The Economics Association of Malawi (Ecama) says it wants the 2020/21 National Budget to be premised on realistic assumptions and ensuring that macroeconomic stability is entrenched.
The sentiments come as Parliament is expected to start meeting for the 2020/21 National Budget from this Friday up to October 9 2020.
In a written response on Monday, Ecama president Lauryn Nyasulu said to ensure that this happens, the fiscal plan needs to be aligned to the national development agenda.
She said this can be done by increasing budget allocations to key priority areas of the Malawi Growth and Development Strategy (MGDS III).
Said Nyasulu: “Given the Covid-19 pandemic, the 2020/2021 budget should focus on economic growth, job creation, economic empowerment, social protection and resistance and infrastructure development.
“There should also be clear strategies in place on how such programmes would be achieved and assessed.”
She said the key challenge of the budget remains poor growth prospects following the Covid-19 pandemic, with the country’s projected growth of 1.9 percent expected to plunge further to negative 3.5 percent should the pandemic persist to December this year.
Nyasulu said this will weigh negatively on government revenue, adding that this implies that the deficit will likely widen further.
Figures from the Reserve Bank of Malawi show that during the 2019/20 financial year, Treasury posted a K428.7 billion deficit, which is K113.8 billion shy of the projected K314.9 billion.
Nyasulu said at the current level of deficit, government needs to minimise consumption expenditure as the deficit has been persistent over the years.
“Worsening fiscal deficit necessitates borrowing, which would be costly to the economy as it could disturb hard-earned macroeconomic stability,” she said.
Last month, World Bank country manager Hugh Ridell said the new budget calls for hard choices and trade-offs as well as credible revenue projections and sustainable expenditure.
Speaking at the launch of the 11th edition of the Malawi Economic Monitor in Lilongwe last month, he said it was imperative for the new administration to rebuild fiscal buffers and reduce reliance on expensive domestic debt arrears.
Ridell said with Covid-19, the key challenge for many countries, including Malawi, is the balance between immediate response—to save lives and livelihoods—and the need to protect future recovery based on prudent fiscal management.