Expect budget cuts—Goodall
Minister of Finance, Economic Planning and Development Goodall Gondwe yesterday hinted that Malawians should expect adjustments in the 2018/19 National Budget in view of continued delay by some donors to honour their budget support commitments.
In an interview yesterday, the minister also described the budget support delay as one key ‘external negative shock’ that has posed a threat to the smooth implementation of the K1.3 trillion national budget.
Gondwe, who is set to present a Mid-Year Budget Review Statement in Parliament this afternoon, also said Treasury has no other option but to cut some budget expenditure lines in light of the strained fiscal space.
He said: “We expected that we will receive K60 billion from the World Bank, but that has been delayed which means we will have to reduce some expenditure. As to exact details, wait until I say it tomorrow [today].”
Gondwe declined to outline specific measures he will undertake to strike a balance between domestic revenue for Treasury against the planned expenditure in the wake of continued uncertainty over budget support from the World Bank and the European Union (EU).
When he presented the 2018/19 budget statement in May last year, Gondwe said with optimism that revenues and grants were projected at K1.3 trillion and that grants were programmed to reach K209 billion of which K60 billion was expected to come from the World Bank in form of budget support.
But nine months down the line, it is still hazy as to whether the two institutions would honour their respective commitments with only two months before the 2018/19 budget expires.
But commenting on the same, Economics Association of Malawi (Ecama) executive director Maleka Thula yesterday warned that the budget cuts as envisaged by Gondwe would have serious multiplier effects in the economy more especially if the minister attempts to slash the development budget.
The 2018/19 budget projects a real gross domestic product (GDP) growth rate of 4.1 percent in 2018 and 6.0 percent in 2019, coupled with an average inflation of around seven percent.
While emphasising that the key risk to the 2018/19 budget remains the delay by the development partners to release budget support to Malawi, Thula said it is most likely that the situation would widen the 2018/19 budget deficit, which Gondwe estimated at K242 billion and is 4.5 percent of GDP.
But it is likely that this planned deficit would further yawn as government expenditure is already under pressure on account of expected expenditure towards the May 21 2019 Tripartite Elections.
University of Malawi Chancellor College economics professor Ben Kaluwa said his critical area of concern when it comes to budget implementation is the rising domestic borrowing by Treasury which is not sustainable in the long-term. n
