Anti-Bakili Muluzi / MALAWI POLITICS TODAY

Personal pride costs Malawi

by Ephraim Munthali, 08 April 2007 - 08:29:56

It never came as a surprise to many. It has happened before. In fact, some even expected it to happen and would have been surprised if it hadn’t. Ever since President Bingu wa Mutharika took over government, rejecting the national budget has been an anticipated occurrence—premeditated and systematically executed by the all-powerful opposition. Critics say the opposition is abusing its numerical strength by irresponsibly using the political muscle to elbow out critical government policies, cripple the popular administration and render it unstable in the eyes of the voters. It is a cockfight likely to continue until the country holds the next general elections in the next two years. But like in any other battle, there are always winners and losers. In terms of political supremacy, the opposition surely has the upper hand. But for the grass that is being destroyed as the elephants fight, it is a sad story of what night have been had the budget passed. Memories are still fresh of how Malawi almost lost the US$55.9 million (K7.8 billion) Poverty Reduction and Growth Facility from the International Monetary Fund (IMF) due to squabbles over the national budget. The three-year PRGF, which was initially suspended during the Bakili Muluzi administration in 2000, was the key performance indicator of whether Malawi would qualify for debt cancellation or not. After pressure from the media and civil society, the opposition finally but grudgingly nodded to the budget and Malawi immediately had an economic programme with the Fund. The resumption of the PRGF saw the boards of the IMF and the World Bank last August announcing that Malawi had made enough progress to be the 20th country to reach the Highly Indebted Poor Countries (Hipc) Completion Point and qualify for debt relief. Since then, government creditors in the Paris Club and non Paris Club members followed suit to forgive Malawi’s foreign debt which, before the multilateral cancellation, stood at around US$3 billion (K420 billion). The debt cancellation is poised to leave the country with annual debt service savings of over US$100 million (K14 billion) annually over the next 20 years. This translates to 1.7 months of additional import cover. Thus, apart from helping to boost donor and investor perceptions, the write-off is tipped to improve the country’s balance of payment position which is always in the red largely because its trade account has traditionally maintained a deficit. Analysts at the Standard Bank Group say debt cancellation, buoyed by the downward trend in Malawi’s inflation rate, enabled the Reserve Bank of Malawi to cut the benchmark bank rate by 500 basis points to 20 percent effective November 13 last year. The analysts already see a modest downward trend in interest rates over this year as long as government maintains fiscal discipline; donors continue to pour in aid and money supply growth and inflation remains under control. It is part of these Hipc resources, roughly K8 billion since the other savings were already incorporated into the main national budget, that Finance Minister Goodall Gondwe presented in Parliament. “The main loser in this case are ordinary Malawians who could have benefited more from all these programmes since debt relief savings are supposed to go to pro-poor activities,” says Mavuto Bamusi, director of programmes at policy lobby group the Malawi Economic Justice Network. “As long as government spends on priority pro-poor programmes and later account for it, I would urge the government to use the rejected expenditure plan and ask Parliament to validate it later,” says Bamusi. The private sector and the financial market in particular also have a lot to lose from the budget rejection. According to deputy finance minister Ted Kalebe, out of the total supplementary budget, government planned to spend K5 billion to retire the domestic debt which still hovers around K50 billion. “Imagine what that money, released to the banking system and lent out to the private sector could do. It’s a lot of capital whose multiplier effects can benefit businesses and the economy as a whole,” said Kalebe. Even Malawi Congress Party spokesman on finance Respicius Dzanjalimodzi, a former secretary to the Treasury, appreciates the need to retire the domestic debt. His party led the pack that threw out the mini-budget. “Repayment of the domestic debt should be treated as a priority if we are to move in the right direction after debt relief,” says Dzanjalimodzi in his comments on the Mid-Year Budget Review which Gondwe tabled ahead of the actual supplementary budget. The MCP parliamentarian added: “This [public debt repayment] will rejuvenate the private sector and the productive sector of the economy, particularly given the atmosphere of low interest rates.” How the former fiscal technocrat expects such benefits to trickle down to the private sector without a Parliament approved budget is a question Dzanjalimodzi could not answer by the time we went to press as he could not be reached. But as far as minister Gondwe is concerned, the opposition rejected the budget not due to lack of accountability by the Executive but “because someone in government said something they [opposition] didn’t like.” It is a case of putting personal pride above the national good. As veteran politician Aleke Banda says, there should always be a time when national interests should override personal interests if Parliament is to earn respect both in the eyes of local people and international partners. -The Nation Newspaper