Bailed out!

The German Government has committed 58 million euro (about K48 billion) to Malawi for development programmes, a move government says is a sign of renewed donor confidence in Capital Hill.

German Minister of Economic Cooperation and Development Gerd Muller made the commitment yesterday during a cooperation audience with President Peter Mutharika at Kamuzu Palace in Lilongwe.

Mutharika and Muller during the meeting

He said: “We are committing 58 million euro as part of our economic cooperation with Malawi. But not only that, we want to strengthen political cooperation with Malawi.

“The prerequisite for development is good governance, peace and stability, as well as fighting corruption. We are pleased to note that Malawi is working hard to fight corruption and maintain peace. This is why we commit ourselves to supporting our identified key areas of support to Malawi which include agriculture, health, education and the G20 Compact with Africa for Malawi to become a member.”

Elaborating on the areas of support, Muller said Germany is committed to supporting the establishment of an Agricultural Innovation Centre to enhance agricultural production and marketing in the country.

“We note that Malawi has great potential to develop and we want to support the rural population by supporting agricultural enhancement programmes through the creation of the Agricultural Innovation Centre to increase value addition and to ensure fair prices and fair trade with Europe and the rest of the world,” he added.

According to Muller, the grant will also support the health sector in fighting HIV and Aids and other diseases, provision of quality services, including drugs and family planning.

In the education sector, Muller said his government will support increased access to quality education that expands to technical and vocational skills development.

The minister also pledged Germany’s help for Malawi to complete processes towards becoming  part of the G20 Compact with Africa that enables members to tap on economic development opportunities that arise from being a member of the Compact.

He hailed efforts Malawi is taking in fighting corruption and tightening Public Finance Management Systems (Pfms), and urged government to strengthen its bilateral relationship with neighbouring countries like Zambia, Mozambique and Zimbabwe, to enhance both economic and political cooperation.

On his part, Mutharika commended the support the German Government has been rendering to Malawi, which he said hovers around 1.1 billion euro since the cooperation started 55 years ago.

He urged the minister to advocate for Malawi to benefit from the Green Climate Fund and in the finalisation of the processes to join the G20 Compact with Africa.

The Green Climate Fund was established within the framework of the United Nations with financial mechanisms to assist developing countries like Malawi in climate change adaptation and mitigation practices.

Said Mutharika: “Malawi is keen to benefit from the Green Climate Fund to mitigate effects of climate change. We are in the process of joining the G20 Compact with Africa, which has projects and investments that can benefit our country.

“We have serious energy challenges in our country and, through you, we are inviting investors from Germany to invest in our country, specifically to solve energy challenges which have been compounded by the adverse impact of climate change which has seen water levels in Lake Malawi dropping by about 40 percent.”

He said his government is working hard to diversify energy sources to ensure Malawi has sustainable energy in the long run for maximised productivity.

Reacting to the investment plea, Muller assured Mutharika that he will lobby German companies to consider investing in bioenergy, specifically to reach out to the rural population.

Meanwhile, Minister of Finance, Economic Planning and Development Goodall Gondwe has said the funds were not initially committed in the 2018/19 Budget but have been committed to Malawi because of donor confidence.

Speaking in a telephone interview later, he said donors are interested in Malawi and want to see government succeed.

He said: “People outside there are speaking highly of Malawi and they really want us to succeed, particularly in the private sector. There isn’t direct budget support, as we used to understand it, but there is what we call Designated Support, like this one where our partners only want to know what we are going to use the money for.

“The budget support used to be money given to us without really discussing how it is going to be used and these resources will get to government through their agency, GIZ.”

Gondwe confirmed that government is also trying to woo the German Government into more investments, including hydro-electric, solar and wind power generation.

The German grant is one of the most significant from that government since 2013, when major donors under the Common Approach to Budget Support (Cabs) stopped providing direct budgetary support to Malawi after being appalled by Cashgate.

In the Cashgate scandal, about K24 billion public funds were found to have been looted at Capital Hill through corruption and fraud.

The new grant will be channelled through German development agencies, including the German Society for International Cooperation (GIZ) and KfW, a German Development Bank, which have been handling German aid that has continued over the years to Malawi.

Of late, development partners have demonstrated renewed confidence in Malawi’s efforts to fight corruption and improve good governance.

Last November, the International Monetary Fund (IMF) announced approval of disbursement of $15.4 million (about K11.3 billion) in the fund-supported Extended Credit Facility (ECF)  after Malawi’s successful completion of the first ECF review.

IMF acting chairperson Tao Zhang, who is also the fund’s deputy managing director, said at the time that Malawi’s programme performance has been satisfactory.

And in December 2018, the Millennium Challenge Corporation (MCC), a United States of America government agency said Malawi is eligible to negotiate for a second compact after the successful completion of the $350.7 million energy project.

In an earlier interview, the US Embassy in Malawi said eligibility for a second compact was dependent on several factors including an improved scorecard score, particularly on fighting corruption.

In the 2019 scorecard, Malawi scored 65 percent on controlling corruption from 59 percent in 2018, owing to increased prosecution of Cashgate cases and commitment by the government on legal reforms in the Anti-Corruption Bureau.

Yesterday, Muller also hailed Malawi Government’s strides in fighting corruption, sustaining peace and stability and improvements in good governance over the years, which he described as critical factors in the development of any country.

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