APM vows to cut donor reliance

President Peter Mutharika has said even if donors resumed aid to Malawi, his administration would remain on the path of reducing the country’s dependency on foreign alms.

The country’s donors are withholding their contribution to the national budget, estimated at 40 percent, after being frustrated by theft of public resources amounting to about K20 billion christened as Cashgate.

Mutharika said in an interview before he left New York for Malawi last week that the zero-aid budget that his administration is implementing as a result of the aid freeze should prepare the country towards gradually standing on its own.

“We hope to find resources down the road to finance the deficit. But regardless of what happens, we have started the process of gradually reducing our dependency on aid so that finally we can stand on our own,” he said.

Mutharika explained that his sentiments do not suggest that Malawi does not need donors, but that help must be sought only in areas which the country is not able to finance using locally generated resources.

“We need to work hard to reach a point where we are able to finance the entire recurrent expenditure on our own. Let us seek aid only for the development budget and where we intend to technically develop our capacities,” said Mutharika.

He explained that his administration was emphasising aid for trade because he believes in development that is anchored by a market-driven economy, steered by the private sector.

“My administration will continue to intensify efforts to expand the circle of trade where goods from Malawi are internationally attractive and competitive.

“We are also encouraging the need for foreign companies and businesses to take up investment opportunities in Malawi. This is the reason we have produced a compendium of investment information,” he explained.

He said through trade and investment, Malawi will be able to develop the frontiers of the economy and generate revenue that it needs to fight poverty and create wealth.

“If we take this path, we will soon see that our dependency on foreign aid is slowly reducing,” he explained.

Commenting on the matter, Malawi Economic Justice Network (Mejn) executive director Dalitso Kubalasa recalled that he recommended before the May 20 elections that any incoming government should prioritise work of weaning the country from donor dependence.

Kubalasa observed that signs have been clear for a while that Malawi does not have the luxury to continue relying on foreign alms to sustain itself.

“It will obviously be foolhardy for government to continue burying its head in the sand without thinking of an alternative plan.

“We need to embark, strategically and as fast as we can, on the long journey on this winding path towards economic independence, alongside the much needed fiscal prudence and discipline,” said Kubalasa.

Since 1964, Malawi’s macroeconomic structure has been dependent on external support.

At the same time, both bilateral and multilateral aid flows to Malawi have been as volatile and quite unpredictable just as national political and economic trends have been.

According to Kubalasa, considering the continuing fragilities and uncertainties, it is still unlikely in the short to medium term that there will be any substantial increases in aid or budget support and dedicated grants.

He said the nature of political and policy debates about aid in the donor countries centering on substituting trade for aid, increases the uncertainties of even sustaining current levels of aid in the medium to long term.

Kubalasa argued that while Malawi needs any aid support as to boast local revenues, continued over-dependence on external support is ill-advised.

“It is important to underscore this as we continue to witness probably one of the worst collapses of the public service delivery after the suspension of close to 40 percent of budget support in the wake of Cashgate,” he pointed out.

Mejn feels reports of Malawi’s tax performance trends over the years give an impression that it is still possible to enhance domestic resource mobilisation drive on the path of seeking self-sustenance.

“For instance, we hear of reports from government that tax performance shows that Malawi has consistently been beating its targets, pushing it to a level above sub-Saharan Africa members’ averages in terms of tax revenue targets. This makes a move for self-sustenance feasible,” he said.

Besides, according to Kusabalasa, Malawi needs to begin to align its priorities by pursuing local political economy legacies that have propelled the economy in the right direction before, while diligently dealing with all those “bad apple” policies that have been hampering progress.

“These, among others, include the ‘mega’ patronage political systematic governance challenges that have remained at the centre of our economic disasters since independence.

“These have been steadily perpetuating mediocrity through different forms of ‘elite’ capture, either through family connections or other patronage-based favours all at the expense of merit; fraud and corruption at the expense of integrity and patriotism,”  he observed.

This, he said, has been prevalent in all the political regimes Malawi has had since its independence in 1964.