The Government of Malawi has missed a European Union (EU) deadline of March 31, 2016 to fulfil 20 conditions as a requirement for the bloc to provide direct budgetary support.
The EU has set December 2016 for reviewing the given benchmarks.
Minister of Finance, Economic Planning and Development Goodall Gondwe told Parliament in November last year that the EU had asked government to address 20 issues such as the passing of the Access to Information (ATI) Bill, elimination of ghost workers in the public service and reforms to the Farm Inputs Subsidy Programme (Fisp).
In an e-mail response yesterday, EU Ambassador Marchel Gerrmann insisted that Malawi has an obligation to fulfil the requirements in order to qualify for direct budgetary support from the bloc.
“For any country to be eligible for EU budget support, the national authorities must fulfil certain eligibility criteria, including satisfactory progress in implementing public financial management (PFM) reforms and satisfactory progress in maintaining stability oriented macroeconomic policies. For Malawi, these criteria will be assessed again in December 2016.
“Budget support is only one of the EU’s various modalities of aid. What is important is the results that we achieve, not the modality that is used. Following the signature of EDF 11 last year, we have started the implementation of the 560 million euro available. In 2016 alone, new projects are expected to be approved with an overall volume of more than 200 million euro,” he said.
However, Gerrmann said the EU welcomes the announcement that the country is back on track with the International Monetary Fund (IMF) Extended Credit Facility (ECF).
But Ministry of Finance spokesperson Nations Msowoya in an e-mailed response on Thursday said government had made progress on a number of the benchmarks laid down by the EU.
“The EU budget support is dependent on a number of benchmarks besides the passing of the ATI Bill which has already been gazetted and is before Parliament. Treasury is working closely with the EU to ensure that the budget support triggers are implemented in a sustainable manner. The recent mission of the IMF is an important endorsement of the government commitment to strengthen public finance management systems,” he said.
Msowoya said: “With regard to elimination of ghost workers, Treasury has just received a copy of the report which was prepared by National Audit Office (NAO). Treasury is studying the report in order to decide on the course of action to be taken.”
He observed that the EU support was contingent on the successful implementation of certain activities in the PFM action plan which includes the appointment of controlling officers which had already been done.
“On the reconciliation of the cash books with the government Account Number 1, this is still in progress. The implementation of the head count and payroll audit has been done. The Ministry of Agriculture has introduced some reforms, including the involvement of the private sector in retailing of fertiliser as implementation of some reforms to the Fisp,” said Msowoya.
He added that the successful implementation of a fiscal consolidation programme by the government was key as evidenced by the reduction of level of domestic borrowing over the past six months to under K4 billion from over K70 billion in July 2015.
Chancellor College based economist Ben Kaluwa has, however, cautioned government on its drive to attain donor confidence following the announcement by the IMF.
“The fact that we are back on track on the ECF does not mean that we are safe as a country. The problem is that there is still a huge pressure on government expenditure which means that in a few months we could be off track again. The government must, therefore, use a multi-dimensional approach towards donors. While making progress with the IMF programme, Malawi should equally strive to fulfil conditions made by other donors such as the EU,” he said.
Government has been forced to trim the 2015/2016 National Budget from K929.9 billion to K902.6 billion, with critical sectors such as health and education bearing the blunt. n