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Malawi Options Appraisal and Public Expenditure Analysis

Research report

Written by Edward Hedger

Research report

The Malawi Options Appraisal responds to new DFID corporate guidance on economic appraisals which requires more quantification and analysis of alternative options for delivering aid. In doing so the appraisal calculates the expected net benefits of quitting General Budget Support in favour of a set of defined alternatives, quantified in terms of expected impact on spending in priority areas of the Malawi Growth and Development Strategy – a proxy for ‘pro poor spending’. The appraisal highlights the key assumptions in the decision to use or not use General Budget Support and reveals striking differences in the relative importance of different variables. Continuing to provide General Budget Support is found, on the basis of a conservative set of assumptions, to offer significant advantages compared with the alternatives. The expected result is higher overall spending on priority areas of the Malawi Growth and Development Strategy after taking account the degree of influence which DFID can expect to exert on the budget, leakages, transaction costs and interest payments on domestic borrowings. It should be noted that the underlying assumptions although considered plausible are not fully tested and would benefit from further validation. The Options Appraisal is complemented by a Malawi Public Expenditure Analysis which examines recent public expenditure trends in Malawi.

Nick Highton, Edward Hedger and Heidi Tavakoli