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Britain said on Tuesday new Finance Minister Goodall Gondwe’s first budget will be critical to unlocking budgetary support from donors who closed their taps due to the previous administration’s fiscal mismanagement, lack of accountability and corruption.
Britain’s Department for International Development (DFID) economic adviser Alan Whitworth told a training workshop for MPs on the national budget in Blantyre that donors will critically scrutinise Malawi’s 2004/05 budget.
“This [budget] is the new government’s opportunity to prove to the world that it is genuinely different from its predecessors. It will be critical to unlocking budget support from donors,” said Whitworth.
He said Gondwe’s budget will be extremely difficult and it will only be credible if it is seen to be painful. He said it is sad that one third of the country’s national budget goes to debt servicing.
While expressing concern over lack of respect for previous budgets approved by Parliament, Whitworth said it was pleasing to note that Gondwe has promised an end to unbudgeted expenditure and to restore sanctity of the budget.
“In other words, he is promising that the first budget that you [MPs] approve will be the first modern Malawi budget to be taken seriously by government,” said Whitworth whose country is Malawi’s biggest bilateral donor.
In her remarks, Canadian International Development Agency development adviser Debra Scott, whose agency has jointly funded the workshop with DFID, also said the new Malawi government faces a desperate need to restore confidence in economic management.
She said the national budget should be the road map of government activities that provides a basis to measure progress.
But Gondwe, while acknowledging the donors’ concerns, said the amount of overexpenditure due to indiscipline is smaller than that incurred because of lack of support from donors.
“Malawi expected fulfilment of pledges for balance of payments support and very little came. If we had not expected external help, possibly we could not have been in the current situation,” he said.
A retired head of IMF Africa Department and former president for the African Development Bank who was also on secondment as economic advisor to former President Bakili Muluzi before his appointment, Gondwe said the previous administration was also forced to borrow to buy maize to avert a food crisis at a time when resources were elusive.
Malawi’s lack of fiscal discipline forced donor agencies and the IMF to suspend budgetary support for nearly three years forcing government to borrow domestically. This resulted in a government debt of US$500 million whose interest is at $200 million and high interest rates which have discouraged the private sector investment.
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