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The Veiled Prospects of Malawi’s Zero-Aid Budget

Updated: Jan 21, 2020

The Economics Association of Malawi (ECAMA) was recently quoted reprimanding the government on its tardy redress of the compromised financial management situation that has rendered donors hesitant to resource Malawi. We are persuaded to think that speaks to the zero-aid public budget the government has operated since Bingu wa Mutharika's intolerance of development partners at the start of his second term. So Henry Kachaje, when he spoke on behalf of ECAMA, would not have been referring to the general state of overseas development assistance (ODA) flowing to Malawi, which has not fluctuated much since the financial crisis (especially for Malawi), unless reduced due to already falling donor commitments worldwide. The reality for Malawi is that donors have not willed to channel resources through Account #1, for reasons we know all too well. He must have been referring to this.

The odds have improved for the Malawi Government since, evidenced by the World Bank's extension of a hand to the public purse through the famous $80 million loan. Regardless, this website finds ECAMA’s cautioning stance slightly erroneous and quite unhelpful in the current international political environment, which we think ECAMA is otherwise expected to be on top of.

To start, Bingu’s rant with CABS (Common Approach to Budgetary Support) donors, which led to a budget support freeze in 2011, was flawed on many fronts. It was the one thing whose abrupt effects the ageing and flamboyant President was not going to feel for much too long, nor was it in keeping with the bilateral relations the country needed to keep warm for the sake of sectors (like healthcare and trade) that rely heavily on friendly international connections. Direct aid support has not resumed to the Malawi government, now for a seventh year. The nostalgia for the good old times must have prompted Mr. Kachaje to denounce the government’s menacing behavior that continues to keep donors determined to stay put on their companionship with Mr. Mutharika’s government, as far as financial support is concerned.

This website reckons it is important that Mr. Mutharika’s government - as far as it can - continues to maintain a zero-aid national budget, as donor hesitance to directly inject resources into public coffers has actually granted the nation a great gift: autonomy. Although the 2005 Paris Declaration was a milestone in rejuvenating national ownership and leadership among its 5 core principles of managing what came to be termed ‘smart aid,’ it was clear that donor resources continued courting explicit and implicit conditionalities that relied on a foreigner's cognition of Malawi’s root causes for poverty that Malawians, themselves, ought to have understood better.

The discretionary award of development resources to Malawi did not change, in spite of the commandments of the Paris Declaration. Different partner governments, multilateral institutions and private investors continue - to this day - to diagnose problems that are haphazardly aligned with sectors where the national development system would rather prioritize such resources. The aid from the American government, for example, which has never been channeled through Account #1 in Malawi, continues to be invested along the interests of the American people. As such, when foreign pity is elicited by hunger, that is where development resources get directed to.

A pretext for government's ‘deliberate’ mistakes?

And so traditional or emerging donors have continued the practice of according little room for government’s maneuver of development assistance to turn around the fortunes of the country’s fate the best way it knows how. It is important, at this stage, to state that this article should not be mistaken for support of the relaxed foresight of the government’s medium-term development agendas that has been the norm since the general elections of May 1994.

We would rather much focus on the foregone impact of aid resources on creating a public delivery system that was going to work for the country in the wake of multipartyism and the calls to divest government from control of public entities in the Structural Adjustment Programs. And more importantly, it draws attention to the way donor resources have failed to address the departures from the development trajectory defined by the Vision 2020, through the different regimes, in which donors invested millions of their taxpayers’ dollars. Adding to these failures the wanton nourishment of political and personal interests in the Muluzi, Mutharika, Banda and now Mutharika, donor money would have been more instrumental in building the systems of accountability for results (another tenet of the Paris Declaration).

So, the Malawi government should have asserted its authority to ensure development plans genuinely delivered for the poor. It should have taken responsibility for the growing corruption that was developing into a culture of self-enrichment and self-worth, leading thousands of Malawians to idolize this detrimental custom for their own country, and creating a dangerous path that became the carrot for many politicians. Successive governments should have put in strict measures for reversing the institutionalization of corruption in the system's veins to zero. That is the single-most duty to both the country’s rich and poor it should have done very well. Unfortunately, it did not, yet must still make this a core priority.

To get to this end, however, will require it to ignore ECAMA’s plea for the sweet trickle of donor money into that account at the Reserve Bank.

Taking charge…collectively.

We think, with all their shortcomings, the two Mutharika governments have unforcedly stuck to zero-aid budgets consistently well. They have our blessing to continue. But to make it work, they must redraft the rules of development aid coordination. This will ensure that resources from bilateral, multilateral and NGO partners, and private investors, establish the desired pathways to income generation, infrastructure development, affordable quality healthcare, nutrition-conscious food security and others as the ingredients to income redistribution and wealth creation. The Ministry of Finance's Debt and Aid Management Division (DAD) needs to take the upper hand in coordinating the operations of multilateral and bilateral donors, keeping them aligned with the minimum core aspects of the national development plan as much as possible, and learning to accept that not all relationships live happily forever after. The worst case scenario being letting go of CABS in the Development Assistance Strategy and start focusing on a new, more functional aid architecture.

The Debt and Aid Strategy, a once comprehensive approach to coordination of ODA, is losing its steam and needs to be enhanced to properly account for inflows of FDI and other sources of Gross National Income, such as remittances. This, in part, needs to monitor foreign exchange flows generated from net exports to make sense of the bearings the economy is taking. The institutional fabric to make this happen already exists through a compelling network of government Ministries and departments. In some cases, all that is required is action. And, in case it comes in handy, the GoM could use the good advice on the foreign affairs missions we gave in our article of 16 September 2016 (click here). Just some free advice.

In short, Malawi needs to be more in charge of its development. The many failures of the government only infer the need for vibrancy of the opposition to guarantee the Office of the President and Cabinet (OPC) is kept awake. And, instead of spending their donated resources on castigating government officials on the observable challenges, Malawi’s opposition parties should offer solutions so government is held accountable for the common mission that is development. Just not in the style of Atupele Muluzi, who would rather dine with the enemy and sleep in his warm embrace, till dawn delivers catastrophe. It is rather by how well they make government do the job we hired it to do that they would be measured during an election, and not by how automatically suited for the job they think they should be perceived.

Finally, think tanks as ECAMA are indispensable. But for all its good intentions on keeping government in check on its economic agenda, the advice should be informed by a good sense of direction and should nourish on the existing opportunities that make government a stronger and independent force to drive development. It starts with having a government that has the space to think and clearly see the targets of development, which should not be muddled by the squeaking of varying interests.

The Democratic Progressive Party (DPP) triggered zero-aid budgeting as an undesired consequence of their ill-mannered behavior with development partners. But it should be considered a blessing-in-disguise for Malawi to drive the country’s development agenda, while embracing good will with authority and focus to achieve national goals.

Whether Mr. Mutharika is cut out for the task or not, it is imperative, and a responsibility of the nation, to make him do the work that needs to be done. Who knows? He might just do it!


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