Fresh hope of budget support
Malawi and the World Bank Group have agreed on a five-pillar roadmap that will, among others, act as a precondition for the country to unlock $80 million (about K60 billion) in direct budget support this fiscal year.
In a warp-up interview with Nation Online at the end of the two—week discussions a Malawi delegation had with the World Bank, International Monetary Fund (IMF) and other development partners on the sidelines of the 2019 Joint Annual Meeting by the World Bank and IMF in Washington DC on Thursday, Reserve Bank of Malawi (RBM) Governor Dalitso Kabambe said there is assurance of resumption of budget support.
He said: “We had a long discussion with the World Bank and we had a one-on-one meeting with the World Bank vice-president and we have been assured that the bank is going to give us budget support.”
ve been assured that the bank is going to give us budget support.”
Kabambe said one major highlight of their discussions with the bank is the formulation of five-pillar roadmap dubbed ‘Agenda for Growth and Job Creation’.
The five pillars in the roadmap include maintaining macroeconomic stability; enhancing and improving private sector-led growth; dealing with energy sector challenges; improving agriculture, value addition and markets; and creating a delivery framework through which all the pillars can be delivered.
Kabambe said that as part of a follow up to this week’s discussions between the two sides, the World Bank has agreed to send a mission to Malawi next month to further discuss and agree with authorities on ‘triggers’ to be implemented before the Bretton Woods institution releases budget support to Capital Hill.
He said: “I am glad to report that in the discussions that was there with the World Bank vice-president, they have agreed that a mission should come to Malawi next month to discuss with us what are the costs needed for that roadmap to be implemented.”
News about possible resumption of budget support should definitely excite authorities at Treasury who are reeling with a budget deficit of K155.9 billion in the K1.7 trillion 2019/20 National Budget, although the figure is a reduction of about 51.3 percent from the 2018/19 preliminary actual budget deficit outturn of K320.2 billion.
During the last fiscal plan of 2018/19, the World Bank withheld the $80 million budget support to Malawi. This non-disbursement forced Treasury to trim allocations to some ministries, departments and agencies (MDAs) in the budget during the Mid-Year Budget Review held in February 2019.
Kabambe said besides discussing budget support, the Malawi delegation also had ‘extended’ discussions with the World Bank about how best Malawi can further reduce poverty rates in the country.
He said: “You will recall that World Bank was set up after Second World War to eliminate global poverty and in our discussions with them, it was clear that while global poverty all over the world is coming down in other continents, but global poverty in Africa is still stubborn and persistent. So, the issue we have discussed with them is what role can the bank play to support our country in fighting or reducing poverty rates.”
The World Bank contends that poverty reduction has been slow over the past decade in Malawi.
Since 2016/17, the bank said in its ninth edition biannual report on
Malawi, the Malawi Economic Monitor (MEM) released in June this year, that Malawi’s poverty rate has remained roughly unchanged, standing in excess of 50 percent of the population.
While Malawi has made some progress in terms of human development outcomes, such improvements have been extremely uneven, with the gains much less significant for the poorest 40 percent of the population, according to the World Bank.
World Bank Country Manager for Malawi Greg Toulmin had not responded to our questionnaire when The Nation sought the bank’s immediate comment on the discussions they have had with Malawi government during the annual meeting.
But speaking in Lilongwe earlier in the month in capacity as a Co-Chair for Development Cooperation Group (DCG)—a platform for Malawi’s donors deigned to institutionalise development cooperation in Malawi—Toulmin said learning from Malawi’s past experience, it was important that the country secures recent gains from macroeconomic stability.
He also advised the country to ensure strong and transparent governance of public resources while allowing full participation of all parts of society including both women and young people.
The development begs the question on why Treasury continues to plan expenditure based on funding not fully committed.
Since revelations of Cashgate- the plunder of public resources exposed in September 2013, donors suspended direct budget support to Malawi. Instead, they channelled their assistance through some international non-governmental organisations.
Donors support up to 85 percent of Malawi’s development budget and used to put in at least 30 percent of the recurrent budget.
