Withheld donor funds subdued growth—Goodal

Malawi Minister of Finance, Economic Planning and Development Goodal Gondwe has said Malawi’s economic growth in 2013 was subdued due to the withholding of pledged grants amounting to K60 billion in the 2013/14 fiscal year.

The country’s gross domestic product (GDP) growth rate for 2013 was 6.1 percent largely buoyed by the good performance in the agriculture and manufacturing sectors.

Gondwe said following the Cashgate, the looting of public funds at Capital Hill, which rocked the country in 2013 and forced the majority of western donors to suspend budgetary support to Malawi, donors failed to honour grants amounting to 32 percent of those pledged.

“What is not known publicly is the withholding of dedicated grants which were estimated at K93.6 billion, but only K31.1 billion was received. The approved total grants of K240.4 billion consisted of budgetary support, dubbed programme grants in our documents, dedicated and project grants which were budgeted to cover 38 percent of the budget.

“In the event, however, only K79.2 billion, which is 32.9 percent of total grants pledged was in fact received. In consequence, the ability of the government to function was crippled and unbudgeted domestic borrowing of K121 billion was incurred and the stock of domestic debt as at 31 May 2014 climbed to K340 billion,” he said in Parliament when presenting the 2014/15 budget.

Gondwe said in the 2013, growth in manufacturing was attributed to higher agricultural inputs and a more constant supply of fuel and other raw materials.

He said the manufacturing sector registered increased capacity utilisation of above 73 percent.

“However, the contraction in fiscal expenditure in the last half of 2013 as a result of the ‘Cashgate’ scandal exerted significant challenges to the economy particularly on inflation and the exchange rate,” he said.

Gondwe said tight monetary policy in 2013 had ensured an annual average inflation rate of 27.3 percent.

“The pursuance of a tight monetary policy has successfully managed to contain growth in money supply from an annual growth of 34.3 percent in June 2013 to 24.8 percent in June 2014 which is in tandem with the nominal GDP growth projected at around 28.2 percent for 2014,” he said.

Donors on Tuesday refused to commit when the grants will be released with the World Bank, saying talks are still on-going with Lilongwe while others including Germany once again insisted on government meet certain conditions before resumption of support.