13 February 2016

Malawi: EU Rules Out Budgetary Support

European Union (EU), one of Malawi's largest donors, has ruled reinstating budgetary support any time sooner even the country meets the IMF extended credit facility.

A senior EU official from Brussels who is in the country said Friday, Malawi has a lot to do to ensure that donor money is not looted as was the case with the infamous 'cashgate' scandal.

The official, Fernandes Ahnies said the government of Malawi will continue getting EU aid through the development aid which has since been increased by 220 million Euros, hitting 560 million Euros.

The official said the money will continue being used in the sectors of agriculture, health and good governance.

The revelation has not come as a surprise in government corridors of powers as President Peter Mutharika and Finance minister Goodall Gondwe have openly ruled out the return of most donors for the budgetary support, whose pull out has adversely affected the economy which is fast collapsing.

Ministry of Finance spokesperson Nations Msowoya said the government is widening its tax base to fill the gap left by donors.

"We are looking at how best to tax the informal sector," said Msowoya pointing fingers at the untaxed unskilled labour which forms a bulk of the Malawi economy

. Msowoya said soon the government will commission a study on this which will be led by experts from the IMF and World Bank. He could however not say how much new taxes the government is expected to collect, saying everything would be known after the study.

On Thursday, renowned economist Henry Kachaje warned local businessmen to avoid getting bank loans in the wake of high interest rates and high inflation due to a slump in the economy.

Speaking on MBC, Kachaje said: "This is not the best time tto be borrowing from banks."

Finance minister Gondwe has since urged Malawians to hold their patience, saying the government is doing all it can to fix the ailing economy.

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