- Sharply cuts money from public investments
- MPs demand list of ditched projects
Government has largely turned off infrastructure investments, especially in two sectors crucial to the economy—agriculture and transportation.
The decision—prompted by donors’ failure to meet their development budget targets and government’s inability to redirect meaningful resources from the recurrent account into capital spending—threatens efforts to improve people’s wellbeing.
According to the 2016/17 Financial Statement, development expenditure was projected at K318 billion.
Of this, roughly K283 billion (around 90 percent) was expected to come from donors while nearly K38 billion was to be locally generated.
But as at mid-year, donor disbursements to projects fell sharply short of expectations.
The budget envisaged that it would spend K140.5 billion on development by mid-year, but that only turned out to be around K88 billion, of which K76 billion came from donors and K12 billion was from local resources.
Finance, Economic Planning and Development Minister Goodall Gondwe has since calculated that donor aid commitment into the development budget would fall by at least 20 percent by the end of the current financial year in June.
But his move to up government’s contribution to the capital account by 10 percent appears too little too late to fill the yawning gap left by foreign financing.
And so there are casualties of capital expenditure slashes, including the agriculture sector that makes up 30 percent of the Malawi economy.
The agriculture sector has lost K23 billion meant for public sector projects as its capital budget has dropped from K115 billion to K92.4 billion.
Among the projects that were lined up in the sector included Aswap Support Project, Irrigation and Rural Water Supply and Sanitation Project, Agricultural Infrastructure Support Project and Shire River Basin Management Project.
Investment in irrigation farming was one of the strands in government’s four-pronged strategy for turning around the agriculture-dependent economy currently ravaged by climate change effects, especially drought and devastating floods.
The transport sector will nurse a K24 billion cut from donor-funded projects that government lined up in 2016/17 financial year.
Among them are completion of the Zomba-Jali-Kamwendo-Phalombe-Chitakale Road, Jenda-Edingeni Road and Lumbadzi-Dowa-Chezi Road.
Government also planned to buy modern airport equipment, upgrade Chileka and Mzuzu airports and start the ground work for the proposed new Mzuzu Airport. Most of these have now been shelved.
A full list of suspended projects was not available as we went to press yesterday, but during the Committee of Supply—the stage at which the House discusses the budget vote-by-vote—members of Parliament (MPs) demanded that Gondwe provide the full list.
But there was a silver lining as donor-funded projects for the education sector remained untouched at K19.7 billion while the health sector is expected to enjoy an estimated increase of K695 million in its capital account.
Some fiscal hawks in Parliament, including members of the Budget and Finance Committee of Parliament, were unhappy with the cuts to the capital account when the recurrent budget received increases to cater for the salary hikes civil servants demanded and to which Gondwe bent backwards to give after vowing not to.
In its analysis of the mid-term review, the Budget and Finance Committee concluded that the implication of high expenditure on the recurrent budget and depressed spending on the development account meant that Malawi’s budget was now a mere consumption one.
“The Malawi budget is indeed increasingly becoming a consumption budget. More importantly, following this review, spending on wages and salaries has now exceeded the development expenditure,” the report reads.
The committee’s concerns on the spiralling public sector wages echo what the World Bank has been warning of: personal emoluments for Malawi’s public sector are fast approaching unsustainable levels.
This could be especially worrisome in an economy that is barely generating wealth, with growth at less than three percent in 2016, for example.
Malawi Congress Party (MCP) spokesperson on Finance, Alexander Kusamba Dzonzi, observed that by increasing personal emoluments at the expense of development projects, government was creating an economy of entitlement.
He demanded that a list of the projects that have been suspended be brought to the House for MPs to appreciate.
“We want the mid-term review document to give a column of vital projects which have been removed because as it stands now, nothing is functioning. Is Capital Hill functioning? No; is development happening? No,” he said.
Kusamba Dzonzi added: “This government must realise that budgets are not just a matter of increasing salaries, but people must deliver. We seem not to care that developments are not being implemented, but we are only interested to pay people who are not working.”
He gave an example of the Judiciary vote whose K1.3 billion increase is meant to cater for the increased number of judges of the High Court and Supreme Court.
“What economic justification is there for the K1.3 billion increase when the Judiciary has not done half the work they were supposed to do? We can’t just give away money, there has to be service delivery,” he said.