PARLIAMENT RECONVENES TO FOCUS ON BUDGET

UNCLAS LILONGWE 000577

SIPDIS

STATE FOR AF/S, INR/AA
MCC FOR KEVIN SABA
STATE FOR EB/IFD/OMA FRANCES CHISHOLM
TREASURY FOR INTERNATIONAL AFFAIRS/AFRICA/BEN CUSHMAN

E.O. 12958: N/A
TAGS: ECON EFIN KDEM PREL PGOV KCOR MI BUD FIN
SUBJECT: PARLIAMENT RECONVENES TO FOCUS ON BUDGET

REF: A. LILONGWE 00508

B. LILONGWE 00540

C. LILONGWE 00555


1. Parliament reconvened on Thursday, July 7, to focus on
passing the budget for 2005/06. This is the first meeting of
Parliament since the late Speaker collapsed on the floor of
the House on June 23 during debate over Presidential
impeachment procedures. MPs seemed focused on addressing the
budget more seriously, as they decided to discuss only the
budget through July 15.


2. The House voted unanimously to focus on the budget for the
next seven days. The First Deputy Speaker will serve as
Speaker until the 18th, when they will elect a new Speaker.
MPs also unanimously passed a motion to approve a continuing
resolution, giving approval for government spending from July
1 - September 30th. The Opposition Spokesperson on Finance
then gave his response to the budget, in which he called for
a universal fertilizer subsidy, a decrease of two to four
percent for the VAT tax, and an bigger raise for the civil
service.


3. Comment: It is a good sign that Parliament has decided to
focus only on the budget, with the hope that it will be
passed by the end of next week. MPs seem to have gotten the
message that donors, civil society, and the public at large
have been trying to get across. However, if Government
compromises on the fertilizer subsidy, and implements an
expensive universal subsidy without cutting costs somewhere
else, it could cause macro-economic problems and hurt their
chances of concluding a new IMF agreement.

GILMOUR