The country’s bilateral and multilateral donors yesterday welcomed as realistic the K1.2 trillion 2016/17 National Budget with both the Treasury czar and International Monetary Fund (IMF) admitting an increased role of the Bretton Woods institution in drawing up the budget lines.
Finance, Economic Planning and Development Minister Goodall Gondwe unveiling the budget in Parliament yesterday on several occasions told the House most of the economic outlook assumptions were agreed between Lilongwe and IMF, which has kept a close look at work at the Treasury as both sides strive for Malawi to remain on track on its Extended Credit Facility (ECF) programme.
IMF country representative Geoffrey Oestriecher and several western envoys including the representative of the United Nations (UN) and United Nations Development Programme (Undp), welcomed the budget while encouraging Gondwe to live up on pledges of fiscal discipline.
“I think the budget is quite realistic, we are in an inflationary environment and that means nominal amounts of revenues and expenditure from year-to-year and the way to deflate that is to look at the ratios of gross domestic product (GDP) and those ratios look achievable,” said Oestriecher.
“The targets or revenue are projections and are arrived at in consultations with government looking at what GDP growth will be; what tax measures have been put in place. The tax measures in the budget do look quite reasonable, certainly very consistent with what we had discussed with government before. One thing we and the government agree, is that we have to have realistic revenue estimates because if revenue is overestimated it tends to have expenditure overestimated and that can be very dangerous,” he said.
British High Commissioner to Malawi Michael Nevin also expressed optimism that by aiming to reduce inflation, the private sector can be stimulated.
“There are a number of factors that cannot be controlled, but ultimately the combination of being flexible to those factors and driving to an austerity budget, trying your best to use whatever funds available to productive activities,” said Nevin.
He conceded that there is a need to look in detail whether the budget has reached the balance between protecting the poor while also supporting the development agenda in the era of austerity, but said the prioritisation of procurement of maize for the hunger situation was a necessary measure.
UN Resident Coordinator Mia Seppo, while saying the economic environment was difficult, hailed Gondwe for striving to push ahead with the reform agenda, adding the emphasis on education and health was welcome news for vulnerable Malawians. n