Donors halt aid until 2015,tell Malawians to sacrifice

Malawians should brace for tougher times ahead as some cooperation partners will not release budgetary support to the country until 2015.

The citizens have been told told to sacrifice for the country to recover from the current economic challenges.

The development comes at a time when the cost of living is unbearable for citizens as prices of basic commodities have gone up due to the devaluation of the Malawi Kwacha by 48.18 percent.
Everybody, including the privileged few, must sacrifice for Malawi to recover from the current economic slump, Norwegian Ambassador Asbjørn Eidhammer, who also chairs the Common Approach to Budget Support (Cabs) group, has said.

And the United Kingdom (UK) and Germany, members of the Cabs, will not release budgetary support to Malawi till 2015.

Cabs is a group of donors that provide harmonised general budget support to the country. Up to 30 percent of Malawi’s budget is contributed by donors, including the Cabs.

The Cabs’ call for sacrifice also comes at a time Malawians’ are unhappy with government’s extravagant expenditure patterns.

“Sacrifices have to be made and I think it is important from our point of view that although we assist in mitigating those sacrifices and the negative impact particularly on the poor, everybody will have to be prepared to sacrifice and that goes in particular also for the privileged,” Ambassador Eidhammer said.

Eidhammer, whose country is one of Malawi’s leading donors and is among the few intending to contribute to budget support to the 2012/13 budget, said, however, that most donors are impressed with the bold steps Banda has taken to put the country on the recovery path.

He, however, cautioned that the recovery will take more time “because it is not an easy thing to do.”

Said the envoy: “We have seen how Western countries are struggling to get recovery in their economies; so it takes time, it is not an easy thing to do…I do not agree necessarily with those who are criticising government for not getting its act together.

“I would also like to correct the impression that the donors are not coming forward. Some large donors have fast-tracked their support in main sectors and programmes to mitigate the impact of the economic situation on the less fortunate are now in place. Budget support has so far been released in accordance with what was agreed in the Cabs review.”

President Joyce Banda has in the last four months also tried to win Western support by rolling back late president Bingu wa Mutharika legislation seen as suppressing human rights.

She also devalued the kwacha by about 49 percent against the dollar and removed the currency’s peg against the dollar, which has seen the local unit depreciating further by another 20 percent. Banda has also liberalised fuel prices, water and power tariffs, a move that has seen rates rising dramatically.

These policy decisions are in line with what the IMF and other donors have always pushed for to resume financial support to the country’s budget.

This financial year, donors have released funds to support health, agriculture and education sectors in form of basket funding under the Sector Wide Approach (SWAp), but not enough budget support. Basket funds are usually ring-fenced, leaving no room for government control as would be the case with the general budget support which government can spend as it wishes.

An aide-memoire we have seen dated July 20 2012 and signed by Secretary to the Treasury Radson Mwadiwa on behalf of the Malawi Government and the then Cabs chairperson Dr. Andrew Mwaba, the AfDB resident representative in Malawi, spells out that Britain and Germany will not give budgetary support until 2015.

The aide-memoire also shows that government may have banked on and budgeted for money in the 2012/13 national budget before the targeted donors had confirmed their actual commitments.

The indicative disbursement plans in the aide-memoire shows that only the World Bank and AfDB were expected to release budget support in the first quarter of $50 million and UA26 million, respectively, which they have.

In the second quarter which starts on October 1, Norway and the European Union are the only donors who will release budget support estimated at NOK50 million and 40 million euros.

In the third quarter, only the World Bank ($50 million) and AfDB (UA4 million) will part with their money towards the budgetary support. The fourth quarter will only benefit from Norway (NOK25 million).

This totals $165 million, far much lower than what Finance Minister Ken Lipenga expected when he presented his budget statement.

Lipenga told Parliament early this year that donors had pledged a total of around $496 million, an increase of 140 percent from the previous financial year when they pledged $210 million.

“I sincerely hope that our development partners will disburse the budget support in line with their commitments so that government can improve the quality of health and education services and promote food security…Malawians should not suffer because it takes some time to complete reforms,” Lipenga said.

German Ambassador Dr. Peter Woeste explained that his government thinks that the success of Malawi is not necessarily based on budget support only, but other aid interventions in social sectors.

“Germany is supporting Malawi in the education sector, the agriculture sector …There is also a global rethink about such direct support on whether it is a measure of success,” said Dr. Woeste, adding that so far they are impressed with the Banda administration.

Germany has, however, indicated that it is still assessing governance and human rights developments in the country before providing budget support.

Britain, traditionally Malawi’s largest bilateral donor with an estimated £20 million in budget support, also wants the Banda administration to demonstrate strong, credible and sustainable governance credentials before considering budget support release.

So far, the administration’s weakening of the Anti-Corruption Bureau (ACB) where director Alex Nampota is not working because government wants him out is a sticking point.

The willy-nilly firing and hiring of people is also giving donors a pause while recent reports of financial abuse at the nation’s supreme public auditing authority—the National Audit Office (NAO)—has also undermined confidence in the country’s public finance and economic governance architecture.

Cabs comprise the African Development Bank (AfDB), the European Union, Germany, Norway, the UK and the World Bank. The International Monetary Fund (IMF), the United Nations Development Programme (UNDP) and Ireland participate as observers.

Earlier in the week, Lipenga said government is committed to implementing reforms including at the NAO changes. He, however, also cautioned that reforms take time to effect.