* Malawians to vote in test for stability

* Investors want economic policy continuity

* Political tensions simmering

By Mabvuto Banda

LILONGWE, May 19 (Reuters) - Malawi holds parliamentary and presidential elections on Tuesday that could test the political stability needed to secure continued Western donor funding to the poor but fast-growing African country.

President Bingu wa Mutharika's strong economic record makes him a favourite among foreign investors. He won billions of dollars in debt relief for driving reforms that have yielded growth of around 7 percent a year for the past three years.

Wa Mutharika's chances of victory could have increased further after the Constitutional Court upheld a decision to prevent former President Bakili Muluzi from contesting.

But the ruling might also reignite political tensions in a country of 13 million where recent upheavals have unnerved donors and have led to months of delays in approving state budgets.