12.6 14.3 11.7 lL.0 36.0 55.0 60.1 35.9 40.7 50.0 Export (lbs. million) TI7C 6 12.7 7.6 12.0 14.3 1_.6 l1.0 3t.0 54.4 4 .2 Average local export 3_77 29.5 33.2 value £A on 27.0 27.0 27.0 27.0 27.0 27.0 27.0 27.0 28.0 35.5 29.3 Value (unrecorded through 33.8 30.0 1961) (£'l0o) 162 171 103 162 193 157 1d9 459 763 820 557 499 500

~~Source: Cuarterly Dici6t of Sratistics (F'/1966) and Ministry of Natural Resources. Table 27 MALAWI: EXPORTS OF MAIN CROPS ACTUAL AND PROJECTED~~

~~A c t u a I s Act. Est. Projections 1954-57 1956-61 1962-6565 !i 1966 1967 1970 j9 80~~

Volume (million pounds) Tea 18.4 24.5 27.1 28.4 33.6 31.5 37.2 52.0 64 Tobacco 25.i 27.2 31.5 38.0 35.3 36.0 38.0 40.0 48 Air/Tire 30.1 26.2 26 2.0 .C Turkish 0.2 0.2 1.0 2.0 5.0 Burley 5.6 6.0 6.4 7.0 10.0 Flue 2.2 3.6 4.6 5.0 7.0 Oroundnuts 15.a 17.2 52.7 4241 32.2 130.0 134.0 162.0 220.0 Confectionery ...... 80.0 90 0 110.0 MO0.0 Oil nuts ...... 5o.;ao 44.0 62.0 80.o Cotton (lint) 3.7 6.1 9.4 10.2 20.8 7.2 22.2 28.2 38 Beans and pulses 12.0 12.6 )7.6 46.2 29.5 33.2 55.2 65.0 76 Maize (net exports) .. .. (30.0) 32.0 97.8 200.0 240.0 540.0 720 Unit Prices

Tea (pence per lb) 41.0 34.6 30.9 31.8 31.8 30.0 30.0 30.0 30.0 Tobacco (pence per lb) 27.7 29.4 34.6 32.2 30.8 33.0 31.6 34.8 33.0 Air/Fire 31.1 27.2 2-53 30.4 29. Turkish 24.0 24.0 24.0 28.8 28.6 3urley 33.0 32.0 30.0 31.2 31.2 Flue 45.8 80.0 52.2 52.2 51.4 Groundnuts (f per short ton) 60.8 55.6 61.5 77.8 77.5 65.0 58.2 60.0 54.5 Confectionery ...... 75.0 r Oil nuts ...... 50.0 45.0 45.0 45.0 Cotton (pence per lb) 27.6 23.3 24.9 25.4 24.4 24.0 22.2 21.3 20.2 Beans and pulses (f per ton) 27.0 27.0 29.3 35.5 33.8 30.0 30.0 30.0 30.0 Maize (z per ton) .. .. 15.0 15.0 16.0 12.0 15.0 15.0 14.0

~~Value (in £ million)~~

Tea 3.14 3.537 3.490 3.769 4.447 3.90 4.6 6.5 8.0 Tobacco 2.694 3.326 4.531 5.10 4.51 5.0 5.0 5.8 6.6 Air/Fire ...... 29 31 3.3 3.2 rurkish . . .. .02 *- .02 .1 .3 .6 Burley ...... 77 ,. .60 .8 1.0 1.3 Flue ...... 42 .. 1.20 1.0 1.2 1.5 Groundnuts .447 .480 1.500 1.640 1.263 .2 3.9 4.8 6.o Confectionery ...... 3.00 79 3T Oil nuts ...... , .. 1.25 1.0 1.4 1.8 Cotton .418 .591 .977 1.095 1.095 .72 2.1 2.5 3.2 Beans and pulses .162 .157 .557 .820 .499 .50 0.8 1.0 1.2 Maize .. .. .236(b) (.250) .785 1.20 1.6 4.0 5.4 TWng oil .123 .145 .293 .302 .172 .15 0.2 0.2 0.2 Rice .. .. .065(b) (.042) .071 .12 0.3 0.9 1.5 Cassava .034 .059 .077 (.069) .346 .10 0.1 0.2 0.2 Caffee .. .. .039(b) .040 .020 .09 0.2 0.5 0.8 AlL other douastin exports .429 .489 .92 1.2 2.6 5.7 Sub-total of above 7.223 8.295 11.767 13.542 13.700 17.0 20.2 29.0 36.7 (Re-exports) (1.227)* (.955)* (.953) *(.8oB) 3.1 3.2 9.9 1.4 2.0

~~Total (8.450) (9.250)(12.720) 14.350 16.8 20.2 21.1 30.4 40.7~~

* Includes some domestic exports. (a) Consists primarily of low quality confectionary nuts from 1966 harvest which had to be sold as oil nuts in 1967. (b) 196l only.

