During the first decades of independence, agricultural development was emphasized. The government sought to implement this policy by providing the family farmer with basic agricultural support facilities, such as extension services, training, irrigation, and research, and by increasing the output of fertile areas through farm credit, marketing, and processing facilities. During this period, four major agricultural developments were sponsored: the Shire Valley Agricultural Development Project in the south; the Lilongwe Land Development Program and the Central Region Lakeshore Development Project, both in the Central Region; and the Karonga Rural Development Project in the north.
More recently, improvements in the transportation infrastructure, especially in roads, have been emphasized. In the manufacturing sector, the government has stressed diversification. With major constraints on its foreign exchange, Malawi aims to reduce the trade gap, encourage exports, and reduce government expenditures.
The United Kingdom has traditionally been Malawi's principal aid donor. South Africa has been a significant source of aid as well, especially in financing construction in the capital at Lilongwe and the railway extension from Lilongwe to Mchinji. Other significant aid donors have included the European Union, France, Canada, Germany, Japan, the United States, Denmark, the African Development Bank, and the World Bank/IDA. In 1998, Malawi started a six-month International Monetary Fund (IMF) macroeconomic program aimed at reigning in the almost 60% inflation rate, with little success as of 1999.
In 2000, Malawi was approved for $1 billion in debt service relief under the IMF/World Bank's Heavily Indebted Poor Countries (HIPC) initiative, to support poverty reduction efforts through expenditures on health, education, and rural development, among other areas. Also in 2000, Malawi negotiated a three-year $58 million Poverty Reduction and Growth Facility (PRGF) Arrangement with the IMF, which was to expire in December 2003. In September 2002, the IMF approved $23 million in emergency relief to support large imports of food due to shortages that year, and to fight malnutrition and starvation, particularly among those affected with HIV/AIDS. Recent government initiatives have targeted improvements in roads, and with participation from the private sector, improvements in railroads and telecommunications.
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