When donors are stoned, poor pay the price

If you think just doing the job you were employed for can not invite some trouble in your career then take a flight to London and ask one former British envoy to Malawi, Fergus Cochrane- Dyte.

Dyet was posted to Lilongwe not as a tourist but as a watchman for British tax payers and one day just did the job he was employed for-filing a message on what was actually happening in his working station (Malawi) to his government in Downing Street North West 10 in London through Foreign Secretary William Hague.

In the message which was delivered through a confidential diplomatic cable Dyet described how President Bingu wa Mutharika was becoming “increasingly autocratic and intolerant of criticism.”

Despite the filled message containing the truth and real blunders that were likely to offset the gains Malawi had achieved since Mutharika came to power if authorities did not rectify them, Capital Hill in Lilongwe got angry with Dyet.

Mutharika: Deported UK envoy

So on behalf of government the British envoy was summoned and later expelled from Malawi by a health expert with vast nursing experience, former Foreign Affairs Minister Etta Banda.

Dyet took a London bound plane despite several Malawian cross sections including the Opposition, clergy, Civil Society Organizations (CSOs) including the general public pleading with the Mutharika administration to identify alternative solutions to resolve the impasse.

The pleading sections observed that the impact of the Lilongwe-London wrangle would shoulder unbearable pains on the poor and not those in power in the country.

Their pleadings were genuine because between 2011 and 2015, Britain pledged to be giving Malawi 93 million British Pounds Sterlings annually, 22 million pounds of which was budget support, the rest being development aid.

Retaliating to Dyet’s expulsion from Malawi, London also told former University of Malawi’s languages expert turned diplomat in the United Kingdom (UK), Charge d’Affaires, Flossie Gomile-Chidyaonga to pack up her belongings and leave Britain, with Hague warning of “further consequences”.

Further consequences have indeed come since Britain’s Department for International Development (DfID) announced that it had indefinitely suspended budget support to Malawi.

British International Development Secretary Andrew Mitchell said the decision was effected due to the impoverished southern African country’s failure “to address UK concerns over economic management and governance”.

On the economy, he further said UK is concerned that Malawi’s overvalued exchange rate has created chronic foreign exchange shortages which are having a serious impact on the Malawian private sector’s ability to drive future growth.

“There are now daily fuel queues, tobacco exports have deteriorated and Malawi is off-track with its IMF programme,” said Mitchell.

He also explained that under Mutharika Malawi has also been performing poorly on governance with the banning of demonstrations, intimidation of CSOs and the enacting of laws that impinge on human rights.

Apart from Britain and the IMF, the World Bank, the European Union(EU), the African Development Bank(AfDB), Germany and Norway have also all suspended budgetary support to Malawi for same reasons.

Mitchell said his government provides development assistance in order to help communities lift themselves out of grinding poverty.

“Whether that’s through getting children into school, ensuring women survive child-birth or helping farmers grow enough food to feed their families and communities. But poor people in Malawi and British taxpayers alike have been let down,” he said adding therefore, in these circumstances “I cannot justify the provision of general budget support for Malawi.”

Mitchell was however, quick to say London would use other means to ensure that programmes to protect poor Malawians, amongst the poorest people in the world, and deliver basic services like health and education continue.

“The UK has a long and deep commitment to the people of Malawi and we are keen to see the country resume the good progress it has made in recent years,” he said adding that the British are “willing to re-consider our approach as and when our concerns are addressed.”

British money has helped improve food security in Malawi for over seven million people a year by providing them with high yielding maize and legume seeds via the Farm Input Subsidy Programme.

London was also involved in the health sector, helping save the lives of over 3,200 pregnant women and 40,000 children since 2004.
Over 3,200 primary school classrooms and 4,800 toilets have also been built since 2001 using British money.

But since the Mutharika administration bought a presidential jet in 2009, North West Downing Street cut off the budget support by 3 million British Pounds Sterling per year.

Malawi’s 2011/12 national budget is pegged at K303 billion. According to IMF Country Director Rudy Randall, Malawi’s IMF programme is “off truck” meaning that IMF and all donors cannot give any aid to Malawi because they all follow IMF programme.

At least 40 per cent of Malawi’s budget was being bank-rolled by donors until this year when the Mutharika administration was forced to implement what is being called a “zero deficits” budget, meaning that the entire budget will be funded internally through taxes and other levies.

“Fourty-seven years is long enough for us as a nation to mature and generate our own resources for running the affairs of our government,” charged Mutharika currently reported enjoying a holiday in Hong Kong with his wife Callista while poor Malawians are feeling the pinch of the country’s on-going social-economic crises.

The President further differed with his administration’s critics that during his second term Malawi’s social-economic development has slowed down as compared to the first five year period.

