Goodall’s last budget headache

As Finance Minister Goodall Gondwe prepares his last mid-year budget review report, his head must be throbbing  as  some ministries, departments and agencies (MDAs) have virtually exhausted their budgets six months before the financial year ends in June.

Weekend Nation’s review of public spending—based on Treasury reports—shows that the Malawi Defence Force, State House and Malawi Police Service spent more than 80 percent of their funding by November 2018.

 Such overexpenditure forces Gondwe to find more money to fund them until June 2019.

But the lack of frugality, to be confirmed when Parliament meets for Mid-Year Budget Review next month—makes a mockery of government’s talk on fiscal prudence and flouts Gondwe’s measures meant to curb over-expenditure. 

On Monday, Gondwe insisted that he would still rein in on over expenditure to keep the national budget in check, saying that is why government has in place strong policies to contain spending.

“Government is cautiously working towards ensuring that it manages the economy well and [we] will spend as the budget allows us to spend,” he said without elaborating on how he will punish offenders.

But if he sticks to his word, State House will be in financial trouble having blown 82 percent of its 2018/19 annual budget in less than five months.

Figures compiled by the Ministry of Finance, Economic Planning and Development show that by November 2018 State House had already spent 82 percent of its K6.9 billion budget for the 2018/19 fiscal year.

The Monthly Vote-Wise Expenditure report for November 2018, posted on the ministry’s website, shows that in this  financial year, the State House has spent K5.6 billion mostly on goods and services.

The report also shows that as at November 2018, the defence force had already spent 68 percent of its K2.3 billion budget. Likewise, the police had spent 84 percent of its K41 billion allocation and the National Statistical Office (NSO), had spent 94 percent of its K7.1 billion annual budget for the same period.

NSO commissioner of statistics Mercy Kanyuka said the bulk of their budget was for the population census, hence, whatever is remaining from the budget allocation is for normal activities stressing the remaining money will take them trough the next financial year.

The Judiciary at 40 percent, National Assembly (43 percent) and Public Service Commission (39 percent) were within spending thresholds.

But local economic think tanks, the Malawi Economic Justice Network (Mejn) and Economists Association of Malawi (Ecama) have   bemoaned the growing over-expenditure trend, saying it is likely to affect other budget lines. 

Mejn acting executive director June Kambalametore said such excess expenditure, could result in the various entities not having enough resources to take them through the rest of the financial year.

She said this could mean that come February, when Parliament will meet for the mid-year review, the Minister of Finance will present a supplementary budget which may see   budgets for the wasteful sectors being revised upwards.

“In order to satisfy these budget revisions, some sectors will be affected as there will be reallocation of resources within the various sectors. Additional spending could also be offset by increasing taxes so that more revenue is collected to satisfy the additional spending,” Kambalametore said.

On his part, Ecama president Chikumbutso Kalilombe urged government to ensure sanctions against over-expenditure are applicable across the board.

He said: “The departments that have exhausted their budgets, including State House, will need to keep spending at same levels to sustain months to come and in normal circumstances we would have said they face a catastrophe.

“We know most likely scenario is that the burden will be passed on to the taxpayer as a government borrowing or by taking off funds from other departments who might have been more prudent.”

Donor warnings

The over expenditure at State House, the defense force and the police come amid fears by monetary authorities and economic think-tanks that  President  Peter Mutharika’s government may lose its economic gains due to excess spending ahead of the elections.

So far, the 2018/19 K1.5 trillion government budget has been stretched following the withdrawal of World Bank’s K60 billion direct budget support.

In its 2019 flagship report for Africa, African Development Bank (AfDB) also warned that the elections this year are expected to increase pressure on fiscal spending as the current administration strengthens efforts to win re-election hence maintaining financial sector stability should be a key priority.

Similarly, International Monetary Fund (IMF) country representative Jack Ree told The Nation last month that fiscal authority needed to maintain momentum in safeguarding and strengthening gains in the economy ahead of the elections.

 “The elections have now come really close. And election cycles in the past tended to prompt waves of inflation cycles. So the real battle is ahead, and not behind, us,” he said.

Deficits, more deficits

Despite Gondwe’s assurances on tight spending, available figures from the central bank show that in the five month period to November 2018, Treasury has posted three deficits and two surpluses.

The figures show at the start of this financial year in July, Treasury posted a K13.5 billion surplus, a turnaround from deficits recorded in January. This was, however, followed by a deficit in August at K45.5 billion, before returning to a surplus of K13.8 billion in September.

In October government posted a K27.6 billion deficit before overspending K54.5 billion in November against K92.7 billion revenue.

On average, the figures translate to a deficit of 41 percent in the three months, a development that puts a dent on the budget which is likely to be filled with tax revenue.

Gondwe said  Treasury understands the consequences  of overspending ahead of an election and, as such, the authorities are  working to ensure that they spend within the budget.

He said: “By not keeping up to the budget, regardless of who wins the elections, he will inherit a difficult economy as such government is cautiously working towards ensuring that it manages the economy well.

“Indeed a lot of people think that our expenditure is going to be higher than the budget and are pointing to a number of countries that always do that. But as far as we are concerned, our experience has been that we have kept our budget even in an election year.  We did that in 2009 and without Cashgate we could have done it in 2014. We are thus quite certain that we will keep to the budget this time around.” 

 Control measures

Recently, government unveiled expenditure control measures, including limiting use pool vehicles for ministries or departments to three; buying of stationery and drugs from Central Government Stores and Central Medical Stores Trust, respectively; and ensuring that all purchases are accompanied by a Local Purchase Order signed by a senior officer.

The measures, according to Gondwe are aimed at cutting over 30 percent of government spending in the medium-term.

But over the year’s State Residences have emerged as a problem child on spending.

In 2017, State House was also fingered among seven MDAs that collectively overspent their allocations by K23.1 billion in the 2016/17 financial year.

When asked how State House was going to manage the situation, presidential press secretary Mgeme Kalilani yesterday said he needed to check if the acclaimed expenditure level is correct. n