Written by DEREK MAPONDERA
BLANTYRE--Alexander Baum, the European Union ambassador to Malawi said Friday the impoverished southern African nation shouldn't expect "a rescue package" to fix the battered economy.
"It is unlikely that donors would give Malawi a rescue package to address its problems," he told a conference of Malawian accontants, in remarks quoted by Malawi News.
Malawi, which depends on donor support for up to 40 percent of its development budget, is on a "recovery plan" after donors suspended aid due to concerns about hardline governance and rights issues under the late Bingu wa Mutharika administration.
Mutharika, who died in April from a heart attack and was succeded by his vice president Joyce Banda, who has since launched a "recovery plan" through private sector-led economic growth. Banda has also restored relations with foreign donors including the International Monetary Fund (IMF).
“Malawi still needs to put its house in order. Why should donors help Malawi address problems it created by itself?” Baum said.
The envoy said there was still need for the country to "rebuild its damaged image" among development partners for it to become a trusted country again.
“Malawi has to rebuild confidence. It’s not just a matter of changing government. To the international community, Malawi remains the same country regardless of whether there is a new government. The image remains the same,” he added.
He said donors had not given Malawi "a raw deal". saying aid has its limitations.
“It is important to understand that development partners are helping within the framework of their programmes, not with a rescue package of significant fresh money,” said Baum.
Baum said mobilisation of money takes time and remains limited to pledges.
“There is no raw deal,” said Baum, adding: “In fact, there is no deal other than the ECF [Extended Credit Facility of the International Monetary Fund].
The envoy said the Banda government took a "bold and risky but right decision” to devalue the kwacha in May by a third against the dollar, which was a key IMF demand that was largely ignored by Mutharika.
Malawi's ties with the IMF broke down last year after the global lender suspended a $79.4 million credit facility meant to cushion chronic foreign exchange shortages that led to fuel scarcity.
Key other donors, the United States and former colonial ruler Briatin, also put on hold vital aid.
Baum said the devaluation and other reforms were not done to "please donors but because they were necessary".
He said what the donors had so far disbursed to Malawi, some $165 million against pledges totalling $496 million, was in accordance with the schedules provided when the programme with the IMF was being negotiated.
He said although government and donors had agreed on a reform plan to be supported by a multi-donor trust fund, there were still concerns about the political and civil service will to allow swift implementation of the reforms.
The EU envoy said Malawi had "failed to successfully complete many programmes with the IMF." He warned that fixing the economy would "take time and that the country will experience some more difficult months ahead with the lean period coming."
He said the "turnout of things" may be more difficult than Malawians expected, saying the situation had in part been aggravated by shortages of food in some parts of the country. Some 1.6 million Malawians, 10 percent of the population, will need food aid between December and March.
“It is however critical to sustain the reform policies in order to achieve results,” said Baum, adding: “It is important to contain inflation and devaluation but not by changing medicine.”
He said discipline in public expenditure is a key element in the equation.
“As you will know, the worst thing you can do is to stop your antibiotics treatment after one or two days because you are no longer sure about the treatment. When you do that, it will not work again,” he said.
He said Malawi "had no choice but devalue and liberalise kwacha as that is the only way the economy can be healed."
Banda, who served as vice president under Mutharika and was later thrown out of the ruling party, has said the agriculture-powered economy was in a "total mess" when she took office on April 7.
(c) The Maravi Post 2012. Reproduction without acknowledgement prohibited