The International Monetary Fund (IMF) has advised government to balance expenditure on recurrent items with development to ensure that economic development trickles down to the ordinary Malawian.
The IMF mission made the observation at the completion of a two-week final review of the ninth Extended Credit Facility (ECF) programme in Lilongwe yesterday.
Following the completion of the review, the mission will make a request to the IMF Executive Board in June this year to complete the ninth review and make the last disbursement under the programme.
Mission chief Oral Williams said government had been prudent, but still needed to contain current expenditures and continue improving revenue collection.
He said: “It would be more ideal if we can have more spending for development and less on recurrent. If more money goes to wages and farm input subsidy, then we will have less for repairing school roofs in the rainy season.”
Responding to a question on how the government can balance recurrent and development expenditure, Williams said since part of the development budget is foreign financed, it should be consisted with domestically financed component.
He said the balance would ensure that in times of revenue shortfalls, the domestically financed projects are safeguarded.
The 2016/17 National Budget which expires on June 30 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.
While lauding the government’s revenue mobilisation, Williams said challenges remained on the spending side.
“There is a need to double the generation capacity of electricity which is being done now with the Millennium Challenge Corporation; ease of doing business is critical to economic growth as well as access to credit, good feeder roads into rural areas which is also good for reducing inequality,” he said.
The mission also underscored the need to clear arrears which amounted to K157 billion in 2014 and prevention of a recurrence by restraining levels of domestic debt.
However, the IMF mission chief congratulated the government for measures to lower inflation, which stood at 16 percent in February according to the National Statistical Office (NSO), as well as non-food inflation which he said was a signal that the public had confidence in the economic recovery.
The mission also discussed with government measures to ensure progress in public finance management reforms are sustained where notable improvement has been noted in bank reconciliations.
In an interview later, a delighted Minister of Finance, Economic Planning and Development Goodall Gondwe said he was happy that the IMF agreed with his assessment that the economy was on the rebound.
However, he said the goal of government remained finding enough domestic resources to cover recurrent expenditure.
Said Gondwe: “We must be in a position now to increase development expenditure, particularly in the priority projects such as agriculture so we can attempt to counter the effects of bad weather through irrigation projects and insulate ourselves from drought.”
However, Gondwe said less disbursements from donors towards the development budget and spending more from the domestically-financed development budget meant less borrowing charges.