Economists have said Malawi has not done enough to win back donor confidence and that although efforts can be seen, the country is yet to get there.
Economics Association of Malawi (Ecama) and University of Malawi’s Chancellor College economics professor Ben Kaluwa have also argued that reclaiming lost trust from donors is a tough balancing act for Malawi.
The economists were speaking in reaction to the plea by President Peter Mutharika on Monday during a meeting with parliamentary committees in the United Kingdom (UK) to push the British government and, by extension, other donors to resume direct budget support to Malawi.
In his address, Mutharika outlined several reforms his administration is implementing to regain confidence from development partners who withdrew their 40 percent contribution to Malawi’s national budget in October 2013 amid concerns of Cashgate—the plunder of public resources at Capital Hill.
The President also said his administration has put in place strict measures to restore discipline in financial management and win back donor trust.
He said, among others, his government managed to come up with a Cabinet size of 20, embarked on a wide range of public sector reforms to achieve efficiency and effectiveness in the public service and taken steps to seal loopholes to avoid a repeat of Cashgate.
However, in an e-mailed response to a questionnaire, Ecama executive director Edward Chilima said although efforts can be seen that the country is doing something to woo back donors, a lot of work is cut out for the country.
He said there is wastage in public services, government expenditure is still excessive, revenue collections weak and the country is yet to stabilise the economy as exchange rates are still volatile and interest rates on the high.
Chilima said there is still more that can be done to make Malawi marketable to investors.
These actions, he said, include improving the business environment, enhancing security and energy; reducing interest rates; managing foreign volatility and working on labour efficiency indicators as well as improving on work ethics.
On the other hand, Kaluwa, , speaking in a telephone interview on Wednesday, said winning back donor confidence means tackling several issues, including economic and political governance, which he said is not easy.
He said: “Donors want accountability on their taxpayers’ money. If their governments are giving money to thuggish governments, the taxpayers would require accountability and that is where conditionalities come about.”
Kalua said for Malawi to make itself marketable to investors, it must lower barriers to entry to foreign investors.
“Foreign investment should be easy. Barriers to entry actually include exit barriers. In short, exit barriers are entry barriers. If you raise your walls high, people cannot get in because they are unable to get out when they want to, so entry barriers are exit barriers and these need to be lowered,” said Kalua.
Speaking on the public sector reforms, Kalua said the reforms that are on the table right now are a step in the right direction more so because they are not politically aligned.
Commenting on the same issue about the President’s plea, another Chancellor College Economics Department lecturer Dr. Exley Silumbu, in a telephone interview on Wednesday, said Malawi needs to meet the 20 conditionalities that donors have set to resume direct budget support.
He said: “Donors have laid 20 conditions and we cannot say those are achievable in a space of little time. The donors are monitoring the conditions stipulated and what I can say is that it will take time for us to achieve the conditionalities.”
According to Finance, Economic Planning and Development Minister Goodall Gondwe chief among the conditions is the tabling of the Access to Information (ATI) Bill, elimination of ghost workers in the public service and reforms in the Farm Input Subsidy Programme (Fisp).
The Mutharika administration has banked its hopes on reforms to win back confidence. In April this year, Mutharika outlined Public Finance Management reforms which, among others, included reformation and revival of the Central Internal Audit Services as a compliance tool.
However, in an interview with The Nation at the time, International Monetary Fund (IMF) resident representative Geoffrey Oestreicher described the action plan as a strong commitment whose test stood in implementation.
Malawi’s public finance management has been rocked by reports of abuse of funds with the Director of Public Prosecutions (DPP) at one time proclaiming that about 30 percent of resources allocated in the national budget went into people’s pockets.
Two years after government started implementing measures to strengthen the country’s financial management system, donors described the budgetary support modality as a leaking bucket which their taxpayers cannot allow to pour money into.
The donors, who have been channelling their support to Malawi off budget, said they will continue providing the aid in this manner until government seals loopholes in the Public Finance Management System.
Government has since been implementing measures to seal loopholes in the Integrated Financial Management System (Ifmis), but donors remain unconvinced by the steps taken.