~~Scrce: MLnistry of Natural Resources and Mission. Table 28: BALANCE OF TRADE 1950-1966 (f.o.b. value in x million)~~

~~Exports to Imports from Balance Zambia & Other Total Zamrbia & Other Total of Year Rhodesia Exports Exports Rhodesia Imports Irports Trade :L950 0.2 4.8 5.0 o.1l 7.1, 7.5 -2.5~~

~~:L951 o.6 5.2 5.8 0o. 6.8 7.3 -1.5~~

~~:L952 0.9 5.3 6.2 0.5 8.3 8.8 -2.6~~

~~1953 0.9 6.2 7.1 0.6 7.0 7.6 -0.5~~

~~1L954 (0.6) 7.2 (7.8) (1-3) 7.0 (8.3) -0.5~~

~~'L955 (0.7) 7.1 (7.8) (1-9) 7.0 (8.9) -1.1 :1956 (0.8) 8.1 (8.9) (2.5) 8.1 (10.6) -1.7~~

~~:1957 (0-9) 8.14 (9-3) (3.1) 9.0 (12.1) -2.8 1958 (0.9) 7.5 (8.h) (3.6) 9.1 (13.0) -4.6~~

~~:1959 (1.0) 8.0 (9.0) (143) 7.5 (11.8) -2.8~~

~~1960 (1.1) 9.1 (10.2) (1X.9) 7.4 (12.3) -2.1~~

~~1961 (1.2) 9.5 (10.7) (5.7) 8.7 (11.h1) -3.7~~

~~1962 (1-3) 10.3 (11.6) (6.6) 8.2 (M14.8) -3.2~~

~~1963 (1-3) 11.0 (12.3) (7.4) 7.3 (14.7) -2Ji~~

~~1961 2.3 10.0 12.3 6.1 8.2 14.3 -2.0~~

~~1965 1.6 12.4 14.0 8.2 12.2 20.4 -6.4 1966 1.6 15.4 17.0 8.8 18.1 26.9 -9.9~~

~~Source: Central Statistical Office, Salisbury, and National Statistical Office, Zomba. Table 29: DIRECTION OF TT-E EXTER'TAL TRADE OF I'tAL4TAI: 1954-66~~

~~(Percentage)~~

~~Imports 1954 1957 1960 1964 1965 1966~~

~~Rhodesia and Zambia 15.7 25.6 39.8 42.7 37.5 32.2~~

~~LUnited Kingdom 47.4 36.3 28.3 23.4 25.2 31.2~~

~~EEC Countries 5.6 6.o 6.6 4.9 5.1 6.1~~

~~South Africa 7.2 7.1 7.7 6.o 5.3 7.7~~

~~Nlozambique 4.9 6.6 2.2 1.6 1.1 1.3~~

~~J'apan - - - 4.7 6.7 5.0~~

~~United States 1.5 2.0 - 2.2 2.7 3.1~~

~~Others 17.7 16.4 15.4 14.5 16.4 13.4~~

~~Total 100.0 100.0 100.0 100.0 100.0 100.0 E:xports~~

~~Rhodesia and Zambia 7.7 9.7 10.8 18.4 14.3 10.14 United Kingdom 62.8 60.2 61.8 43.8 45.8 48.1~~

~~Siouth Africa 1.5 2.7 3.2 4.6 4.1 3.1~~

~~Western Afri.ca 9.6 ll.O 8.0 6.9 /~~

~~Portuguese Possessions 1.6 1.9 1.9 2.4 1/ 1~~

~~EEC Countries 6.2 9.3 8.5 6.9 10.0 10.7~~

~~United States - - 1.0 2.8 2.6 2.4~~

~~Others 10.6 5.2 4.8 14.2 23.2 25.3~~

~~Total 100.0 100.0 100.0 100.0 100.0 100.0~~

~~AAppaxe.tl,y nlnc1udjd. in "otb,r"1.~~

~~Source: ilational Statistical Office. Table 30: MALAWI IMPORTS CLASSIFIED BY MAIN CATBGORIES 1964-66~~

