EU, Norway, UK stake out aid positions on the ‘Chaff’
There is no doubt that the Malawi Government’s fiscal position is precarious largely because a good chunk of the budget has been stolen in a scandal now dubbed cashgate and also due to uncertainties surrounding foreign budget support now delayed following the scam. There is also a lot of misinformation going on.
For example, while word on the street is that Britain and Germany have suspended budget support due to cashgate, the truth is that there is no budget support from the duo to suspend in the first place.
For example, a 2013/14 grant performance matrix produced by the Ministry of Finance shows that the Malawi Government did not factor in British and Germany budget support into the current fiscal year because the two never committed anything. In fact, since suspending budget support in 2011, the two donors have not programmed any, only disbursing £20 million in the case of London and €5 million from Berlin as emergency budget support last year.
Only the World Bank, the African Development Bank (AfDB), the European Union (EU) and Norway pledged general budget support, according to the matrix that gives annual grant projects and offers updates on what has been disbursed so far from donors. While the four released most of the first quarter commitments, second quarter disbursements appear to have delayed owing to the massive plunder at Capital Hill that has emptied donor confidence in the country’s Public Finance and Economic Management (PFEM) system. This is why it was important to get the correct position from some of the major donors so that the correct message is transmitted.
In e-mail interviews being published for the first time, the EU, Norway and UK provide important clarifications here.
EU Head of Delegation Alexander Baum, when asked about the confusions surrounding the status of aid, put the union’s position this way:
“We are operating currently under a Financing Agreement for three years over €98 million signed last year. The intention was to help Malawi to restart its economy and to buffer the budget and forex during the lean period. Therefore, €40 million was disbursed last year in December. The remaining tranches were for €29 million each for fiscal years 2013/14 and 2014/15 respectively. Both tranches consist of a fixed and a variable component. For the current fiscal year, we are expecting that the variable tranche is considerably lower than it should be (because of weak performances); hence, the actual disbursement would be a couple of millions below the €29 million. The target date for disbursing the current tranche was end December 2013. Hence, even now we are not in delay. However, the disbursement dossier that we need to send to our headquarters would have to be ready by now, but two of the three eligibility criteria are not fulfilled: economic stability/IMF programme and Public Finance Management [PFM]. Hence, we cannot process the dossier at the moment and expect, therefore, that we will be in delay. The question now is when do we expect to be able to disburse? [Our answer is]: When both eligibility criteria are fulfilled. One instrumental element of assessment for PFM is the genuine and proven implementation of the action plan that government has drawn up to address the PFM failures around cashgate. We expect that this assessment will be concluded [at least for the purpose of the budget support payment] by the time of the next CABs Review, which we foresee beginning of March next year. If everything is reasonable, okay, we should be able to disburse. Having said this, it is important to note that there is considerable risk aversion on the side of (all) our headquarters; hence, we hope that confidence can be rebuilt swiftly. There is clearly a willingness on the EU’s side to help and support the people of Malawi and to acknowledge the openness with which the crisis is being addressed and that gives an opportunity to tackle some of the fundamental issues around PFM, which go back quite some time without having received the same public attention cashgate gets now”.
As for Norway, ambassador Asbjørn Eidhammer said: “Norway was committed to contribute with budget support of 100 million Norwegian kroner, which is about $16 million for the first half of the Malawi budget year. In September 2013 we released about $8 million. Then the budget support was frozen, so that the second amount of about $8 million will not be released as planned. These $8 million are being used for food support through the World Food Programme and recruitment of doctors through UNDP, and are as such not lost for Malawi. More Norwegian aid has been channelled through the Norwegian Embassy to Malawi in the calendar year of 2013 than in any year before us. The total for 2013 will be above $85 million, which is an increase of well above 60 percent from 2012.”
Britain’s position, as spelt out by DfID head in Malawi, Sarah Sanyahumbi, is as follows: “In light of the corruption scandal the UK has suspended all funding through government or quasi-government institutions. The decision affects all sector budget support, financial aid to government, as well as any funding to government through third parties…All our programmes that do not go through government systems are continuing. These include programmes in water and sanitation, family planning, education, and the UK’s £20m support to emergency feeding programmes with WFP. We are exploring a number of options for reprogramming of any unspent financial aid.”
The Chaffer hopes this clears the mist that has surrounded most of the budget support issues.
Merry Christmas!
