Despite registering positive performance in the first half (H1) of the 2018/19 financial year, the downward revision in the development expenditure and grants remain a concern, economic commentators have said.
Institute of Chartered Accountants in Malawi (Icam) chief executive officer Francis Gondwe said in an interview yesterday the cuts could negatively deprive the masses of socio-economic projects meant to alleviate poverty.
He said: “From the statistics given, the mid-year budget performance is commendable bearing in mind stability of the currency, interest and inflation rates, increase in forex reserves and availability of forex in general.
“However, over-expenditure on some votes like Farm Input Subsidy Programme [Fisp], Malawi Defence Force and Malawi Police Service are areas of significant concern. This has proven not to be effective economically as input costs far outweigh the benefits to the economy.”
Gondwe said while budget performance may seem commendable, this may not be fully reflected in the livelihoods of the ordinary people who continue to face economic hardships.
Economics Association of Malawi (Ecama) executive director Maleka Thula said on Sunday the area of concern is where the development budget being reduced due to low absorption capacity on locally-financed projects.
“It is high time as a country we committed more domestic resources towards development as opposed to the current situation where the bulk of the development funds come from the donors.”
He, however, said the downward revision of the budget should be commended as failure to do so means government resorting to domestic borrowing, which crowds out the private sector.
Treasury figures show that development spending during the first half of the 2018/19 fiscal year underperformed by K73.3 billion with K21.7 billion emanating from the domestically-financed component and K51.7 billion from foreign financed component.
Donor-funded development expenditure amounted to K46.3 billion against a planned expenditure of K97.9 billion while locally-funded development expenditure at K50.4 billion under-performed against a target of K72.1 billion for the first six months of the financial year.
Minister of Finance, Economic Planning and Development Minister Goodall Gondwe told Parliament on Friday that underexpenditures on development projects was largely related to new projects, which require a large number of prior preparatory actions. n