“In fact my second term in public office is the best because Malawi is experiencing development by day. Those who are not appreciating the strides we are achieving in development are just power hungry and aiming at overthrowing this democratically and legitimately elected government,” he said.
However, the United Nations says although Malawi might have achieved some strides in development recently, its Human Development Index (HDI) ranks among the Low Human Development category (on position 171 out of 187 countries and territories) worldwide.

The UN adds that in Malawi over 72 in every 100 of the over 13 million population suffer multiple deprivations while an additional 20 per 100 are vulnerable to multiple deprivations.

The New York based organization also says breadth of deprivation (intensity) in Malawi, which is the average percentage of deprivation, experienced by people in multidimensional poverty stands at over 52 per 100 people.

Meanwhile, Malawi Government’s decision to implement a “zero deficit budget” after falling out with donors has seen the introduction of new taxes and adjustments in existing taxes.

Government has also announced austerity measures like the freezing in recruitment of civil servants and cut in foreign travel by the president, ministers and civil servants.

The effects of the suspension of donor aid are already being felt. Malawi is failing to import adequate fuel resulting in long queues at service stations as most service stations are dry.

It is also hard to get foreign money in banks, drugs in public hospitals, prices of goods and services have also been rising by day against consumers’ already weak stagnant purchasing power.

Political analyst also Executive Director for the Institute for Policy Interaction (IPI) Rafiq Hajat said had government not expelled Dyet Malawi would have not lost British aid and from other donors.

“This just confirms our worst fears that our lopsided decision to expel the British High Commissioner to Malawi will have consequences. We have to work hard to mend fences with Britain,” said Hajat who has been critical to Malawi Government and his offices were petrol bombed in Blantyre few months ago.

The president’s brother also Foreign Affairs Minister Peter Mutharika however, recently assured Malawians in Lilongwe that discussions with donors including Britain had gone well and hoped aid would be rekindled shortly. But no donor agency echoed his claims.

As the government delegation led by the President’s brother returned from Europe, Malawi was at a near standstill due to petrol and electricity shortages, and domestic tax-receipts were significantly lower than the zero-deficit budget had anticipated.

Aid suspension to Malawi has come after Britain’s David Cameron Conservative-led government recently announced it would reduce general budget support across the world by 43 percent as it tightens the guidelines on which budget support agreements are made with benefiting countries.

Diana Cammack , is a Research Associate of the Overseas Development Institute, London, and leads the Local Governance & Leadership stream of the Africa Power and Politics Programme (APPP).

She is also sometimes a Malawian resident as she has researched and written about the southern African nation’s politics and development for more than 20 years.

Cammack said unless Malawi Government addresses the gray areas highlighted by donors and other Malawian cross sections including CSOs budgetary aid support resumption to the southern African nation may be hard to come by soon.
“Neither the British nor the European Commission, the IMF or the Americans indicated they were about to start aid again,” she said.

While presenting her letters of credence at New State House in Lilongwe the new US ambassador to Malawi Jeanine Jackson told Mutharika that she wanted to see a reaffirmation of the government’s ‘commitment to political pluralism, human rights and the rule of law’, and was awaiting the results of the Commission of Inquiry surrounding the deaths of demonstrators in July.

“These demands were similar to those outlined by the British High commissioner,” said Cammack.

In their study ‘Foreign Aid, Institutions, and Governance in Sub-Saharan Africa’ Deborah Brautigam from American University and Stephen Knack from the World Bank emphasized that it is difficult for aid to deliver in poor developing countries in Africa without good governance.

“More than a decade ago, the World Bank argued that “underlying the litany of Africa’s development problems is a crisis of governance,” they said.

They disclosed that poor quality institutions, weak rule of law, an absence of accountability, tight controls over information, and high levels of corruption still characterize many African states today hence contributing to aid’s failure to deliver.

“Due to poor governance aid levels have been reduced in many parts of Africa during the past decade. Yet in many of the countries with poor governance records, aid continues to contribute a very high percentage of government budgets,” they said.

The two researchers disclosed that for example by 1999 Malawi Government under former president Bakili Muluzi had an expenditure of 89 percent as Overseas Development Assistance (ODA). Liz Allcock, a Country Projects Convenor for IDS Knowledge Services at the Institute of Development Studies and Jimmy Kainja, an independent Malawian researcher based in London visited Malawi.

They jointly expressed fear that British aid freeze to Malawi will block the country’s progress towards achieving Millenium Development Goals (MDGs) by 2015 and infringe more pains of poverty on poor Malawians and not those in power.

“The cost implications of the aid freeze could be immense and compromise all the achievements of existing DfID-supported economic and development programmes. A re-routing of aid away from government and through Civil Society Organizations may represent a better alternative than simply pulling the plug on Malawi,” they said.

Allcock and Kainja added: “With 75 percent of the population living on less than a dollar a day, and the country’s heavy indebtedness, any withdrawal of aid by the UK, Malawi’s largest bilateral donor, is likely to decimate this already struggling nation.”

No wonder Malawi’s Finance Minister Ken Lipenga pleaded with donors to consider reviving aid in the face of the country’s current economic crisis.

