Budget crisis

Treasury is struggling to design the 2014/15 National Budget as its number crunchers sweat to find fiscal space in the next financial plan for a record high domestic debt stock as well as unpaid arrears, Weekend Nation has learnt.

While noting on Friday that the period between being declared winner of the presidential election at the end of May 2014 and the beginning of the new financial year on July 1 was too short for the fledgling Democratic Progressive Party (DPP) administration to pull off a budget, Finance, Economic and Development Planning Minister Goodall Gondwe lamented that heavy financial liabilities from the 2013/14 fiscal year have made the job harder.

Presenting a request to Parliament yesterday to allow him to spend K210 billion ahead of a comprehensive budget set for tabling in the House in September, Gondwe said the People’s Party (PP)  administration “left behind” accumulated unpaid bills amounting to K158.5 billion and a domestic debt overhang of K340 billion that have to be factored into the plan.

Gondwe said the K490 billion Malawi accumulated over a period since the last budget is worrisome, saying he will ensure that government stops borrowing through overdrafts immediately.

“What is frightening, and Malawians should pause for thought, is that ministries are not operating at full capacity because of the problems we have had. There [was] Cashgate and whatever and although this was happening, government was still borrowing and we are paying huge interest rates on it. In addition, a lot of them [ministries] are not paying bills and they have arrears and these amount to K158 billion from the June [2013] budgetary year.

“The problem was that the budget that was passed in June last year stipulated [that government] was not going to borrow, but it has not been the case. They borrowed K340 billion. As Ministry of Finance, we will only borrow through Treasury Bills so that we reduce the debt as it is too much,” he said.

Gondwe also said this year, “there is a need to take particular care in preparing the budget in view of a difficult and confused financial situation that confronts government.”

The fact that donors—who traditionally inject around 40 percent into the national budget—have said they will continue withholding the aid on the back of the Cashgate that undermined the country’s Public Finance Management (PFM) system does not help matters either.

Gondwe said the donors’ position had led to a “problematic situation”.

“A good deal of the resources has been denied to us. We need time to solve that problem. One or two donors have indicated they might support us, but some are still talking to their capitals and we need to give them time so that we get certain answers on what will be in our resource envelope,” he said.

Gondwe added that government also awaits discussions with the International Monetary Fund (IMF) on the budget framework due to be held mid-July before formulation of the fiscal plan,  adding that the recent changes in Cabinet structures also need to be considered.

The K210 billion request—which is based on the K638.2 billion 2013/14 approved estimates—will avoid a government shutdown between July 1 and October 31, after which the provision will expire.

Gondwe’s financial resolution yesterday is in line with Section 178 of the Constitution on authorisation of expenditure in advance of appropriation.

Reads the Section in part: “The National Assembly may make provision under which if it appears to the Minister responsible for Finance that the Appropriation Act in respect of any financial year will not come into operation by the beginning of that financial year, he  or she may authorise the withdrawal from the Consolidated Fund of moneys for the purpose of meeting expenditure necessary to carry on the services of the government until the expiration of four months from the beginning of that financial year or the coming into operation  of the Appropriation Act, whichever is earlier.”

However, main opposition Malawi Congress Party (MCP) spokesperson on finance Joseph Njobvuyalema—while supporting the resolution—said the move prevents oversight on the expenditure of the requested resources, saying his party was afraid of providing a blanket approval.

“We have to see that there is prudence in the manner the resources are used,” he said.

Njobvuyalema added that what Gondwe tabled in Parliament is not what the public expected.

“The public is saying we are discussing a provisional budget, but this is not a provisional budget. A budget is a blueprint of all the transactions.  But this is not a budget at all,” he said.

PP spokesperson on finance Ralph Jooma agreed with Njobvuyalema, saying for the sake of oversight purposes, Gondwe should have been more specific on how the money requested is going to be used.

On the other hand, United Democratic Front (UDF) leader of the House Lucius Banda—whose party president Atupele Muluzi is in the DPP-led Cabinet as Natural Resources, Energy and Mining Minister— wholeheartedly supported the financial resolution.

Fast facts:

—             K340bn domestic debt stock, K158bn arrears a drag on fiscal plan

—           As Goodall asks for K210bn for four months