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Ecama contradicts Goodall on borrowing

 

An analysis by the Economics Association of Malawi (Ecama) has shown that the majority of public expenditure is channelled towards consumption.

Out of K171.1 billion (25.5 percent of total expenditure) of the targeted development expenditure for the first half of the year 2017/18, only K138.2 billion (20. 6 percent of total expenditure) was the actual development expenditure outturn.

Gondwe: This is falsehood

In its 2017/18 Year Mid-Budget analysis, the association observed that majority of government expenditure is channelled towards consumption with only 20.6 percent of the total expenditure in the first half being spent on development projects while foreign financing was at 70.6 percent of the total development funds.

Finance, Economic Planning and Development Minister Goodall Gondwe, however, asserts that consumption, which is synonymous with recurrent budget, is completely covered by domestic revenues and designated external grants.

In his Mid-Year Budget Statement, Gondwe said this indictment about the so called “appetite” for domestic borrowing overlooks the fact that this government’s annual domestic borrowing has steeply declined from K94 billion in 2014/15 down to K37 billion in 2016/17 and to a planned figure of K28 billion in 2017/18, which does not reflect a Government that has an appetite for domestic borrowing.

“It follows that the extra available resources from external grants, domestic revenues and borrowing must be funding the development budget. That being the case, this indictment that domestic borrowing in Malawi is needed to satisfy the consumption segment of the budget is a falsehood,” he said.

However, Ecama said should government miss the borrowing target in the remaining part of the year, this would pose risks on monetary policy stance.

Said Ecama president Chikumbutso Kalilombe in the analysis: “The outturn on development expenditure is worrisome as less resources are being dedicated towards development. Even more worrying is that the bulk of the funds dedicated to development were foreign financing at 70.6 percent of the total development funds. This clearly shows that the majority of government expenditure is channelled towards consumption.”

Kalilombe further notes that with total revenue and grants for the second half of 2017/18 financial year projected at K656.3 billion and the bulk of it being domestic revenue at K518.7 billion, the major risk to meet this target would be lower growth than earlier on projected. n

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