Chinsinga on reality of zero-aid budget in Malawi

The new government of Malawi that was ushered into power following the 20 May  2014 elections started its tenure facing an ultimatum from donors: restore fiscal integrity or forget about the resumption of budgetary support that makes up as much as 40% of the total budget.

Donors suspended budgetary support to the tune of US$ 150 million following the revelation of massive looting of public funds to the tune of US$ 100 million by syndicates involving civil servants, politicians and businessmen.

Dr Chinsinga:   Knee-jerk experiments with bizarre, self-reliant budgetary frameworks

Dr Chinsinga: Knee-jerk experiments with bizarre, self-reliant budgetary frameworks

This unprecedented looting has been christened “cashgate“. It involved making massive dubious payments to suppliers that often did not provide any goods or services. The popular expectation was that the new government would quickly address donors’ concerns about cashgate in order to restore their confidence in the public financial management systems, but this has not happened.

The critical question is: why is the government of Peter Mutharika not moving with speed on cashgate even as it holds the key to the restoration of budgetary support? Instead, his government has opted for the “zero-aid budget” as a strategy to cope with the withdrawal of donor support.

The zero-aid budget is pegged at MK742 billion, with a deficit of about MK 107 billion. It is therefore projected that the national revenue authority will rake in about MK 535 billion. While the 2014/15 budget has desisted from raising taxes, it does not explain how the deficit will be financed, apart from saying that the government will continue engaging with donors, and should they decide to support it, a supplementary budget will be prepared accordingly.

This is not the first time that Malawi experiments with an innovative budgetary framework. In the 2011/12 fiscal year, late president Bingu wa Mutharika, brother to the current President, rolled out the so-called zero-deficit budget. Likewise, the zero-deficit budget was minted in response to donors’ withdrawal of budgetary support, prompted by a worrisome economic management and governance track record. The consequences were disastrous: Malawi was headed for almost complete political, economic and social meltdown.

The zero-aid budget has allocated decent sums to security institutions as well as the Anti-Corruption Bureau(ACB). The ACB has enjoyed a 167% increase in its vote, which might at least be indicative of the government’s commitment to get to the bottom of cashgate. This is, however, a huge paradox because the ACB’s Director has been redeployed to the Supreme Court and a replacement is yet to be made almost three months later, while it is well known that the successful prosecution of corruption cases is dependent on the ACB Director being in post.

This is not a good sign. We are very unlikely to see the government actively pursuing the cashgate scandal to its logical conclusion in order to get a clean bill of health to stimulate the resumption of budgetary support. There are strong perceptions that cashgate is the invention of the President’s party when it was in power under the leadership of his brother between 2005 and 2012.

Anecdotal evidence seems to support these perceptions. The late President Mutharika’s estate swelled from MK 150 million to MK 61 billion during this period. There is an audit query for that period that suggests that about MK 93 billion was not properly accounted for. More importantly, according to the Baker Tilly preliminary audit report about the cashgate scandalthe late President Mutharika’s government instituted reforms that created a favourable atmosphere for gross abuse of public financial resources.

These reforms, among others, included removing the ceiling on cheque amounts that government ministries and departments could present for encashment at commercial banks. A consortium of banks where government’s accounts are held were advised not to refer back any government cheque, even when there was no money: they simply had to be honoured.

Given this background, any unguarded prosecution of the cashgate scandal could potentially implicate some of the big shots in the current government. In this regard, the zero-aid budget is very much a strategic ploy to avoid donor accountability, rather than a commitment to graduate from excessive donor dependence after 50 years of independence, as it has been claimed in some circles.

In a much broader context, the experiences of the zero-deficit and zero-aid budgets raise a fundamental question about the underlying nature of the country’s political settlement. The critical issue in this regard relates to how individuals or parties get power and how they attempt to maintain once they get it.

In the absence of a viable private sector and regulatory framework for political finance, the state coffers become a primary target for those in power to play the political game that has invariably led to the entrenchment of corruption in the public sector and the primacy of patronage politics.

There is no doubt that Malawi needs to graduate from excessive donor dependence after 50 years of independence, but this cannot be achieved through knee-jerk experiments with bizarre, self-reliant budgetary frameworks minted to protect the political elite’s prerogative to dip into the public coffers as they please and largely for selfish ends.

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Reu
Guest

This prof is writing his article with conspicous prejudice the whole article is therefore compromised and his integrity is questionable

WAMANDASI
Guest
Nobody in his/her right mind would like to be begging forever. Budgetary support is the neo capitalistic slavery imperialistic method that keeps poor malawians to the umblical cord of white masters. It’s political as well as corrupt because it ant zdb are agents of manipulative dependency. In real sense once could advocate gradual zdb to materialise in 20 years time unlike scraping it out in its entirity. Let’s be frank the more we depend on whites we become vulnerable to whatever demands they make. Ask white people to provide roads, schools, hospitals, high speed internet like theirs. They will face… Read more »
Austin Matutu
Guest

Professor well said. I may not all the information but can continue to the argument by saying 1) the delay in avoiding the conclusion fast is because a foundation had been made to loot more money. 2) The writing on wall clearly shows we may be heading for another meltdown of the country. 3) The emphasis to nail the former president on th so called Cashgate is derailing efforts to address Donor’s concerns.

nick
Guest

Excellent article!
This article should be responded-to by the Minister of Information, point-by-point —- but that is not the way in Malawi.
Serious criticism of the government is never answered by the government except by vague charges of anti-government bias.
Is this because the critics (Tenthani, Chinsinga etc) are always better-educated than ministers?
Or perhaps that the criticisms are correct ?

jessy mtila banda
Guest

are you the whole proffessor, trying to say that because there is cashgate then we should not have budget? donors have withheld their budgetery support then we shouldnt have a budget? because there 92b audit querry then there should be no budget? what sort of lecture are you? did you read what you have written? if so have you seen how nosence your article is? a chisinga you are useless, heartless, nonpatriotic baised commentator. malawians are watching you from a distance

peter
Guest

Hahaha! While some Malawians are watching Chinsinga from a distance most Malawians are following your government’s actions from within!!!

Smart Namwali
Guest

Goodall is the most notorious man he and his government are trying to suck milk from astarving cow.Malawians are the starving cows

Fukulani
Guest

A sober write up!

Chingwe Chambuzi
Guest

Well written article prof. The current DPP administration led by Peter Munthalika is scared of persuing ‘cashgate’ to its logical conclusion because DPP was the architect of the same. Their names appear on the list and we should not be suprised by their inaction.

Munthu wa Mkulu
Guest

Kodi agalu inu mukukana chiyani apa? Munaba ma voti kuopa kuti Dr. Chakwera akalumbira akunjatani. Pano budget yavutatu. Zipiyo za chabechabe. Kagulitsani mmashopumo.

Joe
Guest
zina zanenedwa mu article yi ndi zoona.but some points are being missed here because of bias and hatred.Donors gave conditions for resuming aid right before the current govt.The amayi govt did not delay in passing the budget bcoz they knew court cases,one of the conditions, could not be concluded within a day.Came Peter govt, they disolved the budget with the aim to addres the concerns raised by the donors.but they also discovered that the conditions could not be fulfiled within a day as well.If the only option you have is to act independently,do acordingly otherwise you suffer bcoz nobody wil… Read more »
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