Minister of Finance, Economic Planning and Development Goodall Gondwe has rewarded with extra allocations ministries, departments and agencies (MDAs) that overspent in the first half of the financial year in the Mid-Year Budget Review Statement presented on Friday.
Details in the draft Mid-Year Budget Review Statement tabled in the National Assembly show that the “bad-boys”, who include Malawi Police Service (MPS), Malawi Defence Force (MDF) and State Residences have received the increases whereas the Office of the Vice-President has had its allocation trimmed by K98 million in the proposal.
Reacting to the decision, Economics Association of Malawi (Ecama) said the move is counterproductive to principles of fiscal prudence as there would be no motivation for other MDAs to be prudent as they would know that Treasury would rescue them at mid-term.
But Gondwe told our sister newspaper, the Weekend Nation that the overexpenditure in MDF and Police were justified as the two institutions needed to buy new equipment for crowd control.
In the draft Mid-Year Budget Review Statement, MDF is allocated an additional K6.8 billion funding whereas Police gets K16.8 billion total.
According to the draft Mid-Year Budget Review Statement, MDF had spent K19 billion of its K21 billion annual budget for other recurrent transactions (ORT) by December 31 2018, halfway through the government financial year which ends on June 30.
On salaries and allowances (personal emoluments-PE), MDF spent K13 billion of its K20 billion allocation. These are the budget lines which have been increased substantially with K4.7 billion to PE and K2.1 billion to ORT.
In the Police allocation, PE budget has been increased by K4.4 billion from K24 billion to K28.5 billion whereas the ORT has moved from the approved K16.7 billion to K29.5 billion, a whopping K12.8 billion increase.
The other gainer is State Residences, which also overspent by K133 million. It has since been allocated a K300 million boost to spend in the second half if Parliament approves.
The Judiciary, which also overspent by K419 million, has had its budget increased by K604 million.
PE and ORT allocations for the Office of the President and Cabinet (OPC) have also gone up by K1 billion.
But, while some MDAs are enjoying substantial increases to their allocations, the same cannot be said of governance agencies, including Malawi Human Rights Commission whose ORT faces a K44 million reduction. The Office of the Ombudsman also faces a K63 million cut in ORT while the rest have remained static.
The Office of the Vice-President has also had its PE reduced by K98 million and ORT from K5.7 billion to K1.5 billion largely due to the removal of the Department of Disaster Management Affairs (Dodma) from the office to the Ministry of Homeland Security.
But in an interview on Mon
He said: “First, there should be justification on why they overspent. Was it sanctioned? But before that is answered, the MDAs are given more funding? There is definitely something going on.”
Kalilombe said this move has the potential to discourage fiscal prudence among those that kept a tight leash on expenditure in the same period.
The increases come at the expense of reductions to the development budget, in particular projects funded by government.
For the financial year 2018/19 which started on July 1, government allocated K139.4 billion for the development budget, but this allocation has been revised downwards by K27.5 billion.
Major victims of this cut are National Local Government Finance Committee (NLGFC), Ministry of Education, Science and Technology (MoEST) and Roads Fund Administration (RFA) which is responsible for financing road projects.
Gondwe had allocated K21.4 billion to MoEST towards development projects from the local purse, but, at mid-year, this has been trimmed to K12.9 billion.
In NLGFC, the locally-financed projects budget has been trimmed from K4 billion to K150 million.
NLGFC is the institution that is the custodian of funds for councils for the sectors of health, education and agriculture.
In the 2018/19 National Budget, Parliament approved a K4 billion allocation for rural development through councils, but only K150 million had been spent at mid-term necessitating a slash to K150 million.
Kalilombe observed that such a high concentration of funding allocations to ORT and PE at the expense of development would in the long run damage attempts by government to induce growth.
Others whose development budgets have gone down include Ministry of Foreign Affairs and International Cooperation with a K300 million cut from K1 billion; Ministry of Labour, Sports, Youth and Manpower Development has gone down by K900 million.
However, Ministry of Transport and Public Works will go to the bank smiling because its locally financed development budget will enjoy a K1.5 billion increase from K1.6 billion to K3.1 billion.
Gondwe said non-disbursement of K60 billion budgetary support from the World Bank had necessitated the downward revision of the budget by K25 billion.
But the minister said crucial sectors such as health would not be adversely affected by the revision. Figures show that Parliament approved a drug budget of K22.8 billion and at mid-year, central hospitals had spent K4.2 billion and district hospitals K7.2 billion. n