November 24, 2003

Cautious optimism as donors re-open aid taps

Major Western donors have announced the re-opening of budgetary support taps for Malawi, but warned that the support was coming with strict conditions. The donors, who comprise Britain, Norway, Sweden and the European Union, announced the resumption of the budgetary support under the Common Approach to Budget Support (CABS). This follows a decision by the International Monetary Fund (IMF) to release part of a US$ 47 billion budgetary support, which it suspended in 2001 after accusing the government of being prone to overspending. Accordingly, the four donors have said that the new pledge will require a strong and sustainable political commitment to fiscal discipline on the part of the Malawi government.

Finance minister, Friday Jumbe, said he had been receiving reports from other stakeholders in the country that the IMF programme meant extra money to spend on certain ministries. He pointed out that this would be a crucial time for the country to maintain fiscal discipline and not to borrow more money on the domestic market, to insure that the IMF does not withdraw the economic programme. The resumption of the IMF's budgetary support comes after agricultural experts in the country warned that the country was likely to have low yields of tobacco next year, a resource which is the country's major foreign exchange earner. (African Church Information Service)

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