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IMF tips Malawi on public investment management

 

The International Monetary Fund (IMF)  says the Malawi Government needs to balance public investment against potential fiscal risks.

In its country report for Malawi released on Wednesday, IMF said public investment in Malawi has been volatile compared to neighbouring countries and that the number of public-private partnerships has also been small in recent years.

Cassim: There is unpredictability in
funding of capital projects

According to the report, project loans and grants accounted for more than 84 percent of total public investment in 2017, representing a significant increase from 2015 when only 64 percent of total public investment was externally-financed.

Over the last three years, project grants have averaged 54 percent of total externally-financed projects compared to 46 percent for project loans.

IMF said indicators of Malawi’s performance in public investment management are mixed.

On the positive side, IMF said performance is relatively strong in areas such as the country’s comprehensive national planning system, coordination between central and local government, the comprehensive public sector investment programme and well-enforced restrictions on moving budget funds from capital to recurrent spending.

Reads the report in part: “We have noted failure to apply cost-benefit analysis systematically to large projects along with significant gaps in the data published in the budget documents on capital investment costs and multi-year contracts.

“There is also unpredictability in the funding of capital projects and vulnerability to in-year budget cuts.”

University of Malawi’s Chancellor College macroeconomist Lucius Cassim said Malawi has good policies to spur investment, but implementation is a challenge.

“To some extent, we have proper guidelines to support public sector investment but from experience, the problem is that we do not put those polices into practice. Other than this, Malawi Government invests in sectors that are less important largely because of political reasons living out key areas,” he said.

Commenting on the IMF assessment, Treasury Secretary Ben Botolo said government will factor in the recommendations by IMF.

He said government continues to prioritise public investment to spur economic growth and support private sector in doing business.

“For the past four years, our priority has been to stabilise the economy to ensure that we maintain the same. But the whole idea is that while all this is happening, the economy should be growing.

“We know that it is infrastructure other than production of goods and services that will help the economy grow. We thus take the suggestions to improve this sector seriously,” he said.

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