Malawi still Need Aid -Mutharika
Malawi still need donor aid to help it grow economically according to Foreign Affairs and International Cooperation Minister Professor Peter Mutharika
Mutharika said this on Wednesday after a meeting with the International Monetary Fund team that are holding talks with government officials.
“Malawi will continue to need some support until such a time when we have developed, become economically independent and increased our engagement in international trade.”
“Right now, Malawi has not reached that position where we do not need aid,” he said.
Malawi has suffered economically after most of its western donors froze aid mainly for the budgetary support with concerns of governance issues.
Traditionally Malawi has been relying on donor aid, which accounts 40 percent of the whole national budget.
Malawi then introduced a zero deficit budget for the year 2011/2012 with an aim of reducing the over reliance on donor aid.
The zero deficit concept which has not been well understood by many people, was aimed for Malawi to a least be able to pay the recurrent expenses after almost fifty years of gaining independence.
Zero deficit concept has been hailed by economist in the country as a way for Malawi to gain economic independence.
However the aid freeze has left a budget hole of about $121 million according to finance minister Ken Lipenga who told parliament last month.
Recently, Malawi government has been at different ends with the IMF and World Bank, who have been demanding for Malawi to devalue the Kwacha by 40 percent in order to go back on track of their programme and help ease the forex problem.
But president Bingu Wa Mutharika has said, he can not just devalue the kwacha without an exit route, taking into account the current economic environment which he says, will make the poor people in the country suffer more.
This has created a debate in the country to whether devaluing the kwacha help solve malawi’s problem or will only make things worse with other opting to help the country increase production before the kwacha is devalued.
However the western donors have urged Malawi government to work with IMF and World Bank to help solve the country’s economic woes.
The IMF mission is in the country to review recent economic developments and assess the mid-term economic outlook. The team is expected to release a statement on its mission in Malawi this Friday.
“Our role is to give advice to government based on the experience that we have and not dictate the policies. We are still trying to put the pieces together,” said Tsidi Tsikata, IMF division chief in the Africa Department.
This is the second time the IMF team is coming to Malawi in a space of four months, following the world bank team which also visited the country few weeks ago and are said to have given Malawi an exit plan.
But President Mutharika has said he will only accept programme that will help Malawi.
Aid freeze has been squeezing Malawi’s economy and recently the Millennium Challenge Corporation a United States department, has suspended its $350 million fund that was supposed to help revamp the electricity system in the country saying governance issues.