It never rains but pours for Malawi’s battered economy as a visiting European Union (EU) development official has ruled out EU’s return to budgetary support in the 2015-2016 financial year.
The EU says Malawi has not done enough to restore confidence in the public finance management system.
The development contradicts Finance, Economic Planning and Development Minister Goodall Gondwe’s statements in Parliament that the EU was among a group of few donors waiting to resume currently suspended budgetary support if it meets 20 conditionalities, including the tabling of the Access to Information (ATI) Bill and elimination of ghost workers in the public service.
Finance Minister Goodall Gondwe reacting to the news of the development, said government there was no reason to despair as was still going to give Malawi 150 million euro (about K 124.1billion) to support education via the budget but could not state when the funds will be released.
He said the money which had been pledged but has now been suspended is 29 million euro (about K24billion).
“There is nothing we can do about it,” said Gondwe.
“Twenty-nine million euro is the figure they were going to give us but they said they are coming back in December and maybe give us if we work on some things in 2016/2017 budget.
Gondwe, who insisted the nation will be fine despite the development saying the 29 million euro will be coming much later than anticipated.
“Let’s avoid focusing too much on the budget support. It’s not much anyway. Even when we were getting the budget support, it’s only 10 percent of the budget and not 40 percent as often reported,” said Gondwe.
But speaking to journalists in Lilongwe on Friday after visiting several projects sponsored by EU in the country, EU’s Head of Unit for Southern Africa and Indian Ocean in the Directorate of Development and Cooperation, Fermin Melendro Arnaiz, said Brussels has not been impressed by ongoing reforms of the public finance management.
“On the provision of budgetary support to Malawi, can we make it clear, despite the fact that we are encouraged to see government making more progress in regarding to implementation PFMR— public finance management reforms—and this government is taking measures to enforce fiscal discipline required, the EU is of the opinion that more progress is needed to justify the resumption of budgetary support. The practical implication is this, consequently, the EU will not support budget this year, 2015-2016,” said Arnaiz.
Gondwe could not be reached on Saturday, but Treasury spokesperson Nations Msowoya insisted the two sides were still engaging in talks and the position might change.
“It might be a no today, but it can be a yes tomorrow, we are still engaging them. We are discussing and working on bringing a solution,” said Msowoya.
Head of EU delegation in Malawi Marchel Germann, also present at the briefing, went further to cast doubt on long-term return of budget support, saying the EU, which last granted budgetary support in 2012, has “moved on” from budgetary support but cited the soon to be approved 200 million euro development package to Malawi as sign of commitment to support.
“We have moved on as EU and as my colleague has explained, it Is not the modalities what is important to us, what is important is for us to achieve the intended objectives for the people of Malawi,” said Germann.
Both Germann and Arnaiz emphasised that EU was still providing financial support to crucial social services, including health, education and other poverty alleviation and development programmes; hence, appealed for the public not just to focus on the modality being used to channel the support.
“The last disbursement of budget support was in 2012, we are working in Malawi and we will still be in Malawi. We are providing drinking water, Malawians are getting cash transfer, building rural roads, etc,” added Arnaiz.
But addressing Parliament on November 25 last year, Gondwe said the European Union and World Bank were ready to once again inject billions of crucial direct budgetary support if the country meets 20 conditions the two institutions had demanded.
Gondwe then sounded optimistic, saying a number of the conditions had already been agreed with, including reforms of the Fertiliser Input Subsidy Programme (Fisp).
“A large number of conditions have been agreed which we will have to satisfy before they can disburse the budgetary support that has been pledged. For example, the two institutions require, inter alia, that we should have presented to Parliament the “Access to Information Bill” as well as implement reforms relating to the wage administration that will eliminate the “ghost workers” in the system,” Gondwe told Parliament.
On Fisp, Gondwe said the donors stressed that the country should completely reform the programme so that half fertiliser is sold through the private sector instead of Smallholder Farmers Fertiliser Revolving Fund of Malawi (SFFRFM) and Admarc.
The visit comes as EU celebrates later this year, 40th anniversary of bilateral relations with Malawi and comes as the economy continue struggling while skepticism grows of Malawi development agenda as underdevelopment and poverty continues ravaging the nation 52 years after independence. n