UK to continue with aid for Malawi
Despite the International Monetary Fund (IMF) showing confidence with the Joyce Banda administration with a $20 million loan approval, the British government says it will continue to freeze its aid until government restores confidence fully.
In an official response from British High Commission and Department for International Department (DfID) in reaction to IMF’s decision, the UK, one of Malawi’s largest bilateral donors, says it will not resume aid until it is sure that its funds will be secure.
Yesterday, the Common Approach to Budget Support (Cabs) also said their members will conduct their own review in March; hence, the aid remains frozen.
“The UK does have a number of sectoral programmes that were financed through government financial systems and these programmes will continue to be frozen, or alternative delivery mechanisms found, until we have confidence that the funds will be secure and used for their intended purpose,” reads part of the response from the High Commission .
The UK also advised government to put in place that financial control measures that would start producing results after cashgate.
“The cashgate investigations are still ongoing and new financial control measures have yet to bed in. The key to building confidence is a record of sustained implementation that demonstrates a changed culture towards issues of fraud, corruption and inadequate financial management control.
“We believe that more needs to be done. We strongly agree with the IMF statement which underlined that to restore confidence the government will need to investigate the cashgate fraud thoroughly and to fully implement its action plan to address the weaknesses in public financial management exposed by the fraud. While there has been some progress, it is too early to judge the impact.”
Council for Non-Governmental Organisation in Malawi (Congoma) chairperson Voice Mhone also agreed that government needs to do a lot to ensure there is no repeat of cashgate.
“The cashgate came because the Ifmis [Integrated Financial Management System] we were using was porous. How sure is the IMF that the reintroduced Ifmis does not have loopholes which might result into another cashgate? We feel that much as the disbursement was welcome, there was a lot that needed to be done before starting disbursement of funds,” said Mhone.
Precisely! These guys already know of the cosmetology applied in these investigations. Kungoti wakuba akafuna kuziteteza amaona ngati anthu siakumuona. The difference between now and March will so immense in how it impacts our economy. And never forget they are discrete kingmakers and powerful indirect policy drivers…they know too well that Malawians need to be angry enough but we seem not to be getting the message
Now you are talking, ambassador Nevin. Malawians urge you to stand your ground until measures are in place to make sure the money you kindly give us is used for the proper good. after, all your taxpayers worked for this money! As you know, there are no enemies in politics, just adversaries. So in this context, are still mad at the DPP for expelling your predecessor? Let bygones be bygones. Let’s face it, the previous government excelled in economic planning for this country, did it not? Donors were able to witness fruits of their aid money; and Malawians were proud to show off the progress as well. The current government should not be facilitated into position next May. ABJB : “Anybody But Joyce Banda” is our mantra now!
Bingu was a corrupt thug. Period. On the other hand, JB is a corrupt liar. I hope one day both of them will burn in the lowest levels of hell.
I’m in agreement with the suspension of aid. I want MY taxes to benefit the needy of Malawi, not the greedy.
Guys nobody gives us money. Donors are actually lending this money to our countries and if we misuse the mioney we end up shooting ourselves in the foot because we will still have to ay the money back!
Niven has lived in the country long enough and understands the malawian psychology sifficiently to have worked out what is true and what is not true but a Bitish man is always a diplomat no matter what, they dont shoot their mouths like Joyce Banda but Joyce Banda’s stupidity suits them just right because they do as they wish!
These decisions have serious life and death consequences. When people comment on these matters they must pause and serious think about what they are uttering. Unfortunately this situation is very complex. This standoff between donors and the govt is only harming the poorest, the weak and the very vulnerable. The earlier the situation is resolved the better for everyone. For the first time I have followed closely what is going on in Malawi and frankly, I am pulling my hairs out!
The more I read about the situation the more I am convinced that Malawi must call time out, take stock and re-evaluate everything from a strategic standpoint. This is a watershed moment to chart a new direction for the country. The country cannot carry on struggling with development like this. The situation breeds corruption. There is a better way!
