IMF welcomes budget approval

The International Monetary Fund (IMF) has welcomed the parliamentary approval of Malawi's budget late last Friday. "Successful implementation of a strong budget is critical to sustain the improvements in economic and fiscal policies during the last 12 months, as is continued donor support," said Thomas Baunsgaard IMF resident representative. "The budget is also essential to enable government and donors to start operations to ensure food security later in the year," he added. The government is expected to meet the IMF later this month to discuss a request for a Poverty Reduction and Growth Facility (PRGF) arrangement, noted analyst Boniface Dulani. A delay could have retarded Malawi's prospects of securing international debt relief. Up to 80 percent of Malawi's development budget is provided by donors, and the country faces enormous challenges related to poverty, food insecurity, HIV/AIDS and the capacity to deliver services. Political bickering between President Bingu wa Mutharika and his political rivals, former president of the country and now chairman of the United Democratic Front (UDF) party, Bakili Muluzi, and Malawi Congress Party (MCP) leader John Tembo had held up approval of the budget. Last month the UDF proposed a motion to amend the constitution to allow MPs to impeach Mutharika and his deputy because the president had left the UDF, which sponsored him in the national elections. A "compromise" with the opposition also helped smooth the passage of the budget through parliament, noted Dulani. "The government had conceded to the opposition's demands of a universal fertiliser subsidy, which had increased the expenditure from an original figure of US $961.3 million to $966.9 million - which has helped ease the tension in parliament," he explained. The opposition has argued that a universal fertiliser subsidy would help boost Malawi's agricultural production, which has been hit by four consecutive years of erratic rainfall. Minister of Finance Goodall Gondwe, who unveiled the budget last month, announced that the government intended spending more than US $20 million on the fertiliser subsidy, but with the inclusion of smallholder tobacco farmers the cost has shot up to almost $33.9 million. A portion of the funds will be channelled from other departments. The Donor Coordination Group on Agriculture and Food Security has warned that increasing the fertiliser subsidy could affect the country's progress towards the completion point of the enhanced Heavily Indebted Poor Countries initiative, influencing the decision on its $11.3 million debt.