The United States (US) Ambassador to Malawi David Young has said Malawi can achieve its economic goals if it exercises fiscal restraint.
He said this Thursday when commenting on Malawi’s achievement of an Extended Credit Facility (ECF) with the International Monetary Fund (IMF).
Young said development partners will be scrutinising measures that President Lazarus Chakwera has outlined to aid the recovery of the local economy.
“As President [Lazarus] Chakwera said, the government cannot waste this opportunity by spending unnecessarily or frivolously. Budget discipline is needed and so is accountability.
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“Daily subsistence allowances (DSAs), which are associated with conferences and trips, not only keep civil servants away from their duties but become ends in themselves. They are wasteful and DSAs must be curtailed,” Young said.
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He said there is hope that the government will go further to address this issue which, he said, takes away much-needed funds that could help cushion resource constrained Malawians.
He also said donor partners will be closely scrutinising trips and conferences.
Young’s sentiments come after the United Kingdom (UK) said, after Malawi got ECF approval, that there is a need to continue working on managing unsustainable external debt, designing and implementing a “realistic budget” and improving the use of public funds through tighter scrutiny and control.
It said these measures are key to stabilising Malawi’s economy and creating the building blocks for investment and growth.
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While pledging to support the country’s efforts aimed at achieving growth and stability, the UK urged the authorities to put the private sector in the equation.
“There can be no doubt that for the longer-term growth and prosperity that is needed to prevent future hardship, Malawi needs a vibrant private sector and a more diverse economy that can create more jobs. The UK looks forward to working in partnership to support this goal,” it said in a statement.
In a televised address on Wednesday night, Chakwera announced the suspension of all international travel for himself and those in his government in a bid to save money.
He said the measures would be in place until the end of the financial year; that is, March 2024 as the government’s financial year starts on April 1.
He further announced that fuel allowances for senior government officials had been cut by 50 percent.
On November 15, the IMF Executive Board discussed the second (and last) review of the staff-monitored programme with Executive Board Involvement (PMB) and approved a 48-month arrangement under the ECF for Malawi in an amount equivalent to SDR131.86 million (about $175 million), with an immediate disbursement of SDR26.37 million (about $35 million).
However, the Bretton Woods institution observed that the country is not out of the woods yet.
For instance, Gita Gopinath, who is the First Deputy Managing Director and acting chairperson, said: “Successful external debt restructuring is vital as there is no reasonable mix of adjustment and financing alone that can deliver macroeconomic stability. The Malawian authorities are seeking comparable treatment from all official bilateral creditors and continue to pursue good faith negotiations with commercial creditors. However, time is of the essence for debt relief, as further delays would result in greater financing gaps, which could then only be closed at an undesirably high cost to the population.
“Fiscal discipline, supported by a robust public financial management system and timely production of comprehensive fiscal reports, remains critical. Concerted effort by the authorities and other domestic stakeholders to prepare for fiscal financing challenges is important. Price stability is critical to prevent a further erosion of purchasing power. Rebuilding international reserve buffers and allowing for greater flexibility in the exchange rate are critically important to bring back trade credit and to reduce Malawi’s vulnerability to external shocks. Addressing weakness in governance and institutions will be important,” Gopinath said.
Meanwhile, Information Minister Moses Kunkuyu has said the US envoy’s comments are an indication that President Lazarus Chakwera has struck the right chord.
“It is gratifying to see the tough decisions taken by President Lazarus Chakwera being appreciated both locally and internationally. We appreciate the relationship that exists between our two governments and we hope that the American government will continue to be a good friend who appreciates our journey and share our aspirations to industrialise our economy,” Kunkuyu said.