No self respecting Malawian should celebrate the freezing of aid by donors! It is hurting the whole country more than it is hurting the perpetrators of these crimes. To many people, aid freeze just means one thing: money has been withheld from this govt so they cannot steal it. Unfortunately, this is the least of the consequences. If this was the only impact then I would be 100% in support of the action; after all, who wants to support criminality in their midst? No one. However, there are other areas that are also impacted with serious consequences on the whole economy of Malawi. A) The first I will call it monetary system validation. This means ensuring that the Malawi currency, the Kwacha is functioning as part of the global monetary system. This is the most serious thing if cut to happen to any economy. It happened last year with devastating effects. The IMF loan represent this option. It is not the amount of $20 m tranche but the general arrangement that makes the IMF positive decision so critical. The IMF arrangement is different to aid from all the other donors! The reason RBM have issued a statement assuring people that the forex position is adequate to cope with any eventuality is because of this IMF decision. That is why I argue that the current arrangement of bringing the IMF into CABS configuration is wrong. B) The second area impacted with aid freeze is current account deficit. The dollar in aid goes to fund various programs in Malawi but indirectly, and that is what is not well understood, it supports the country’s ability to import goods. It also helps strengthen the kwacha so that it does not depreciate too much. When the kwacha depreciates it drives up prices (inflation). Food prices, soap, sugar and salt prices all go up that rural areas people cannot afford. The kwacha buys fewer medicines than it would otherwise have causing havoc in the hospitals, schools books etc. It affects everyone. C) The final area that is affected is the capital formation due to lack of investor confidence. This is what developing a country is all about! Right now the situation of cash gate and donor aid freeze have combined in synchronisation to scare investors (portfolio as well as FDI). Donor freeze last year cost the Malawi economy severely in capital formation, as shown on the graph on the link (based on World Bank data)
http://www.indexmundi.com/facts/malawi/gross-fixed-capital-formation
The graph also shows that since independence Malawi was not developing fast enough until recently!
In my evaluation, the govt criminal elements are to blame for the scandal as everyone knows by now. However, donors’ aid freeze is also not the optimum response given the impact that such an action has on the overall economy as outlined above. Therefore, two wrongs do not make it right. The earlier this situation is resolved the better for everyone! My message to those Malawians gyrating, dancing, celebrating, and rejoicing in the streets, and cheering on donor aid freeze, thinking it is punishment to politicians, think again. It is punishment to you all. You are all collateral victims of these life and death decisions as outlined above whether you are aware of it or not.
Ngoma …. To argue about the malawian economy is to validate a non-existent economy . Let’s be honest, as malawians we have failed not only in the creation of an economy but since 1994 Malawi just as a society has lost direction . We grow tobacco and earn seasonal forex … That’s it. Gone are the days of robin bridge and promotion of local industries. Now to get to your points
Currency validation is completely irrelevant when you barely export much and do not participate in the global economy.
Regarding the investment foundation, grant money will not abate issues of corruption, absurd red tape and taxes and the lack of a “can do” spirit that just grips Malawi.
At this point the only strategy is the tea party strategy – starve the beast. Sure , we know people are suffering more than the officials but we will see if the govt can rule over a hungry mass.
Malawians have to be the most docile creatures on earth … At least dogs bite when cornered ….
Madam, your responses make absolute no sense whatsoever! They clearly show you are out of your depth on these economic matters I raise here. Malawi economy does exist, and paying your university salary. Currency validation matters, otherwise how does Malawi import medicine, or fuel if the IMF kicks it out like they did last year? Your sentiments about the good old days, I request that you look at the development graph again on the link and you will see how dormant,stagnant and absolutely “growthless” the first 37 years were post independence . That is not me saying that but the evidence based on the historical data from the World Bank which you may not to know about. The little gains the economy made since 2001 were severely damaged by the donor aid freeze in 2011 hence the big drop. That is what I am querying as to how aid freeze impacts poor economies like Malawi. Look at the link again. I am not interested in baseless streetwise non factual brawls. I am aware that the points I have highlighted above are not common knowledge and your response has indeed confirmed that view. But the idea is we must bring this highly specialised subject matter knowledge to the public if Malawi is going to develop a consensus to move in the right direction. Pointless boisterous rows like these are truly pointless!