Malawi budget row threatens donor support - minister

Malawi will lose crucial international budget aid if an on-going political stalemate between the government and the opposition-led parliament continues, Finance Minister Goodall Gondwe said in an interview.

Gondwe's warning came after parliament and President Bingu wa Mutharika's government failed to agree on Malawi's planned $1.2 billion annual budget on Monday.

The opposition wants a dispute over the poaching of its members by the ruling party to be resolved first.

"We are in a financial crisis and further delays to pass the budget will be catastrophic as donors will not be forthcoming to put financial support to the budget," Gondwe told Reuters as parliament met again on Tuesday to try and break the deadlock.

The impoverished Southern African country relies heavily on donor support for its public spending.

"This financial year our budget is 172 billion Kwacha (US$1.2 billion) and from that we are only contributing 98 billion Kwacha (US$700 million)," Gondwe said.

"The rest is from our cooperating partners. That's how serious this is because we will not get anything if this continues," he said.

The budget debate, which should have been concluded by June 30, was indefinitely suspended last month over the dispute on the poaching of members of the opposition coalition of the United Democratic Fund (UDF) and the Malawi Congress Party (MCP) by the ruling Democratic Progressive Party (DPP).

The draft 2007/08 budget allocates more resources to poor rural areas, proposes salary increases for civil servants, and higher spending on health care and food production.

On Monday, the government rejected a proposal by the opposition to adopt a temporary three-month budget that would allow for public spending while the political dispute over the opposition's members is resolved.

The opposition had also proposed to allow government to spend an additional $70 million for the procurement of the fertilizers meant for a subsidy programme which has proven very successful in the last two years.

Frustrations have been growing in the southern African nation of 12 million people as the political standoff deepened.

Thousands of people have held demonstrations over delays in the budget for the country bordered by Tanzania, Zambia and Mozambique.

"This is now time to act statesmanlike, both the opposition and our side, and resolve our differences," Gondwe said.