A common approach that is not so common

Under the layer of what cooperating partners tried to portray as a unified message this week are sharp differences in positions when it comes to the tricky matter of to disburse or not to disburse.

From both inside sources, analysis and observation, it is clear that donors that help finance Malawi’s national budget to the tune of 40 percent and who congregate under the Common Approach to Budget Support (Cabs) banner are divided over how to deal with the Joyce Banda administration on the question of suspended aid.

After the review meeting this week that followed a postponement of the same some weeks ago, I got the sense that the so-called common approach was not as common as the name suggests.

Indeed, between the diplomatic lines, it is fairly easy to read sharp differences on whether it was still necessary to keep withholding the more than $150 million (K60 billion) frozen in the last quarter of 2013 in the face of the Cashgate that eroded confidence in the country’s Public Finance and Economic Management (PFEM) system.

With K60 billion withheld by Cabs and around K13 billion looted from the Treasury—all within the same 2013/14 financial year—the national budget is in disarray.

In fact, the two developments have left Capital Hill so broke that, according to reports, government ministries, agencies and departments cannot even afford to buy stationery to print memos, for example.

Civil servants’ salaries are being paid in trickles. Social services such as health, education, water and sanitation have suffered embarrassingly.

Public investments—especially in infrastructure development—are almost non-existent, having taken a devastating knock likely to hurt the long-term vigour of the economy.

There is nothing surprising in this outcome. The only surprising thing is that Cabs co-chairperson Alexander Baum—who is also European Union head of delegation to Malawi—is surprised that there are harsh cuts to social spending.

What did these donors expect? A combined K73 billion—more than 10 percent of total expenditure—is taken out of the national budget and somehow things are supposed to remain smooth?

Probably what should be worrying the donors is the prioritisation aspect, which can be tricky when such a large sum is taken out of the equation, more so in an election year!

What is also surprising is that a good number of donors have been saying nice things about the progress the Banda administration has made in pursuing Cashgate cases and strengthening public finance management, yet they cannot disburse?

Some have gone to the extent of being the administration’s surrogate and consigliere on the Cashgate forensic audit report.

How does one explain the mismatch between the determined support for the administration and the unwillingness to unlock aid?

Indeed, when the International Monetary Fund (IMF) reinvested its confidence in the Malawi Government by approving the third and fourth reviews of the Extended Credit Facility (ECF) and releasing a long delayed $20 million (around K9 billion), Malawians hoped for the best.

To many, the positive IMF reviews and subsequent disbursement—which in this case came four months after Cashgate broke and following consequent aid suspensions by key donors—was an important green light for Cabs members to resume budget financing. Yet, they did not.

We were told that each donor would make independent decisions on whether to unfreeze or not after the fund’s reviews. So much for the common approach!

The point is: what is the point of having a common approach when your approaches are not so common?

The conflicting messages from donors regarding budget support position and the potential of changing its disbursement modalities is creating more uncertainty in an already uncertain environment.

Donors should not be playing with the currency of perception because they could unwittingly be sending very damaging signals.

While some development partners signal that the Banda administration has made progress in addressing systemic issues that have undermined public finance management, others do not seem to be so sure.

Such a split is surprising given that the major performance benchmark for Cabs is the Extraordinary Performance Assessment Framework (E-PAF), which contains targets and indicators agreed during the last Cabs meeting in November 2013.

According to the E-PAF, some of the indicators and targets are the need for government to obtain a full understanding of the scope and extent of the misappropriation of funds from the Accountant General’s Department, strengthening the security, internal controls and functionality of the porous Integrated Financial Management Information System (Ifmis) and restoring a robust payments system.

Government was also expected to ensure that all interim manual payments are validated and recorded as well as strengthen the capacity of the Ministry of Finance in key technical areas.

In addition, donors asked government to demonstrate commitment to undertaking comprehensive and robust action on public service performance management problems, strengthen public accountability as well as achieve and sustain macro-economic stability.

On the other hand, donors agreed to meet their commitments under the Joint Financing Arrangements (JFA) and to ensure that all ongoing government reform programmes are consistent in their phasing and intentions and are mutually reinforcing.

Thus, I want to believe that this is an objective performance assessment tool and reaching a consensus on Malawi’s performance should not be a problem. So, why are we getting incoherent words and actions from the donor community?

I am also inclined to believe that this being an election year, it is possible that donors are trying to calibrate their messaging so that their positions should not, for whatever reasons, be a factor in the May 20 Tripartite Elections.

It is also possible that with no presidential candidate emerging as a clear favourite, development partners are also playing a wait-and-see game by dodging commitments. Meanwhile, the poor are suffering and the donors are pretending that they are concerned about the innocent’s suffering. This is a lie of course.

The suffering poor are collateral damage in this high stakes diplomatic and political manoeuvering that is clearly at play here.