MALAWI: PRESIDENT WINS BUDGET APPROVAL, THEN

UNCLAS SECTION 01 OF 03 LILONGWE 000715

SIPDIS

SENSITIVE
SIPDIS

STATE FOR AF/S
STATE FOR INR/AA
MCC FOR MALIK CHAKA

E.O. 12958: N/A
TAGS: PGOV KDEM EAID EFIN MI
SUBJECT: MALAWI: PRESIDENT WINS BUDGET APPROVAL, THEN
DISSOLVES PARLIAMENT

REF: LILONGWE 646

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1. (SBU) Summary: After nearly four months of political
confrontation, Malawi's Parliament passed the USD 1.24
billion national budget on September 11 -- a major victory
for President Mutharika. The prudent, pro-poor budget is
consistent with the President's Malawi Growth and Development
Strategy (MGDS) and should contribute both to continued
poverty reduction and macroeconomic stability. Even most
opposition MPs recognized the successful economic policy of
the GOM to date. Opposition parties, once focused on
financial matters, raised several valid concerns about the
budget and secured government concessions to commercialize
the national radio and television networks, and to increase
discretionary funds to MPs for projects in their own
districts. Prior to passage of the budget, the government
had agreed to remove injunctions preventing the Speaker of
the National Assembly from acting on Section 65 of the
Constitution. The provision could require up to 40 of 71 the
ruling Democratic Progressive Party's (DPP) MPs to vacate
their seats because they crossed the aisle after being
elected under opposition party banners. Before the Speaker
could act, however, President Mutharika exercised his
constitutional authority to dissolve Parliament, prompting
charges of bad faith from the opposition and other observers.
The President's action, while apparently legal, may cost him
some of increased popular support his party gained by
standing firm during the budget approval process. End Summary

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FINALLY -- A BUDGET
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2. (SBU) Parliament passed Malawi's national budget September
11, ending a protracted process that began on May 21 and was
stopped three times due to a one-month period of mourning
following the First Lady's death, a political impasse, and
several court injunctions (reftel). Once the National
Assembly finally resumed meetings on August 13, the
constitutionally required three-week budget debate period
proceeded in a generally constructive atmosphere, concluding
on August 31. The National Assembly's subsequent process for
approving each line item of the budget typically has taken no
more than two days to complete, but this year required seven
days as the opposition used its numeric superiority in the
Assembly to force the delay of key votes. The most contested
vote was the line item for the Subvention to Statutory
Organization, which funds state-owned organizations.
Throughout the budget process, both the Malawi Congress Party
(MCP) and the United Democratic Front (UDF) accused the
government of using the state-owned broadcasters, Malawi
Broadcasting Corporation (MBC) and Television Malawi (TVM),
to spread anti-opposition propaganda. Government in the end
decided to concede to the commercialization of the two
networks, reducing the government funding of each
organization to one Malawian kwacha and moving MK 360 million
(USD 2.5 million) back to the Ministry of Finance. (Further
implications of the commercialization of the only national
radio and television networks in Malawi will be covered in
septel.) In addition to state organizations, the Ministry of
Information and Civic Education and the Anti-Corruption
Bureau (ACB) budgets were also delayed by opposition until
the government opened investigations into possible corruption
by the organizations' heads, Information Minister Patricia
Kaliati and ACB Acting Director Tumalisye Ndovi respectively.

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PRO-POOR AND FISCALLY PRUDENT
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3. (U) In his statement to conclude the budget debate,
Minister of Finance Gondwe highlighted how the budget
implemented President Mutharika's Malawi Growth and
Development Strategy (MGDS) framework, as well as the
budget's sound macroeconomic base. Gondwe also specifically
addressed all key issues raised by opposition members during
the debate, pointing out where underlying claims or
assumptions were incorrect, but also noting when valid
criticisms had been made. One noteworthy example was his
agreement with the opposition to increase the constituency
funds of members which can be used for local projects, but he
insisted the increase in funds not come at the expense of
fiscal discipline. Among the economic achievements Gondwe
underscored were reduced inflation (7 percent currently and

