PARLIAMENT APPROVES SUPPLEMENTARY BUDGET AND

UNCLAS SECTION 01 OF 02 LILONGWE 000240 SIPDIS SENSITIVE/ NOFORN E.O. 12958: N/A TAGS: PGOV ECON EAID MI BUD FIN SUBJECT: PARLIAMENT APPROVES SUPPLEMENTARY BUDGET AND CORRUPT PRACTICES AMENDMENT BEFORE DISSOLUTION REF: A. 03 LILONGWE 1309 ¶B. 03 LILONGWE 1295 ¶C. 03 LILONGWE 1202 ¶D. 03 LILONGWE 851 SUMMARY -------------- ¶1. (SBU/NF) Before Parliament's March 20 dissolution, the House passed the controversial "compromise" version of the Corrupt Practices amendment, a supplementary budget, and other minor pieces of legislation. At present, the "compromise amendment" appears sufficient to fulfill the IMF's relaxed structural requirements and to placate bilateral donors eager to disburse budgetary support to the GOM. The supplementary budget, an MK 11.339 billion (approximately USD 105 million) increase to the MK 56.812 billion (USD 600 million) budget already in place, has been made necessary by continued government borrowing from the domestic market and overspending by government agencies. Increasing nearly MK 8 billion (USD 75 million),interest payments on domestic debts are the largest expenditure and are expected to rise to more than MK 16.1 billion (USD 150 million). Driven by a tight deadline, the House displayed rare efficiency in this last planned session before May's presidential and parliamentary elections, and the session was filled with pertinent debate on the eve of its closure. END COMMENT. CORRUPT PRACTICES AMENDMENT PASSES -------------- ¶2. (SBU) A topic of public discussion since its referral to the Legal Affairs Committee during the December parliamentary session, the Amendment to the Corrupt Practices Act passed on March 18 did not include provisions to allow the Anti-Corruption Bureau (ACB) to prosecute cases without consent from the Director of Public Prosecutions (DPP). Submission of an amendment with such provisions was originally required as a structural condition of the IMF's second review (reftel B). The "compromise" version of the Amendment, which emerged and which was the subject of uncharacteristically passionate debate in the House, requires the DPP to make a decision on prosecution of ACB cases within 21 days of their submission to the DPP, and, if consent is withheld, the DPP must justify to Parliament the refusal with "clear reasons for the decision." ¶3. (SBU/NF) According to an IMF team member, the current formulation of the Amendment is "legally sufficient" to satisfy the IMF's required "prior actions" for its next review, even though it would not have satisfied the original structural condition. (COMMENT: Although we are unclear about who the GOM "compromised" with, the UK, Norway, and the EU all appear satisfied with progress on this condition.) SUPPLEMENTARY BUDGET OF USD 105 MILLION -------------- ¶4. (SBU) Parliament accepted without changes the supplementary budget of MK 11.339 billion (USD 105 million) presented by Minister of Finance Friday Jumbe on March 15. Jumbe blamed the bulk of the continued domestic borrowing on the donors' delays in disbursing budgetary support and resulting higher interest rates. He also admitted to some over-expenditures, which occurred in spite of automatic triggers put in place to reduce spending if donor funding was not received, by saying it was "technically impossible" to reduce spending by some government agencies. Jumbe explained that to-date over-expenditures of MK 3.008 billion (nearly USD 28 million) were concentrated in the Office of President and Cabinet, State Residences, the National Assembly, Foreign Affairs, Police, and Special Activities. (NOTE: It has already surfaced that the supplementary budget approved by Parliament did not include the USD 10 million gap in elections funding that the Electoral Commission informed the donor community about on March 22, to be reported septel.) ¶5. (U) Robust debate in the House and in public venues criticized the GOM for not reducing domestic debt and not increasing funding for pro-poor expenditures. Leader of Opposition, Malawi Congress Party (MCP) MP (and presidential candidate) John Tembo, made a compelling speech that denounced the ruling United Democratic Front's lack of fiscal discipline and called for the budget to be reviewed by the Budget and Finance Committee of Parliament. Civil society activists also lamented that the current government spends more on domestic debt servicing than on pro-poor expenditures, including education and health. OTHER MINOR PIECES OF LEGISLATION -------------- ¶6. (U) In addition to the Corrupt Practices Amendment and the supplementary budget, the House approved a loan from the Kuwait Fund for Arab Economic Development for construction of a road, an International Development Association Loan, commencement of rural electrification projects, and an amendment regarding community-friendly natural parks and wildlife management. DISSOLUTION OF THE HOUSE -------------- ¶7. (U) As constitutionally mandated, the House was dissolved on March 20 in advance of the May 18 elections. The dissolution of Parliament marks the beginning of the official campaign period, allowing candidates and parties to legally campaign. (NOTE: Although Parliament has officially been dissolved, the House can be re-convened if deemed necessary by the Speaker.) COMMENT -------------- ¶8. (SBU) Driven by deadlines, the House was uncharacteristically efficient and filled with legitimate debate on the eve of its closure. The particularly passionate addresses given by members of the opposition regarding the Amendment to the Corrupt Practices Act (in favor of the Anti-Corruption Bureau's independence) represented genuine democratic discourse in a House normally dominated by the ruling party's agenda. BROWNING