Malawi’s empty begging bowl and drying aid taps

The Times Group’s THOM KHANJE was among international journalists covering the 2012 World Bank and International Monetary Fund Annual Meetings in Tokyo, Japan and he analyses the relevance of the meetings to Malawi:

About 20,000 world financial officials – including finance ministers, central bank governors and business leaders, from 188 International Monetary Fund and World Bank member countries last week met in Tokyo to explore ways of enhancing international cooperation towards the restoration and sustainability of economic growth and stability around the world.

Malawi was well represented on the government side at the global meetings which have significant bearing on matters of finance, trade and investment around the world.

Although developing countries, let alone Malawi, were hardly being mentioned or discussed in documents circulating or the meetings that took place at the event, expectations were high among the Malawian officials on international assistance the country requires in support of its economic recovery efforts.

In fact, nobody was talking about aid at the meetings and indications were so clear that the era of development assistance is coming to an end.

Has Malawi been caught unawares?

Obviously, yes, but economic realities and narrow thinking on alternatives to aid, in the country, makes it awkward for government officials to accept that the country is wasting time talking about aid whose files are on pending or have already been thrown into trash bins of most benefactor countries.

Economic Planning and Development Minister Atupele Muluzi admitted in an interview in Tokyo that world financial leaders are no longer talking about aid and that the catch phrase was now trade.

He said, however, Malawi still needed aid to help it achieve sustainable economic growth and cut its umbilical cord away from mother aid.

“For us the important thing is continued support of our recovery programme and implementation of the Malawi Growth and Development Strategy [MGDS],” said Muluzi, adding: “The reform measures which are underway and then unintended social impact will require international support to be managed.”

He said the meetings in Tokyo provides the Malawi officials an opportunity to hold one-on-one meetings with various international collaborators as the country seeks sympathetic partners to support in economic development agenda.

On his part, Finance Minister Ken Lipenga said the aim of government is to one day be self reliant but that in the meantime, the country still requires support that will create room for the country to carefully strategise on how it could wean itself out of dependency.

“Despite the financial problems our partners have been experiencing, they have still continued to support Malawi,” said Lipenga.

He said these meetings in Tokyo are relevant to Malawi as Malawi is on a programme with the IMF which enabled the unlocking of budget support.

“IMF’s view of our macroeconomic policies gives confidence to our development partners that Malawi is following internationally accepted macroeconomic policies,” said Lipenga.

He said the Malawi team at the meetings is working in such a way that every meeting is approached with a view to extract as much benefit as possible for Malawi, and that the bilateral partners also often use these to hold important meetings with the Malawi delegation.

He said Malawi, being part of global economy, also needs to be on top of current developments in international finance and global trade as they directly impact on how the country performs in the regional and international economy.

“As with all international meetings, there are a number of seminars and these are open to all delegations and they provide opportunities to learn from best practice,” said Lipenga.

He said, for example, that one of the issues that will be discussed during the meetings is the reform of the IMF’s quotas which, if approved, will give more powers to emerging and developing countries in decision making at the IMF.

“This will also enable countries like Malawi to access more funds from the IMF,” said Lipenga, adding: “As you are aware, the amount of money a country can access from the IMF is based on its quota.”

He said what Malawi would work on is improvement of aid effectiveness so that it has the maximum impact on economic growth and poverty alleviation.

Despite Lipenga’s reluctance to accept reality, latest donors on donor aid calls for Malawi’s urgent need to immediately adjust its revenue lines.

The Organisation for Economic Cooperation and Development (OECD) and the United Nations (UN) reveal that major donors’ aid to developing countries fell by nearly 3 percent in 2011.

This, according to OECD, was the first drop since 1997.

Continuing tight budgets in donor countries will put pressure on aid levels in coming years, says the OECD on its website.

“The fall of ODA [Overseas Development Assistance] is a source of great concern, coming at a time when developing countries have been hit by the knock-on effect of the crisis and need it most,” says OECD Secretary-General Angel Gurría.

UNSecretary-General Ban Ki-Moon agrees, saying the first decline in international aid to developing countries in years is jeopardising the UNgoal of reducing poverty by 2015 in many countries.

A UNreport shows that official development assistance in 2011 fell to US$133 billion, less than half the US$300 billion needed annually to meet the goals set by world leaders in 2000.

The report says 16 key donors reduced their aid in 2011, mainly in response to the global economic crisis.

The economic downturn also led governments to adopt protectionist trade policies that hurt developing nations, the report said.

According to OECD, bilateral aid to sub-Saharan Africa was US$ 28.0 billion in 2011, representing a fall of -0.9 percent in real terms compared to 2010.

During the year, members of the Development Assistance Committee (DAC) of the OECD provided US$ 133.5 billion of net official development assistance, representing 0.31 percent of their combined gross national income.

“This was a -2.7 percent drop in real terms compared to 2010, the year it reached its peak,” says OECD, adding: “This decrease reflects fiscal constraints in several DAC countries which have affected their ODA budgets.”

While the World Bank, in collaboration with the UN, is focusing its attention on post-2015 support to developing countries as attainment of the MDGs became uncertain because of surging food and fuel prices, Europe’s sovereign debt crisis seems to have stolen the attention of the IMF whose traditional role of focusing on poorer countries seems to be changing.

In 2010, the IMF approved its US$38.7 billion contribution to the first EU-led financial aid package for Greece and more than US25.2 billion to Ireland and Portugal. It has committed a further US$300 billion to support EU championed efforts to economies in the grouping.

Compare this to just about US$17 billion allocated for low incomes countries, mostly in Africa, over the period 2009–2014 were boosted to US$17 billion, one would quickly realise that the IMF has now surely turned from being a developing countries’ lender of last resort to a saviour of advanced ones.

As the Malawian officials mingle with fellow world leaders in Tokyo, it is also certainly times the country conceded that aid is now a dying lingo and that instead of travelling to such conference with begging bowls, the country should instead master trade and investment terminology that would enable it negotiate and strike business deals on equal terms.

Future delegations to international meetings such the annual meetings should probably include industry captains such as Thom Mpinganjira of FDH Holdings and Matthews Chikaonda of Press Group to ensure that Malawi’s international attendance takes a new and strategic business approach.