Some donors have grouped to rescue government to finance some critical health sector operations amid the worsening fiscal crisis by resuming direct aid to the health sector through commercial banks.
An initial US$21.6 million (about K12.1 billion) has been committed and this follows discussions between government and the development partners last week to find an agreeable funding mechanism in the wake of suspended direct budgetary support.
The agreement is known as the Health Service Joint Fund (HSJF) a broader agreement known as Common Fiduciary Oversight Arrangement (CFOA).
The HSJF is a financing commitment that comes following the CFOA which is an overarching agreement between government and donors to strengthen the financial management systems.
“The CFOA is not a commitment to funding. It is rather an intention for development partners and government to work cooperatively to strengthen the government’s health sector fiduciary systems through such things as joint technical assistance, single sector audits, procurement oversight and stronger coordination of sector financial reporting and improvement efforts,” the donors joint statement explains.
Initially, the donors that have immediately joined the fund include Dfid with 6 million pound (K5.5 billion), Norway with (K6.9 billion), Flanders with US$1 million (K598 million) with Germany committed to join next year with a commitment of Euro10 million (K6.47 billion) as additional funding to the health sector for 2015-16 year.
In a joint statement, the development partners who signed the agreement with government on Tuesday stressed that this is not a return to budget support.
“It is a designated to provide critical support to key government and church health sector activities but does so through commercial bank accounts with externally contracted oversight and control in the form of a contracted Fiduciary Agent and a Procurement Oversight Agent,” says the statement.
However, Norwegian Ambassador to Malawi, Kikkan Haugen, who signed the agreement on behalf of the other development partners said the HSJF is in line with the Health Sector Strategic Plan (HSSP).
“The funding is intended to be as aligned as possible with the regular health budget whilst at the same time reducing the risk of misuse of funding,” he said.
The initial support will go towards the cost of utilities for central hospitals and district hospitals, service level agreements with Christian Health Association of Malawi (Cham), completion of a range of infrastructure like staff houses in rural health centres and procure medical equipment for hospitals and health centres.
Secretary to the Treasury, Ronard Mangani, who signed the agreement with the donors, said it is envisaged that the HSJF will be an interim arrangement to be eventually replaced by alternative mechanisms that are more fully integrated with government systems, upon a fully restored confidence.
“The HSJF oversight arrangements have a huge element of strengthening government financial management and procurement systems,” said Mangani.
He said government anticipate, more donors to join the fund or align to the common fiduciary and oversight mechanisms under the Fund in line with international agreements on aid effectiveness and Malawi’s national development cooperation strategy.
The budget aid suspension by donors in reaction to theft of public resources through Cashgate has exposed government to fiscal constraints that have crippled several operations, hence compromising public service delivery.
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