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