Minister of Finance, Economic Planning and Development Goodall Gondwe has warned that government’s decision to allocate funds to the maize seed component of the Farm Input Subsidy Programme (Fisp) will have effects on the implementation of activities in the 2015/16 National Budget.
Government was forced to fund the seed component of Fisp after donors declined to contribute following unauthorised spending of $5.2 million (about K3 billion) for the 2015/16 growing season.
Gondwe told The Nation in an interview on Tuesday that President Peter Mutharika had asked him to find resources in the budget because 1.5 million farmers could not go without seed for Fisp.
However, the decision does not bode well for the implementation and management of the budget at a time the International Monetary Fund (IMF) has declared the programme with Malawi off-track and asked government to revise its budget.
Gondwe said donors walked away from funding maize seed which they have been doing since Fisp was introduced in 2005.
He said: “We promised that we were going to do it ourselves because they promised us that they would resume budgetary support, particularly the World Bank as well as the EU [European Union] an amount that would be about K50 billion. We thought we were going to use that on maize seed.”
But now that donors have refused to fund the component, and at the same time have not given government budgetary support, Gondwe was asked to find some resources somewhere to help the farmers obtain maize seed.
“In line with revision of budget that we are doing, we have found that we can use, not K14.5 billion, but K9 billion, which we can use when subsidising maize seed for the smallholder farmers,” the minister said.
But Gondwe would not say which specific sectoral allocations would be affected because the exercise of identifying funds is still underway.
He added that to be in line with IMF targets, government was in the process of revising the budget and it is in that process that the K9 billion for seed will be identified.
Gondwe will have to inform Parliament during the Mid-term Budget Review on how he has revised the budget and which areas have suffered six months into financial year.
Government had earlier allocated K2 billion for legumes under Fisp, expecting that donors would buy maize seed.
But chairperson of the donor coordinating committee on agriculture, Nikolas Bosscher, told The Nation recently that donors would not fund the seed subsidy because government had used $5.2 million for the 2015/16 financial year against their advice.
At a press briefing held yesterday by several ministers to respond to criticism on the economy and governance, Gondwe said Malawians should expect tough times ahead as government would reprioritise budget activities after noting that donors would not be coming in soon.
Donors remain unconvinced of the government macroeconomic measures and tightening public finance management in the wake of Cashgate that is now suspected to have siphoned at least K577 billion in the five years up to December 2015, according to a PricewaterhouseCoopers preliminary data analysis.
Reacting to the decision to revise the budget, economic governance commentator Dalitso Kubalasa said it was unfortunate that back-and-forth type of planning was still happening this year.
However, he defended the inclusion of the seed component in Fisp, saying it was an important element of subsidy investments.
But Budget and Finance Committee of Parliament chairperson Rhino Chiphiko said Gondwe would have to explain to Parliament how and why the allocations approved by Parliament have undergone drastic changes.
“In the past, we have always been taken by surprise because we are not involved in the revision of the budget. By the time Parliament meets to review the mid-term budget, it will be too late,” he said.
Although government is looking for K9 billion to bail out farmers, they will be asked to contribute K1 500 for a three kilogramme (kg) bag of maize seed apart from K3 500 for a bag of NPK and K3 500 for a bag of Urea.