John Kapito, the executive director of the Consumers Association of Malawi, says the development would paralyse essential service delivery to the people. He urges the government to instead address critical issues raised by donors, which include tightening of financial control systems and regular audit of government accounts, in order to win back their confidence and allow them to resume budget support.
Chancellor Kaferapanjira, the CEO of the Malawi Confederation of Chambers of Commerce and Industry, says that the move is likely to have a ripple effect on the poor and said it was high time Malawians should also be thinking of taking appropriate measures to starve government of direct budget support they provide in the form of the taxes.
“In fact, we give government 60% of its revenue while donors give only 40%. So it should hurt us more. We should not always wait for donors to react. In fact at that time [when zero-deficit budget was introduced in 2011], we should have stopped paying taxes to a government that was in breach of the basic rules of economic governance. We should never have allowed the zero-deficit budget to have been implemented by a government that was running away from doing the right things. It was a crazy idea,” says Kaferapanjira.
However, the US ambassador to Malawi, Jeanine Jackson, told local radio, Capital FM, in April, that the zero-aid budget is possible with strong reforms within government systems: “Every country struggles, the US struggles with its budget so it’s a matter of insuring that the government and the people do the right things to ensure that the social services are maintained, that there is a good platform for economic growth. Democracy and good governance is always a struggle.” She added that for Malawi to be able to cope with the development, there was need for a significant change of mindset as well as taking concrete actions on good governance, economic reform and tackling corruption.
AfDB and WB to the rescue?
Ben Kaluwa, a professor in economics at the University of Malawi, says the delay in donor support towards Malawi’s budget will lead to dire situation as “foreign borrowing is almost a closed avenue now. We can’t sustain it and at the moment nobody is going to lend us money. Our foreign position is very poor. This means that we will rely on local borrowing yet, at the same time, we need funding for our imports. It’s a dire situation.”
Henry Kachaje, the managing director of Business Consult Africa, says “this is not the first time the donors have pulled out. We should have trod carefully when the donors came back [in 2012] to avoid such surprises. It also happened during the rule of United Democratic Front and the Democratic Progressive Party.”
He said government could have devised a proper strategy of dealing with the donors’ percentage of contribution so that the country is not taken by surprise.
However, as CABS members and other donors continue their stance of not providing budgetary support to Malawi, the country is now banking only on the African Development Bank (AfDB) and the World Bank, whose board members are yet to meet to determine Malawi’s fate.
The African Development Bank’s resident representative in Malawi, Andrew Mwawa, said in May that the AfDB was still in consultation for possible budget support to the country.
“According to the assessment we had, there are still some improvements in terms of addressing the Cashgate issue but a lot of work needs to be done. We are currently discussing with the government, on the basis of the meeting we had during the CABS meeting, and also acknowledging some of the achievements done in addressing the Cashgate [scandal] before we make a position on budgetary support,” he said.