~~Values in £1000 at f.o.b. at point of dispatch~~

~~Category 1964 1965 1966 (Provisional)~~

~~1. Food, drink and tobacco 2,340 28,894 5,105 Food 1,530 2,222 1,972 Of which, sugar 598 911 n.a. Beverages and tobacco 810 672 3,133 1/ Of which, beer 345 508 415 spirits 49 62 n.a.~~

~~2. Basic materials 307 583 607 Crude materials 203 223 404 Animal and vegetable oils 104 360 203 3. Fuels 942 978 1,298~~

~~14. Semi-manufacturesand chemicals 52858 8,750 9,823~~

~~Of which, chemicals 1,066 1,395 1,596 textile piece goods 1,961 3,249 2,657 5. Transport equipment 1,331 1,786 2,862~~

~~6. Capital goods 1,739 2,670 4,617~~

Non-electric machinery 992 1,474 2,724 Electric machinery 537 949 1,510 Plumbing and electric fixtures, etc. 71 74 117 Instruments, etc. 140 173 266 7. Consumer goods 1,587 2,403 2,368 Of which, rugs, clothing and footwear 868 1,441 1,276

~~8. Miscellaneous 215 338 220~~

~~TOTAL 14,320 20,402 26,900~~

~~1/ Includes re-exports of which Zambian tobacco was £2.5 million in 1966.~~

~~Source: Ministry of Finance. Table 31; VALUE OF RECORDED REPaTITANCES SENT TO HAIAWI BY MIGRANT WOFRKERS (FiocO) Year Remittances Paid/1~~

~~1954 909~~

~~1955 1,276~~

~~1956 1,462~~

~~1957 1,664~~

~~1958 1,765~~

~~1959 1,599~~

~~1960 1,689~~

~~1961 1,690~~

~~1962 1,640~~

~~1963 1,528~~

~~1964 2,048~~

~~1965 2,367~~

~~1966 2,140~~

~~/1 1964-66 includes remittances from Zambia and estimated pocket money brought back by migrants; 1954-63 include neither of these.~~

~~Source: Ministry of Labour, Zomba. Tqb]l ISTIMIATED BALANCE OF PAYMENTS~~

~~(_ million) Mission Estirmate~~

~~1957 195d 1959 1960 1961 1962 1963 1961 1965 1966 1967 CURRENT ACCOUNT~~

~~1. Lxoorts f.o.b.l/ 9.3 8.5 9.0 10.2 10.7 11.6 12.3 11.8 11.0 16.8 20.2 '. Imports f.o.b. 1/ -12.1 -13.0 -11 -12.3 -15.4 -15.8 -15.7 -15.3 -20.5 -26.9 -27.7~~

3. Balance of Trade -2.8 -5.6 -2.8 -2.1 -3.7 -3.2 -2.1 -2.5 -6.L -10.1 -7.5 5. 9regh -r - e -1 5 -1.6 -1 -1.5 -1.8 -1.9 -1.? -2. -2.7 -2.7) c Foreign travel (net) -0.6 -0.6 -0.8 -1.0 -1.2 -1.2 -1.2 -0.9 -O.6 -0.6) -3.5 t,. Other Services (net) .0.1 -0.1 7. Balance on goods & services -4.9 -6.8 -5.0 -5.6 -6.7 -6.3 -5.5 -5.8 -9.6 -13.3 -11.0 d. Investment income receipts 0.3 0. 0.5. 0.3 0.4 0.3 0.3 0.1 0.5 0.5) ,. Investment income payments -0.9 -1.0 -1.1 -1.1 -1.5 -1.0 -1.1 -1.3 -1.8 -1.9) 10. Otner factor income received 2/ 1.8 1.7 1.7 1.7 1.8 1.7 1.5 3.0 3.6 3.3) 11. Other factor income payments 2/ -0.1 -0.2 -0.3 -0.3 -0.5 -. 6 -0.8 -2.1 -1.8 -23

~~12. Balance on factor income 2/ 1.1 1.0 0.7 0.6 0.2 0.5 -0.1 -0.3 .0.5 -0.5 -°-5~~

~~13. Balance on current account -3.8 -5.8 -5-3 -5.0 -6.5 -5.9 -5.6 -6.1 -9.1 -13.7 -11.5 1t. Government transfers (net) o.6 0.5 0.3 1.3 2.3 2.3 5.5 6.7 11.0 6.3 +6.3~~