Lipenga made the plead during a meeting with donors to review Malawi’s macroeconomics and the implementation of the national budget after earlier leading the country’s delegation to the IMF headquarters in Washington where he also held discussions aiming at persuading donors resume aid flows to Malawi.

He said Malawi’s development partners should have the interests of suffering Malawians at heart and not let them continue feeling the pains from the effects of the current economic problems like the prevailing fuel and forex shortages that have hardened their lives.

“In every decision we make it’s important to have the interest of the common Malawian at heart because they are the ones suffering the most,” said Lipenga.

World Bank Country Manager Sandra Bloemenkamp said donors are reviewing their position on aid to Malawi.

“The review is taking place at a critical moment in the bilateral partnership since no budget support has been flowing to Malawi since January,” she said.

Commenting on economic growth in Malawi during Mutharika’s first term (2004-09), as in the 1970s under late first President Hastings Kamuzu Banda, Cammack attributed the country’s growth to some sound policy choices including winning back donor confidence [which was lost during the 10 years under Bakili Muluzi], an apparently disciplined management of economic rents and a relatively effective public service.

But since Mutharika and his Democratic Progressive Party (DPP) won with a landslide victory in 2009 according to Cammack they have abused their power hence missed opportunities to identify solutions for some vital highlighted issues of national interest for the benefit of Malawians.

“Since then Mutharika has used this overwhelming parliamentary majority and presidential orders to push through a series of unpopular measures, many of which curtail civil rights including free expression and privacy, academic freedom and local elections,” said Cammack.

She however, patted Mutharika and former Finance Minister Goodall Gondwe on their backs for working together and putting Malawi’s economy back on track and generating growth of 9 per cent per year between 2004 and 2009.

Cammack however, said: “During post 2009 Malawi domestic constraints and policies have resulted in slowed growth and crippling shortages of key inputs (forex, fuel, electricity etc.).”

She further said after the 2009 elections, Mutharika also made a blunder by appointing Ken Kandodo, a less experienced and less independent figure than Goodall Gondwe as Finance Minister.

“Kandodo and Mutharika took control of the economy. Their intention was to keep the exchange rate stable against the US dollar, which meant that by 2010 it was overvalued in real terms by 10 to 20 percent and a parallel market in forex had appeared,” said Cammack.

She disclosed that the result was a contraction of business, external payment arrears that saw the closing-off of lines of credit, and fewer and more expensive intermediate inputs that increased the cost of local production.

“By mid-2011 many businesses were being asked by local suppliers to purchase their imports with foreign exchange; entrepreneurs no longer bothered to approach banks, as they had no forex to sell,” said Cammack.

She further expounded that the lack of forex and poor credit ratings impacted petrol supplies worst of all, and shortages rebounded throughout the economy as mini-buses increased fares and/or stopped running, transport costs rose, factories closed and dismissed staff, the availability of consumer goods declined as prices climbed, and new construction projects were halted mid-stream.

“At the macro-level, statistics told a sorry tale. Economic growth leveled-off in 2010 and slowed further in 2011. The balance of payments worsened, even as mining revenues came on stream,” said Cammack.

She also explained that revenues from tobacco (accounting historically for about 60 percent of export revenues) fell from 2008
and collapsed completely in 2011.

“Typically, in that sector Mutharika reacted by setting minimum prices and bullying buyers, accusing companies of transfer pricing and externalizing profits, and deporting tobacco bosses (‘exploitative colonialists’) when companies refused to meet his minimum prices,” said Cammack.

As a result reduced tobacco sales worsened Malawi’s forex position even more, and the high foreign-exchange rate reduced real local currency export prices, which hindered macro-economic performance further.
“Tobacco farmers suffered, and maize farmers, who had benefited from subsidies that generated surpluses, found themselves hurt by falling prices,” she said.

Cammack added that as only 6 in every 100 of the population is connected to Malawi electricity grid, there was hope in early 2011 that the K53 billion Malawi Government -Millennium Challenge Corporation (MCC) deal would supply funds for building new power-generation facilities, since Mutharika refuses to buy power from Mozambique.

However, MCC also suspended the deal until the Mutharika administration addresses the same concerns that were raised by Malawi’s other major donors.

The shortage of forex alone affected not only businesses, farmers and traders but anyone wanting to send children abroad for schooling, to buy a car or building supplies, or to travel overseas.

In mid-2011 fuel supplies contracted to the point that diesel, petrol and kerosene were unavailable for days, and when they arrived people had to queue for hours.

“Moreover, nationwide electricity shortages meant near-daily power cuts, which worsened mid-year to 5 hours or more daily as national supplier ESCOM reconditioned its generators,” said Cammack.

She added that in Blantyre water supply had been problematic for years and it has been unreliable in other towns too.

“But the shortages of electricity (for pumping water) made it worse and reduced production output of the manufacturing industry,” said Cammack.

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