The International Monetary Fund (IMF) says it is still discussing with fiscal authorities on the target of primary balance—fiscal balance excluding interest payments—missed in the first half of the 2018/19 financial year.
IMF resident representative Jack Ree said in an interview yesterday that the discussions are focusing on corrective measures on the unmet target of the three-year $112 million (about K82 billion) Extended Credit Facility (ECF) programme.
He said: “The performance under the Extended Credit Facility programme has been good with all but one of the quantitative macroeconomic targets met.
“However, the target on the primary balance was missed largely due to front-loading of budgeted inflation expenditures and increases in spending to hold elections.”
Minister of Finance, Economic Planning and Development Goodall Gondwe earlier said most of the reported cases of over expenditure were related to the May 21 Tripartite Elections.
Ministries, departments and agencies (MDAs) which overspent include Malawi Police Service and Malawi Defence Force (MDF).
In a statement issued to mark the end of an IMF mission visit in March, IMF mission chief for Malawi Pritha Mitra said that two structural benchmarks were completed on time and the rest were met with a short delay.
She said the delay was partly due to capacity constraints in automating public finance management, which are being addressed.
“Looking ahead, fiscal policy should continue to focus on actions to ensure fiscal sustainability. To this end, fiscal consolidation should be accelerated in the upcoming fiscal year,” said Mitra.
Nonetheless, she commended monetary policy for focusing on maintaining single-digit inflation.
Economics Association of Malawi (Ecama) president Chikumbutso Kalilombe in an interview yesterday urged fiscal authorities to ensure that they contain budget overexpenditure, which could affect macroeconomic balance.
In March last year, the global lender approved the ECF with an advice to fiscal and monetary authorities to contain budget deficits, inflation rise and safeguarding and building on gains in public finance management reforms.