Malawi’s key donors under the Common Approach to Budget Support (Cabs) meet in Lilongwe this Tuesday to, among other things, discuss budget support commitments to the new administration and undertake a second 2011/12 review with government.
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The meeting comes at a crucial time when the Joyce Banda administration is trying to consolidate donor confidence restored after the death of president Bingu wa Mutharika, who died of a heart attack last month.
Aid-dependent Malawi slid into economic crisis over the past year as Mutharika’s administration squabbled with major Western donors who then froze millions of dollars of assistance that had traditionally bankrolled about 40 percent of the budget.
But Banda has quickly engaged donors in the last few weeks since assuming power and asked the International Monetary Fund (IMF) for a new programme. She has also indicated her administration will devalue the kwacha and address economic and other governance concerns that caused the donor freeze.
Her diplomacy seems to be working. Last month, IMF asked the country’s key donors to pledge their financial commitments to the country’s 2012/13 budget to make it easy for government to formulate the budget.
The African Development Bank (AfDB) has since responded and pledged to give Malawi $45 million in three tranches while the World Bank has said it will work with the IMF to quickly respond to Malawi’s needs.
South Africa and Zambia have also come to help ease the fuel shortages that besieged the country for the past two years.
Malawi receives a harmonised general budget support from a group of donors which consist of United Kingdom (UK), Norway, the African Development Bank, and the European Union (EU), the World Bank and Germany.
The IMF and United Nations Development Programme (UNDP) participate as private observers.
Malawi was one of the fastest growing economies in the world after late Mutharika took office in 2004, averaging seven percent expansion between 2005 and 2010, thanks to internationally funded Farm Input Subsidy Programme that turned the nation of subsistence farmers into food exporters.
But the aid cut-off and Mutharika’s steadfast ways put the economy on a death spiral.
