Malawi donors call for sacrifice

Last week fuel shortages hit the country again especially the capital Lilongwe a reminder that Malawi is yet to recover from the economic downturn
Everybody, including the privileged few, must sacrifice for Malawi to recover from the current economic slump, the Common Approach to Budget Support (Cabs) has said.

Cabs chairperson Asbjørn Eidhammer, who is also Norwegian Ambassador to Malawi, said this in an exclusive interview with The Nation this week.

The remarks, by a group of Malawi’s donors that provide harmonised general budget support to the country—up to 30 percent of the national budget—coincide with The Nation’s revelations on Tuesday that President Joyce Banda’s trip to the United Nations (UN) General Assembly in New York in the United States will cost taxpayers about K308 million in air tickets and allowances for her and he 40-plus entourage.

Expenditure critics say this is a luxury the gasping Malawi economy and the tattered public purse cannot afford. Frequent internal travel with huge entourages by President Banda and her deputy, Khumbo Kachali, have also projected the image of an administration obsessed with visibility—even from mundane public events fit to be presided over by senior civil servants—at the expense of the larger population.
The Cabs’ call for sacrifice also follows Malawians’ anger at the recent 80 percent increase in Cabinet ministers’ accommodation allowances at a time the People’s Party (PP) administration is preaching austerity for everybody while the ruling elite live large.
With The Nation establishing that Britain and Germany will not give Malawi budgetary support until 2015, the administration may need to walk its austerity talk.
“Sacrifices have to be made and I think it is important from our [donors’] 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.
His remarks, although not directed at this week’s K308 million expenditure for the UN trip, may resonate well with sentiments on social media and other platforms that the leadership has to cut spending.
In an open display of opulence, Banda is reportedly staying at the Wardoff Astoria Hotel in New York, with accommodation costing between $1 500 (K450 000) and $15 000 (K4.5 million) per night, a far cry from expenditure controls government is preaching.
When Mutharika slept at the same hotel two years ago, he was widely criticised because at the time his government was implementing austerity measures to rein in on expenditure.
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.”
“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,” he said.
In an apparent response to comments by both the Minister of Information Moses Kunkuyu and Finance Minister Ken Kandodo that it is time for donors to act on their pledges, Eidhammer said they have stuck to their timetable and budget support as agreed.
“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 …” he said.
President Banda has in the last four months also tried to win Western support by rolling back 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.
Meanwhile, 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, clearly spells out that Britain and Germany will not give budgetary support until 2015.
The 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.
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.
On his part, German Ambassador to Malawi 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,” Dr. Woeste who said 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 consist of 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 that government is committed to implementing reforms including at the NAO. He, however, cautioned that reforms take time to effect.