Some donor countries have pulled out their budgetary aid amid revelations of massive looting of public funds at the Capitol Hill famously named as Cashgate Scandal through which over K13 billion of tax-payers money was stolen by the then Peoples Party (PP) officials, some civil servants and private businessmen.
About 40 percent of the countrys financial support which is over US$150 million comes from the bilateral aid.
Norwegian Ambassador to Malawi Asbjorn Eidhammer said in an interview that there is “no further direct budget support consideration” for 2014 and it will be “unrealistic to put false hopes to government authorities on possible direct budget support” resumption from Norway.
The outgoing ambassador, however, said Norway will continue with its support to the people of Malawi through other means like sector support which is parallel to direct budget support.
Direct budget support is made in such a way that donor funds and those that Malawi government does collect from citizenry taxes gets into the consolidated government account number one at the central bank, economic correspondents.
Once the funds get consolidated there is no trace because government has final say on how funds in account number one can be spent while those supported through projects are easily traced by donors through monitoring and evaluation of projects, a local economic commentator said.
President Peter Mutharikaās government will be forced to adopt a zero-deficit budget when the Parliament meets this September following reluctance by donor countries to resume aid to Malawi.
So far the current regime has inherited a domestic debt of up to MK340 billion exerting an economic burden on the next generation. Meanwhile, Minister of Finance, economic planning and development Goodall Gondwe has suspend domestic borrowing with immediate effect. On the other hand that foreign debt stands at 1.4 billion dollars. Economic experts have deplored the rising debt levels describing the situation as retrogressive.
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