Economic commentators have criticised government as lacking strategic direction over fiscal policy inconsistencies which have seen the Executive reversing expenditure controls by curving in to pressures and through directives for extra allocations to various ministries, agencies and departments (MDAs).
The experts gave their views in response to The Nation Online enquiry on implications of recent directives by President Peter Mutharika, among others, for Treasury to release K1 billion ($1.4 million) to the University of Malawi (Unima) to meet the deficit created by a K50 000 ($68) reduction in tuition fees as well as an apparent U-turn to effect an across-the-board pay hike for civil servants and employees of the country’s five water boards.
Reacting to the developments coming after Parliament authorised government to spend about K1.3 trillion from July 1 2016 to June 30 2017, Gilbert Kachamba, head of economics department at Catholic University (CU) in Chiradzulu, said the trend was worrying.
Speaking in an interview yesterday, he said government should consult widely before making financial directives despite pressure to ensure transparency and accountability.
Kachamba said such inconsistencies have the potential to negatively affect other critical sectors whose allocations may end up being redirected elsewhere.
He said: “Government is supposed to spend in accordance with parliamentary approved budget. We are worried with these huge inconsistencies. We do not know where the Treasury will be getting the money to spend in respect of such directives. We are afraid this trend may put pressure on poor Malawians as government would want to collect more to cover up the gaps.”
On his part, Malawi Economic Justice Network (Mejn) executive director Dalitso Kubalasa said once passed, the budget becomes law and represents the competing needs as well as systematic interventions in the economy as deliberated by Parliament.
In this regard, he said, any perceived change to the budget should follow all statutes and provisions of the law.
Kubalasa asked government to ensure that everything is mirrored in line with the true spirit of the programme-based budgeting ideals.
He said: “Malawi has had numerous examples and cases where such prerogatives and manipulations [either economic or political] have ended up giving Malawians a raw deal, when looked at from a results-oriented point of view.”
Treasury spokesperson Nations Msowoya dismissed fears that the directives may interfere with the national budget, arguing that from time to time Treasury reviews the performance of various budget lines and votes to identify potential savings and that it is such savings that are re-allocated.
On how much, on average, Treasury saves over a given period, he said: “Our role as Treasury is to monitor budget execution on a daily basis. At the moment, we cannot quantify the savings in advance, but we will use the Mid-year Budget Review to formalise some of the changes that have been introduced.”
He said in implementation of the budget, it is not strange to find certain votes underperforming and not utilising all the funds allocated to them due to certain challenges.
Backing Msowoya, former minister of Finance Friday Jumbe said in budgeting there can be some changes and where need be, allocations can be moved from less important votes to more important ones.
He also defended the recent financial directives by the President, saying they are for the good of the nation.
Jumbe said the Minister of Finance, Economic Planning and Development is under obligation to present such changes to Parliament during Mid-year Budget Review and members of Parliament (MPs) will have a chance to scrutinise and understand all the changes.
But Budget and Finance Committee of Parliament chairperson Rhino Chiphiko said the constant policy reversals signal poor planning on the part of government.
“It is inevitable to have some adjustments in the budgets, but this is only the second month of the budget. This shows that government did not properly allocate resources. There were calls to increase funding on some of these votes they are trying to fire fight on, but they did not listen, what will become of budget at the end of the year if they continue operating like this?” he queried.
He feared the inconsistencies may blow the budget and put more pressure on the already struggling Malawi Revenue Authority (MRA), the main source of revenue for the budget, to collect taxes even as economic output assumptions have been revised downwards from 5.1 percent to around three percent.
Among others, late last month government backtracked on its earlier proposal to give a 15 percent pay hike to junior civil servants only and has since affected an across-the-board increment, pushing the wage bill up by K22 billion. The change followed an agreement between government and workers.
Later, through the Department of Statutory Corporations, government offered a 15 percent increment for junior officers in parastatals, backtracking on its earlier announcement of pay increase freeze for parastatals due to prevailing bad economic environment.
In the just-ended Budget Meeting of Parliament, government increased Constituency Development Fund (CDF) from K12 million to K18 million per constituency amid pressure from members of Parliament (MPs).
Ironically, the same government through Minister of Finance had earlier indicated there was no money for an increase in CDF allocation.