AfDB gives Malawi K13bnsector budget support
The African Development Bank (AfDB) board of directors yesterday approved a sector budget support grant worth $30 million (about K13.5 billion) to Malawi to support basic social services of health and education.
The resources—in form of a ring-fenced sector budget support—will help to preserve the gains Malawi has made in expanding access to basic services, according to the bank’s statement released yesterday.
The disbursement is a fulfillment of the AfDB’s commitment in February this year that they would unlock budget support on condition that Capital Hill completes Public Finance Management Plan (PFM) implementation as well as bring back on course the International Monetary Fund (IMF) programme supported by an Extended Credit Facility (ECF).
On March 23, the IMF Executive Board completed the fifth and sixth reviews of the country’s economic performance under the programme.
The Board also approved a request for an extension of the current ECF arrangement by six months to May 22 2016 and the rephasing of disbursements associated with the seventh and eighth reviews.
The move enabled the immediate disbursement of Special Drawing Rights (SDR) 13.02 million (about $18.1 million or nearly K8 billion), bringing total disbursements under the arrangement to SDR 65.08 million (about $90.3 million or roughly K39 billion).
It also sent signals to other donors that Malawi’s public finance management has improved.
Donors froze budget support after a PFM system breach that culminated into what has become known as Cashgate—the brazen plunder of public funds.
Reacting to the AfDB’s gesture, Finance, Economic Planning and Development Minister Goodall Gondwe yesterday described the step as a “positive development”.
Said Gondwe: “And we have the EU [European Union], the World Bank in the country who are looking at what we have done so far in [PFM]. We hope that they too will do the same, but not for this financial year, but the 2015/16 financial year,” said Gondwe in telephone interview.
AfDB is among Malawi’s major development partners who suspended budget aid to Malawi in November 2013 following revelation of Cashgate at Capital Hill.
Following the scandal, donors—who operated under a defunct grouping called Common Approach to Budget Support (Cabs)—withheld resources worth $150 million towards the 2013/14 national budget.
As such, yesterday’s approval of the grant by the Tunis-based bank should be timely in view of the fiscal pressures currently facing government in the delivery of basic services following suspension of general budget support.
And a source at AfDB yesterday said the approved resources are merely a blend between budget support and project support “and the modalities are different from the general budget support”.
The difference is important because under semi-earmarked funding condition that appears to be the case, it means that government may not enjoy much direct control over the funds—an indication of lingering doubts about government’s sound public finance management abilities.
According to the statement, the funds will complement government’s own efforts in meeting the country’s requirements, and the support being provided by Malawi’s other development partners.
