The European Union (EU) has cast doubt on resuming direct budget support to Malawi soon over concerns of poor fight against corruption as well as debt and public finance management.
EU Ambassador Rune Skinnebach stated the position during celebrations of Europe Day in Lilongwe on Tuesday evening.
He said Malawi needs to address corruption because it is one of the underlying factors contributing to the country’s economic and social stagnation in recent years.
Skinnebach said: “We see there is a need for budget support to be relaunched, but to do that we must remember that budget support will be European taxpayers’ money channelled to Malawi.
“For Malawi to be eligible for budget support, a series of eligibility criteria, including good debt management and sound finance management must be put in place and progress demonstrated. This is something we are working with the government and we hope to relaunch the budget support in the near future.”
He expressed concern that due to corruption, citizens are not getting the public services they deserve such as schools, roads and hospitals.
“Corruption is hindering growth because investors are fearful of investing in Malawi. We, therefore, are supporting the government and the President [Lazarus Chakwera] to put to an end this malpractice,” Skinnebach said.
The diplomat acknowledged that since Cashgate, the plunder of public resources exposed in September 2013, Malawi has made some progress in addressing the stated issues. But he said there is need for a thorough assessment before direct budget support can be considered.
The EU and other donors, under the Common Approach to Budget Support, stopped their support to Malawi in September 2013. The development left a 40 percent hole in the recurrent budget and about 80 percent in the development budget as donors opted to channel resources through non-governmental organisations.
The EU position has also dampened Minister of Finance and Economic Affairs Sosten Gwengwe’s expectation to have some relief through donor funds in the implementation of the deficit-riddled K2.8 trillion 2022/23 National Budget.
In the 2022/23 fiscal year, total expenditure is projected at K2.840 trillion, representing 24.9 percent of gross domestic product (GDP). Out of this budget, recurrent expenses are estimated at K2.019 trillion, representing 17.7 percent of GDP and 71.1 percent of the total expenditure.
Total revenues and grants for the 2022/2023 fiscal year are estimated at K1.956 trillion representing 17.2 percent of GDP.
The minister estimated grants at K320.3billion, or 2.8 percent of GDP, comprising K278.4 billion from international organisations as well as K41.9 billion from foreign governments in form of dedicated and project grants.
In her response during the ceremony, Minister of Foreign Affairs Nancy Tembo said the Chakwera administration has an agenda to stamp out corruption, but she was quick to point out that the fight against corruption is the responsibility of every Malawian.
She said: “Corruption is conducted behind doors and sometimes difficult to arrest, but if we as citizens of the country can join hands to stamp out corruption, the battle can be won.”
On the Europe Day, Tembo said the EU as the country ’s biggest multilateral partner has over the years supported Malawi in strengthening governance institutions, particularly in the areas of justice, human rights and accountability.
Reacting to the situation, Economics Association of Malawi executive director Frank Chikuta said the legal framework governing public finance management in the country has adequate provisions to safeguard public resources and avoid pilferage.
He said the Public Finance Management Act is the overarching law in the management of public funds and government needed to ensure the law is followed to the letter.
Economist Milward Tobias said it is possible to have clean public finance management systems if controlling officers are held to account for financial leakages.
He said the weak public finance management systems are a reflection of a lack of responsibility and accountability on the part of controlling officers as mostly they go away with their inefficiencies.
Tobias said: “It all begins with the President. The Pesident sets the tone. If the President spares some corrupt people within his circle, then people will feel it is right to continue plundering public resources.”
Centre for Social Accountabil ity executive director Willy Kambwandira said he was not surprised with the EU position because the Tonse Alliance has not d e m o n s t r a t e d g e n u i n e commitment to decisively deal with high profile corruption cases since they were voted into power in the court-sanctioned Fresh Presidential Election held on June 23 2020.
By press time at 9pm, Treasury spokesperson Taurai Banda was yet to respond to a questionnaire on the steps government is taking to address the EU concerns.