Tunisia-based African Development Bank (AfDB) says it is discussing with government the possibility of resuming budget support to Malawi and has since earmarked $15 million (about K6 billion) towards the 2014/15 national budget.
AfDB country representative Andrew Mwaba broke the news to The Nation on Thursday at Capital Hill in Lilongwe on the sidelines of the signing ceremony of loan and grant agreements with the Malawi Government for the Nacala Road Corridor Development Project, the Sustainable Rural Water and Infrastructure Project and the Feasibility Studies for the Shire Valley Irrigation Project.
Said Mwaba: “We are discussing with our partners and we are going to continue with budget support. As you know, some of our partners have reduced budget support or they are still reconsidering, but ourselves [AfDB], the World Bank and the European Union (EU), are still discussing with the government.”
Budget support, an aid instrument or aid modality, helps the country beef up its foreign exchange reserve position as money is given directly to a recipient country government, usually from an external financing agency or donor government.
AfDB and other Common Approach to Budgetary Support (Cabs) members withheld budget aid worth over $150 million (about K60 billion) on November 7 last year, angered by revelations of massive looting of taxpayers’ money dubbed Cashgate at Capital Hill.
Other Cabs group members include Britain’s Department for International Development (DfID), the European Union, Norway, and the World Bank; with the International Monetary Fund (IMF), the United Nations Development Programme (UNDP), Ireland and Germany having the status of ‘observers’.
Mwaba said AfDB looks forward to providing budget support within the fiscal year 2014/15.
He added: “We are waiting for some of the actions to be fulfilled, especially further strengthening of public finance management reforms.
“Following Cashgate, a lot of donors were worried about government finances, so we are looking for strengthening of that and also continuation of the reform programme under the Extended Credit Facility Programme of the International Monetary Fund (IMF).”
Going forward, Mwaba said there is need for the DPP-led government to sustain some of the economic reforms initiated by the former People’s Party (PP) government in May 2012 and also to keep improving on managing public finances.
Commenting on AfDB’s hint on budget support in the 2014/15 national budget, Ministry of Finance spokesperson Nations Msowoya said government is pleased with the news considering that the 2014/15 fiscal plan is already ‘under stress’.
“The $15 million that AfDB is talking about, if provided, will definitely help us address our cash-flow challenges facing the social sectors of health, education and the whole economy at large,” said Msowoya.
Secretary to the Treasury Newby Kumwembe on Monday said during pre-budget consultations that the 2014/15 budget is being prepared amid the need to strengthen government financial systems through the Public Finance Economic Management reforms.
