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Wednesday, December 07, 2005

"Former President Bakili Muluzi, through his misguided economic policies, plunged the country into fiscal crisis and brought Malawi into disrepute with the international donor community."- Department for International Development (DFID) Economic Adviser Alan Whitworth

By GERALD NAMWAZA - 07 December 2005 - 11:40:59

A LEADING donor says former President Bakili Muluzi, through his misguided economic policies, plunged the country into fiscal crisis and brought Malawi into disrepute with the international donor community.

The Department For International Development (DFID) has, however, applauded the 18- month economic reforms of President Bingu wa Mutharika. The body has also cryptically predicted economic doom if government pays lip service to its zero tolerance on corruption.

DFID economic advisor Alan Whitworth said when he presented his paper to business captains in Blantyre Monday yesterday through wanton plundering of resources , the Muluzi administration spent money on projects that failed the economy.

“The previous government failed to curtail expenditure and started borrowing as if nothing had happened to fund non-productive services,” Whitworth said.

He said money was questionably channeled to state residences, the now defunct National Intelligence Bureau (NIB), external and internal travel, foreign service and other covert operations with no regard to the provisions of the budget.

The economic advisor said this led to donors cutting their budgetary support and the International Monetary Fund (IMF) locking loan taps for Malawi in 2001. The development, he said, led to increased interest rates and a bloated government expenditure bill.

Donors were not prepared to continue ‘pouring good money after bad’ in support of a fiscally irresponsible government, Whitworth said.

DFID notes at the time the new government was taking over in August 2004,there was no IMF program, interest rates were high, domestic and foreign debt was bloated and there was no donor confidence in government.

“But now the story is different, IMF, donors are back and for the first time in 12 years government has stayed within its budget,” Whitworth said.


He said DFID, the European Union (EU) Norwegian and Swedish development agency have resumed the Common Approach to Budgetary Support (Cabs) following the tough anti-corruption stand of the Mutharika administration, among other considerations.

“If a country is corrupt, donors don’t want to put their money, which is tax payers money, to be stolen,” Whitworth said.

He said what has pleased the donor community is the, strict fiscal discipline and adherence to IMF staff monitored program (SMP) that if well harnessed would turn around the economy by 2006.

DFID forecast a cut in interest rates, increased donor support and significant reductions in domestic stock from 7.4 percent of Gross Domestic Product (GDP) to 5.5 percent next year.

The donor says the cut in domestic debt would let government channel resources to pro- poor activities and bring about the much needed economic transformation.

“If this improvement is sustained over the medium term, there are good prospects for government. And the if in the sentence is critical,” Whitworth said.

DFID says for the Bingu administration to sustain donor confidence government must avoid borrowing on the domestic market, stick to the IMF Poverty Reduction Growth Facility (PRGF) and fight corruption relentlessly.


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