AfDB may unlock budget support
Tunis-based African Development Bank (AfDB) has confirmed it will resume budget support to Malawi in April this year on condition that government completes Public Finance Management (PFM) plan implementation as well as bring back on course the IMF programme.
AfDB country representative Andrew Mwaba told Business News in Lilongwe last week that there has been a series of intense discussions by the pan-African bank officials and Malawi Government over the possibility of resuming budget aid to Malawi.
The bank, a member of the disbanded Common Approach to Budget Support (Cabs), alongside other members withheld budget aid worth $150 million [K70 billion] since November 2013, following revelations of public finance plunder at Capital Hill dubbed Cashgate.
“We plan to resume disbursing budget support sometime in April, but there are some outstanding issues that we are waiting for and these include the finalisation of public finance management plan by government and we also want government to make sure that the ECF [Extended Credit Facility] programme supported by the IMF [International Monetary Fund] is back on track,” he said.
The three-year ECF is currently off-track mainly due to Cashgate, which has prompted the global lender to also delay release of its financial tranches to Malawi.
In December 2014, the IMF mission and government officials reached a staff level agreement on policies that could be supported under ECF, the fund’s main tool for medium-term financial support to low-income countries such as Malawi.
Mwaba was reacting to an announcement by Finance, Economic Planning and Development Minister Goodall Gondwe who told Parliament last Friday that AfDB has decided to release K8 billion as budget support during the latter part of this fiscal year.
Gondwe said there are indications that both the World Bank and the European Union (EU) could release their pledged budget support during the next financial year [2015/16].
“There will be a number of people who will consider the continued drought of budget aid as a failure. However, equally there will still be others that will see the fact that we seem to be surviving the drought as a good sign that augurs well for the times when, as an independent country, we are bound to be left alone except for foreign loans which every economy, advanced or developing, universally needs to either develop or in the management of an economy,” he said.
But Gondwe said lack of budget support is still painful as it requires every Malawian to accept sacrifices in different forms.
He, however, said despite many meetings with donors being held alongside public finance management reforms, only AfDB has decided to resume budget support.