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headed below five percent),positive real GDP growth (8.5
percent last year and 6 percent expected this year),a
reduction of poverty in urban areas, increased food supplies
and storage ability in rural areas, diversification of
agriculture away from maize to exportable cash crops, and an
increase in the proportion of technical and capital goods as
a percentage of imports. Approximately 28% of the budget is
being allocated to the four pillars agreed upon in the Malawi
Poverty Reduction Strategy Paper (PRSP) developed during the
Heavily Indebted Poor Country (HIPC) qualification process:
pro-poor growth, human capital development, improving the
quality of life of the most vulnerable, and good governance.
Senior opposition leaders, including the shadow finance
ministers of both major parties, reluctantly acknowledged the
GOM's economic success in their Parliamentary interventions
and offered few substantive objections to current economic
policy.

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PRESIDENT TAKES THE MONEY, THEN RUNS
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4. (SBU) The final budget vote was not completed until the
government provided proof to opposition members that it had
withdrawn the injunction it had earlier obtained to stop the
Speaker of the Assembly from acting on Section 65 of the
Constitution. The provision could require up to 40 of 71 the
ruling Democratic Progressive Party's (DPP) MPs to vacate
their seats because they crossed the aisle after being
elected under opposition party banners. All goodwill that
had developed between the government and the opposition with
the removal of the injunctions disintegrated on September 14,
however, when President Mutharika suddenly exercised his
Constitutional authority to "prorogue" (dissolve) the
National Assembly, thus ending the current session without a
resolution on Section 65. The premature closure of the
National Assembly vindicated opposition leaders who had
warned that if that Section 65 were not addressed before the
budget approval, the President would simply take the budget
and run. These same leaders railed against the bad faith
tactics of the Mutharika government after the dissolution of
Parliament and warned that they would find a way to punish
the GOM somehow. They also argued that the President had
acted unconstitutionally by failing to consult with the
Speaker as required before the decision to prorogue. UDF and
MCP leaders appeared momentarily stunned by the President's
move, however, and announced no immediate steps they planned
to take.


5. (SBU) Parliament's closure will prevent progress in
filling key vacancies such as Chief Justice of the Supreme
Court of Appeal, the Auditor General, and the members of the
Malawi Electoral Commission (MEC). The nominees for Auditor
General, MEC, ACB, and the Financial Intelligence Unit have
all been blocked by the opposition-controlled Public
Appointments Committee of Parliament or by
opposition-sponsored litigation, and the President has so far
been unwilling to nominate more opposition-friendly
candidates. The Chief Justice nomination has been announced
but not considered in Parliament. Another measure stalled
was approval of an agreement to connect Malawi's electrical
grid with Mozambique to share generation capacity and
alleviate shortages. It was in fact the MCP's unwillingness
to move immediately on these measures before addressing
Section 65 that the GOM cited as justification for proroguing
Parliament. The GOM also pointed to the UDF's failure to
clear up its own injunction against Section 65 promptly and
continuing delays in Parliamentary business as justifications
for dissolving the National Assembly. There has been no
indication when the President might reconvene Parliament,
though most expect it will not be before December or January
at the earliest.

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COMMENT: PRESIDENT SACRIFICES COMITY TO CONSOLIDATE POWER
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6. (SBU) Comment: President Mutharika has emerged as the
clear winner in the showdown over the budget, at least in the
short-term. His effective use of the "bully pulpit" won
strong public support for his budget, and also allowed him to
face down opponents who sought to weaken the President
severely through Section 65. Mutharika apparently believes
he has both time and popular opinion on his side as he heads

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off for three weeks in the U.S. for the UN General Assembly
and other activities. While the passing of the budget
ensures that the executive branch can legally implement its
successful development strategy for another year, the
vacancies at Chief Justice, Auditor General, and
Anti-Corruption Bureau (ACB) Director will hamper the proper
functioning of government, including the fight against
corruption. Perhaps more importantly, the President will
find it even more difficult to secure future agreements with
the opposition on important issues in the remaining year and
a half of his term. For the moment, however, Mutharika has
outwitted determined rivals who are more interested in
defeating him than in Malawi's development. End Comment.
EASTHAM