Donors squeeze Malawi further on macro-economic stability

Malawi’s international development partners have clearly called on government to address economic and non-economic concerns raised by various stakeholders and earnestly work on reviving the International Monetary Fund (IMF) programme which is now off-track.

This is contained in a stand by the Common Approach to Budgetary Support (CABS) now chaired by the World Bank Malawi office.

CABS has been providing harmonised general budget support to Malawi since 1999 and the group consists of African Development Bank (AfDB), European Union (EU), Germany, Norway, United Kingdom – Department for International Development (UK-DFID) and the World Bank (WB). The IMF and UNDP participate as observers.

Lipenga: Addressing concerns

The donor community say in their October 2011 Review of the country’s economic health held high level discussions on strategic issues that included adherence to fundamental principles of budget support, macroeconomic performance, implementation of the national budget, and public finance and economic management (PFEM).

The group said it is increasingly concerned with the persistent deterioration in the country’s macroeconomic environment and called for urgent implementation of reforms to restore macroeconomic stability.

“While acknowledging efforts currently underway, CABS DPs call for a swift restoration of macroeconomic stability and revival of the IMF Extended Credit Facility (ECF), as a critical step towards the resumption of budget support.

“However, it would be best if all the members of the CABS could resume the budget support in the near future, and for this to materialize both economic and non-economic issues will have to be resolved,” the group said.

In addition CABS said in appreciating the severity of the situation, its development partners  expressed their preparedness to hold a special CABS meeting with government once it has reached an agreement with the IMF.

The development partners observed that the challenges government is facing in implementing their ‘zero-deficit’ budget and the current macroeconomic instability require urgent actions on the part of Government to address the current downfall.

They commended government for making progress on some audits and public expenditure reviews, and the ministerial level commitment to dialogue with the CABS members in the October review.On economic policy, CABS expressed concerns on the realism of the macroeconomic assumptions that underpin the current budget framework as well as the MGDS II, considering the current economic and growing supply side bottlenecks.

They acknowledged challenges the Government is faced with in the implementation of the 2011/12 zero-deficit budget, especially with weak tobacco revenues and without budget support, suggested that macroeconomic assumptions be re-visited in light of the ongoing economic problems, and strongly emphasized the need for critical actions on political and economic concerns to build up credibility and restore confidence in Malawi.

CABS urged Government that any further delays in the approval by cabinet of this development blue print will have negative implications to the CABS DPs formulation of new programs for Malawi.

Malawi Finance Minister, Ken Lipenga , government is making headway in reforms and addressing concerns of the donors.

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