January 7, 2011 / 2:19 PM / in 7 years

US grants Malawi $350 mln to upgrade power supply

LILONGWE (Reuters) - The U.S. government Millennium Challenge Corporation has given Malawi a $350 million grant to overhaul its energy sector, whose dire condition is a major brake on the African state’s economic growth.

<p>Electricity pylons carry power from Cape Town's Koeberg nuclear power plant July 17, 2009. REUTERS/Mike Hutchings</p>

A U.S. statement said the five-year grant should help improve Malawi’s erratic power supply, which economists say costs the country about $215 million a year and deters new investment.

According to its energy ministry, Malawi had 63 days of power outages in 2009, one of the worst performances in the sub-Saharan region.

Its current installed electricity capacity is 282.5 MW compared to estimated demand of 344 MW, and only seven percent of the 13 million population have access to electricity, with the rest relying on firewood and charcoal for energy.

Despite the constraints of its power system, Malawi has been one of the world’s fastest growing economies in the last few years, due in large part to a fertilizer subsidy programme that has boosted farm yields.

The IMF said in October farming output was flattening off -- a cause for concern -- but still raised its 2010 growth forecast to 7 percent from 6.3 to reflect the expansion of the mining sector, especially the opening of a uranium mine in the north of the country.

Even with the strong growth, Malawi remains heavily dependent on foreign aid, with donors underwriting as much as 40 percent of its budget.

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