Efforts to improve investments in critical social sectors could spell doom if grants from development partners continue to fall, an economic analyst has said.
The observation follows Business News analysis of the projections and outturns of grants in five consecutive financial years, which indicate a continued declining trend.
In an interview on Tuesday, Catholic University of Malawi dean of social sciences Gilbert Kachamba said with overreliance on grants, the country stands to be negatively affected as spending on key services is also disrupted.
He said: “The decline in grants will have negative impacts on the welfare of Malawians as we are aware that we rely more on grants and other support from international development partners.
“For example, if we look at the health sector expenditure, almost 35 percent of what we are spending comes from development partners. So, it is such kind of people who will be affected.”
Treasury figures show that in the 2017/18 fiscal year, grants amounted to K70.2 billion. Grants underperformed by K38.8 billion compared to the end-year revised figure of K108.9 billion.
In 2018/19 fiscal year, grants were projected at K197.1 billion, but at mid-year, the estimates were revised downwards to K137.1 billion. At year end, a total of K115.1 billion was received from international organisations against an expected K110.5 billion, creating a K5 billion gap.
In the current fiscal year, government is projected to receive K150 billion— K133 billion in 2020/21 financial year and K113 billion in the following financial year.
In the past, Treasury included pledges from donors in the budget before conditionalities for disbursement were met.
However, since 2013/14 financial year, donor support to Malawi is increasingly off-budget, following a huge public finance management scandal discovered in 2013 dubbed Cashgate in which K24 billion could not be accounted for.
But Malawi has not done well in corruption fight and has again slipped on the 2019 Transparency International (TI) Corruption Perception Index (CPI), which measures perceived levels of public sector corruption, after scoring 31 points to move from position 120 in 2018 to 123 in 2019.
Malawi Confederation of Chambers of Commerce and Industry chief executive officer Chancellor Kaferapanjira said in an interview that grants are likely to continue declining as some development partners will only consider resuming support if there is progress in critical areas such as curbing corruption and maintaining macroeconomic stability.