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Identifier
Created
Classification
Origin
04LILONGWE540
2004-06-21 15:51:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Lilongwe
Cable title:  

NEW FINANCE MINISTER BRIEFS DONORS ON PLANS TO GET

Tags:   EFIN  ECON  PGOV  MI 
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						UNCLAS LILONGWE 000540 

SIPDIS

SENSITIVE

E.O. 12958: N/A
TAGS: EFIN ECON PGOV MI
SUBJECT: NEW FINANCE MINISTER BRIEFS DONORS ON PLANS TO GET
MALAWI BACK ON TRACK

REF: LILONGWE 503



1. (SBU) Summary. Two days after being sworn in, new finance
minister Goodall Gondwe briefed donor heads of mission of his
plans to get Malawi back on track with the international
financial institutions; indicated that Malawi is entering
into an IMF staff-monitored program; made a pitch for early
disbursements by the World Bank and other donors; discussed
plans for the new budget; and promised greater transparency
and regular communication with donors. End summary.



2. (SBU) At a two-hour meeting in Lilongwe on June 18,
Finance Minister Goodall Gondwe spelled out his immediate
plans to extricate Malawi from its dire economic situation.
He promised to hold regular meetings with donors, as often as
on a monthly basis. He asked that his discussions with
donors be confidential and that information shared
(including, he hopes, expenditure data on
ministry-by-ministry basis) be considered privileged. He
specifically asked that information not be shared with the
press.



3. (SBU) Per reftel, the IMF has agreed to a fast-track
staff-monitored program with Malawi. Gondwe said the program
will run through the end of September, and that it will not
call for resources from the Fund. June benchmarks have been
agreed upon, and Gondwe indicated they focus on wages, other
recurrent transactions, total expenditures, domestic
commercial borrowing, and net domestic assets in the Reserve
Bank. He added that the Fund would also like to see how the
new administration's move of government functions from
Blantyre to Lilongwe is being conducted. Gondwe said that
"unlike in the past," the GOM had taken a substantial part in
determining targets. "We think the targets are fair and
attainable; if we don't attain them, there's something very
wrong."



4. (SBU) Gondwe said there would be a Fund mission in the
first or second week of July with three objectives: to
determine how the GOM has fared on the June benchmarks; to
conduct Article Four consultations; and to discuss a
staff-monitored program of 3-4 months duration.



5. (SBU) If Malawi performs "robustly well" on the June
targets, Gondwe hopes that a Letter of Assessment from the
Fund will enable the World Bank ("and others, I suppose") to
decide whether or not to disburse. The Bank's Country
Manager said the Bank will "look at its position in late
July." He later added that he hopes for support from the USG.



6. (SBU) Gondwe's principal secretary at the Ministry said
that in lieu of a new budget, the GOM will use Provisional
Warrants from the beginning of the new fiscal year in July
for a period of three to four months. Ministries will be
advised of ceilings on their spending, and will then be asked
to submit their prioritized spending plans. Gondwe admitted
that the next budget will be "very difficult." He mentioned
problem areas including interest payments on treasury bills;
the need to reform the civil service wage structure (which
could lead to an incremental increase); and how to implement
presidential initiatives (such as fertilizer subsidies).



7. (SBU) During the briefing, Gondwe twice referred to his
recent meeting in Washington at Treasury with U/S Taylor. He
advised that there was a perception at Treasury that the Fund
had too often changed targets for Malawi. He also said that
U/S Taylor had indicated USG support of World Bank
disbursement of its Structural Agreement Credit so long as
the IMF is satisfied with GOM performance.



8. (SBU) Comment: Gondwe started off on the right foot,
but clearly realizes the daunting challenge ahead of him.
His recovery scenario definitely includes early World Bank
disbursements. (Though he would also like to see early
direct budgetary support from bilateral donors, he was
advised that such support will not be considered for several
months.) Without Bank disbursements soon, he is
(understandably) concerned there could be a rapid fall in the
kwacha. He knows the GOM must perform now if it wants to get
back on track. The question is whether he and President
Mutharika can first dig Malawi out of the hole dug by the
previous government, and then impose fiscal discipline on a
bureaucracy which historically has resisted it. End summary.
DOUGHERTY