Economics Association of Malawi (Ecama) has asked Treasury to cut public debt and narrow the budget deficit if the country is to sustain economic gains.
As part of its input to the 2019/20 National Budget, Ecama also wants Treasury to maintain the prevailing macroeconomic stability in the next fiscal plan.
In an interview on Thursday, Ecama executive director Maleka Thula, despite stating that it is yet to officially submit its input to Ministry of Finance, Economic Planning and Development, said economists are worried that Malawi’s public debt has reached alarming levels.
Public debt, which comprises domestic and external, stood at around K3.3 trillion as of December 2018, which is twice the country’s 2018/19 revised National Budget of K1.4 trillion. The debt is estimated at 72 percent of the country’s total wealth as measured by nominal gross domestic product (GDP).
“Public debt has been increasing substantially over the past years and has reached unprecedented levels.
“For instance, domestic debt has hit the 20 percent of GDP threshold and is worrying. This is because we continue to implement perpetual-deficit budgets,” said Thula.
On government budget deficit, the gap between government total revenue and expenditure, he said Ecama hopes that government will narrow the gap which he said is a result of perpetual huge government borrowing.
On Malawi’s biggest social security programme, Farm Input Subsidy Program (Fisp), Thula said Ecama wants government to restructure it in the 2019/20 National Budget, on the basis that it is not delivering on its objectives.
“The objectives of the programme, when it was designed, was to achieve food security and also enable vulnerable beneficiary farmers graduate, but this is not happening,” he said.
Thula said Ecama is also not amused with low allocation, which he said makes it hard to achieve meaningful economic growth as more resources are being channelled to non-productive sectors.
Ministry of Finance, Economic Planning and Development spokesperson Davis Sado, without necessarily reacting to Ecama’s input, said that at a technical level, government already conducted a “tax shopping exercise” which he said involves listening to the business community while soliciting their input on the budget.
Commenting on the uncertainty surrounding pre-budget consultations, he said conducting such consultations is the prerogative of the next Finance minister.
Sado said from a technical point of view, Treasuy has already collected input from the business community and other partners.