SUPPLEMENTAL BUDGET REJECTED AS PARLIAMENT CLOSES EARLY

UNCLAS LILONGWE 000226

SIPDIS

SIPDIS
SENSITIVE

STATE PASS TO USAID
STATE FOR AF/S KAMANA MATHUR
STATE FOR INR/AA RITA BYRNES

E.O. 12958: N/A
TAGS: PGOV KDEM KCOR MI
SUBJECT: SUPPLEMENTAL BUDGET REJECTED AS PARLIAMENT CLOSES EARLY

REF: LILONGWE 194


1. (SBU) Summary: Parliament finished a four week session on March
22 amid controversy over the opposition's refusal to pass a mid-year
supplemental budget. The session ended without any substantive work
having been accomplished, and important bills pertaining to local
government elections, a national ID system and other legislation
were left untouched. The failure of the supplemental will not
hamper government operations, but it reveals Mutharika's continued
weakness in getting vital legislation passed. The next
parliamentary session will be the annual budget session in May/June.
End Summary.


2. (SBU) The GOM's primary motivation for presenting the
supplemental was to show the Malawi public a tangible dividend in
social spending as a result of HIPC debt relief granted in mid-2006.
The 9 billion kwacha (US $65 million) budget request was
deficit-neutral, thanks to higher-than-expected tax revenues and
debt relief. The funds were earmarked for increased social spending
on education and irrigation, as well as augmented budgets for a
number of ministries.


3. (SBU) Both major opposition parties, however, voted against the
budget request on March 21, stating that they wanted more
information on how the government had spent the money allocated in
the 2006/7 annual budget. (Comment: Detailed reports on government
expenditures are traditionally released only at the end of the GOM
fiscal year in June) This came one week after the opposition had,
for purely political reasons, rejected the government's nominee for
the long-vacant position of Auditor General (reftel).


4. (SBU) Annoyed by the budget rejection, which they saw as the only
reason for meeting, government refused to move forward with the
session the following day, forcing the Speaker to adjourn Parliament
one day ahead of schedule. In four weeks of meeting, Parliament
passed three bills authorizing international loans for
infrastructure projects, rejected the appointment of the President's
Attorney General nominee, and rejected the supplementary budget.
More importantly, they failed to discuss bills on local government
elections, national registration, the police force, security, and
amendments to the criminal procedure and penal codes. Some of that
legislation has been pending for discussion for over two years.


5. (SBU) Comment: While Parliament must act as a check on the
executive, politics have now trumped everything else, as
demonstrated by the stalemate in this session. The failure of the
supplemental will not hinder government operations, and the GOM can
legally continue to spend through the end of the fiscal year and
report expenditures to Parliament afterwards. But this rejection is
yet another political setback for Mutharika, who has struggled for
his entire term so far to pass reform legislation and get his
appointees confirmed.


6. (SBU) Parliament's continued failure to pass legislation--more a
product of politics than capacity--is beginning to have a real
impact. Delegates at a USAID-sponsored business advocacy workshop
this week complained openly about Parliament's inability to enact a
number of bills that would improve the business and investment
climate. Economists and business leaders are concerned that
Mutharika's impressive achievements at macroeconomic stabilization
and debt relief are only a first step, and that much new reform
legislation is needed to provide sustained economic growth. Judging
by events in Parliament this week, it will be very difficult for
Mutharika to pass any legislation in the upcoming May budget
session, or perhaps even for the remaining two years of his term and
this Parliament. End Comment.

EASTHAM