Malawi’s key donors under the Common Approach to Budget Support (Cabs) have said the country has no alternative to the economic reforms being implemented by government.
The donors have also pledged to honour their budget commitments to the country in 2013, but reminded Malawi that disbursements sometimes depend on fulfilment of certain conditionalities.
Cabs co-chairperson Peter Woeste, who is also the German Ambassador, said on Wednesday: “The people of Malawi have to stand together in these difficult times. There is no alternative to the reform programme.”
Malawi receives a harmonised general budget support from Cabs group of donors which comprises the United Kingdom (UK), Norway, the African Development Bank (AfDB), the European Union (EU), the World Bank and Germany.
The International Monetary Fund (IMF) and the United Nations Development Programme (UNDP) participate as independent/private observers.
Woeste, who has taken over the Cabs co-chairmanship effective January 1 2013, made the statement in reaction to a call by the Economics Association of Malawi (Ecama) which has pleaded with the donor community to fulfil their resource commitments for 2013 and beyond to support faster stability of the exchange rate and moderation of inflation rate, currently at 33.3 percent.
Ecama made the call in its 2012 economic review titled Focusing Lens on the Road Ahead published this week.
But Woeste stressed that in the previous months, development partners supported the people of Malawi by even going beyond their commitments by transferring emergency-budget support.
Woeste, while quoting International Monetary Fund (IMF) managing director Christine Lagarde who visited the country last weekend, said it is important for government “to stay the course.”
He said: “This is exactly what all development partners have been doing for months already to make sure that the ongoing reforms will turn the economy around. All this can only support the combined efforts of the government and the people of Malawi.”
On Tuesday, AfDB country representative Andrew Mwaba said his bank pledged to provide budget support grant to Malawi amounting to $46 million (about K16 billion) during the 2012/13 fiscal year.
Said Mwaba: “Out of this, the amount of UA26 million [about $40 million] was disbursed in July 2012. The balance of UA4 million [about $6 million] will be disbursed in early 2013. The bank would thus have honoured its full commitment.”
In an interview on Wednesday, Minister of Finance Ken Lipenga said he is encouraged by the pledge from donors whom he said expressed satisfaction with Malawi’s performance in the last quarter.
He said with the support of donor resources, government is implementing a fiscal budget that has provided adequate resources for the delivery of social services and will increase resources allocated for cushioning the most vulnerable from the full impact of reforms.
President Joyce Banda on Friday, during her meeting with Lagarde in Lilongwe, admitted that her government underestimated the impact of economic reforms, but blamed the development to inaccurate information and data that was used from the previous administration.
The President said in the short-term, it was expected that the reforms would have a negative impact on livelihoods of the people.