~~a) Grants received 8.3 12.2 7.5 7.0 b) Pensions paid and other 1.6 1.2 -1.2 1.1~~

~~15. Balance after transfers -3.2 -5.5 -5.0 -2.7 -5.2 -3.6 -0.3 +o.6 +1.9 -7.5 -5.2 CAPITAL ACCOUNIT~~

16. Public (net long term) 1.9 0.7 2.7 3.0 Borrowing _ 7793.9 Government 2 .7 0.7 3.0 3. 9 Governmnt o~~~~~~~~~~~~~~~~~~~~~~~~~.60.9 0.5 - Government Enterprises 1.6 0.9 0 5 AmTortization -. ,- 08-. Government -0.9 0 -O.9 Government Enterprises - - - -0.2

~~17. Sale of Public Assets - - 1.3 Governrent - - - 0.2 Government Enterprises - - -~~

~~16. Private (net) 0.1 0.2 2.3 0.9 Long term 0.1 O 7 0.7 - Short term -0.2 -0.3 1.6~~

~~17. Use of Reserves -2.59 -2. 26 - Government 0.3 -O.8 0.9 - Reserve Bank ) 0.8 - commercial banks ) -2.1 -2.0 0. - Errors and Omissions ) -0.2~~

~~1/ Including estimated trade uith the Rhodesians and estimates on re-exports (1957-1963). Directdata on trade utilized for 1965 and 1965.~~

2/ Includes private transfers which are excluded f'rom factor income in Table 32A. jourcos: Figures for 196L-1967 from Mlinistry of Finance and lMala:xi Reserve Bank. Series 1957-1963 are estimates subject to considerable margin of error. Figures on trade have been agreed between C.S.O. Salisbury and Uialawi officials. Territorial transfers on Federal Government Account are not included. Table 32A: Malawi Balance of Payments 196L-67 Mission (t million) Estimate 1%1, 1965 1966 1967

Current Account Exports Domestic merchandise 1/ 11.0 13.5 13.7 17.0 Non-factor services 1.1 1.2 1.9 2.0 Freight and insurance 0.2 0.2 0.7 Other transport 2/ 0.15 0.2 0.2 0.2 Other insurance 3/ 0.3 0.2 0.3 0.3 Travel I/ 0.25 0.3 O.1 0.1 Government 5/ 0.2 0.3 0.3 0.3 Goods and non-factor services 12.1 1.7 15.6 19.0 Factor services 2.5 3. 3-° 3.0 Workers' earnings 6/ 2.05 2.1 2.1 Miscellaneous services 7/ 0.35 O.1 0.1 0.h Investment income 8/ 0.1 0.5 0.5 Goods and all services I7T 180 17.7 22.0

Imports Retained merchandise 1/ 13.5 19.9 23.8 21.5 Non-factor Services I.3 4.5 1.9 5.5 Freight and insurance 1Th5 2.1 Other transport 9/ 1.1 0.8 0.9 1.1 Other insurance 10/ O.h5 0.5 0.5 0.5 Travel 11/ 1.1 0.9 0.9 0.9 Government 12/ 0.2 0.2 0.2 0.2 Goods and non-factor services 1 30 777 T Factor services 2.2 2.8 3.7 t Employees earnings 13/ 0 0.3 t Miscellaneous services 77 0.55 0.7 1.I o.8 Investme nt income 1.3 1.8 1.9 2 3 Interest on public debt 0.35 0.8T T 1.1 Other 8/ 0.95 1.3 1.1 1.2 Goods and all services 20.0 27.2 32.L 33.5

Balance on visible trade -2.5 -6.1 -10.1 -7.5 Balance on goods and non-factor services -5.7 -9.7 -13.1 -11.0 Wlet-factor income payments +0.3 +0.5 -0.7 -0.5 Balance on current account -5.4 -9.2 -13.8 -11.5

Financed by Transfers Receipts 8.8 8.2 7.8 Private 15/ O. 8 0.7 70 Public 8.3 12.2 7.5 7.0 Grants from U. K. 7T -107 Budgetary grant 16/ (5.0) (5.9) (1.3) (1.2) Capital grants 177 (0.5) (3.1) (0.2) (0.2) Technical assisTance grants ( - ) (0.2) (0.3) (0.3) OSAS and compensation grants 18/ (1.9) (1.0) (0.9) (0.9) Grants from other governrents o.6 1.2 1.2 0.9 Grants from international sources 0.1 0.2 0.3 0.3 Fees and taxes 19/ 0.2 0.3 0.2 0.2

~~Payments 2.8 2.0 1.8 1.1 Private 20/ 1.2 0.8 0.6 O.L Public 21/ 1.6 1.2 1.2 1.1 Net receipts Private -0.7 - 0.2 0.8 Public 6.7 11.0 6.2 5.9 Total 6D0 11.0 6. 8 6.3~~

Balance (after transfers) +o.6 +1.9 -7.h -5.2 Capital Account F'ublic (net long term) 1.9 0.7 2.7 3.0 Borrowing 3_.3 17 37*9 Government 22/ 2.7 0.7 3.0 3.9 Government enterprises o.6 0.9 0.5 - Amortization -1.14 -0.9 -0.8 -0.8 Government -0.9 7 Government enterprises - - - -0.2

~~_ - - 1.3 Government 23/ - - - 0.2 Government enterprises 21/ - - - 1.1~~

~~Private (nmt) -0.1 0.2 2.3 0.9 Long-term 0.1 070..5 Short-term -0.2 -0.3 1.6~~

~~UIse of Reserves -2.h -2.8 2.6 Government -0.3 0.9 Reserve Bank ) 0.8 - Commercial banks 25/ ) -2.1 -2.0 0.9 Errors and omissions ) - - -0.2 -~~

~~Souirces: Reserve Bank of Malawi. Ministries of Finance and of Development and Planning. lotes on Table 32A~~

~~I/ Excludes reexports.~~

~~2/ Principally passenger fares received from foreigners by domestic companies and expenditures in Malawi by foreign air companies.~~

~~3/ Premiums paid to foreign companies in connection with life and general insurance.~~

~~14/ Expenditure of foreign visitors in Malawi.~~

~~5/ Expenditure by foreign government agencies, foreign, diplomatic and consular missions in Halawi.~~

~~6/ Remitted earnings of contract workers serving abroad.~~

~~7/ Expenditure and receipts from various services (management fees, agents' fees, surveyors' and consultants' fees, rentals etc.).~~

~~8/ N4ainly interest on foreign reserves held by the Government and the Reserve Bank.~~

~~9/ Principally payments by Malawi residents to foreign carriers for passenger fares.~~

~~10/ Claims paid by foreign companies to residents in connection with life and general insurance.~~

~~11/ Expenditure of Malawians travelling abroad.~~

~~12/ Expenditure abroad of M4alawi Government agencies, diplomatic and consular missions.~~

~~13/' Remittances sent abroad by expatriate civil servants, and payments to expatriate civil servants on long leave.~~

~~14/ Payments of earnings, dividends, and interest on foreign-earned capital invested in commercial enterprises and controlled by foreign investors.~~

~~15/ Principally grants to religious missions for the provision of health and educational services.~~

~~16/ Grants from the United Kingdom in support of the current budget.~~

~~17/ Grants for development purposes.~~

18/ Grants under the United Kingdom's overseas service aid scheme to provide compensation payments to retiring officers and in the case of serviLg officers to provide overseas additions, education and passage allowances. i)/ Principally fees and taxes paid by the Witwatersrand Nativ, ITb",q Association to the Govrernment of Malawi.,

~~20/ Transfers of funds abroad by rlaawi residents (excluLding rtn,Aithances by expa-tiiate civil servants).~~

~~21/ Principally gratuity, pension and compensation payments to expatriata officers retired abroad.~~

22/ Includes external borrowing by the Governnment to finance both development outlays and communtation and compensation paymnmts,0 23/ Sale of Government's equity holding in the Trans-7Zambesi Railway in Mozanbique.

~~24/ Partial net proceeds from sale of the Malawi RailwayTas assets 2i Mozambique.~~

~~25/ Net drawings on overseas head offices by comiercjil banks<. RIEPUBILIC~~

~~j~ f Ih. IAN A 5 CONGO TN - * ~ < 0;~~

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~~Kota \ / 2 kotcIN Kasung>< \0 .- C RA I *- j LILGONGOWAE, t SALIMA ,ROGRAM \ - o Gl j PROJECT~~

~~Railways : CO fuG .rILONGoed Railway ; \ Chkwo F'ROGRAM\ J'STXORTN AREA 0 B 10 AR\A~~

~~41LA E SOBA^w R 2B NOVEMBER 5967ilrn IB T.N~~

~~MAAW Reg1ionaBonais e~~

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~~- -S--lre- ProJoectAreailway~~

~~Reional Boundaries~~

~~Liogepora rarm IBR-205R NOVEMBERhir1967e~~