Implementing a zero-aid budget
Minister of Finance, Economic Planning and Development Goodall Gondwe on Tuesday this week presented the comprehensive 2014/15 national budget based on the concept of zero-aid budget (ZAB).
A budget outlines a government’s expenditure plans and how it intends to raise revenue in a given financial year. It is also used as a tool to influence some policy changes and variables, including new taxes, inflation and interest rates.
Essentially, a zero-aid budget was inevitable for Malawi in the wake of suspension of budget support by our major donors under the Common Approach to Budget Support (Cabs) banner. They withheld $150 million (over K60 billion) in budget support last November in protest over the plunder of public resources at Capital Hill through dubious payments in what has been christened Cashgate.
Put loosely, a zero-aid budget is a financial plan wholly funded by local resources.
The principle behind this budget is not new in Malawi. In 2011, for example, former president the late Bingu wa Mutharika announced that Malawi would adopt a zero-deficit budget (ZDB). That meant government would entirely finance its recurrent expenditure using locally generated resources, nothing from donors or cooperating partners.
Prior to that, donors were financing about 30 percent of our recurrent budget and 80 percent of the development budget of which the 20 percent is locally funded, mostly in kind.
Fast-forward to early 2014, immediate past president Joyce Banda’s administration, which abandoned Bingu’s ZDB, also planned a locally funded budget under the tag of no government budget support (GBS). During pre-budget consultations prior to the May 20 Tripartite Elections, the Ministry of Finance said the budget framework was premised on the basis that there will be no budget support from donors or development partners.
This time around, President Peter Mutharika on Sunday told a rally at Njamba Freedom Park in Blantyre that his Minister of Finance would present the budget based on the ZAB concept.
For a country that clocked 50 years of independence on July 6 this year, I feel locally financed budgets have been long overdue.
In fact, the danger with dependence on donors is that if they withhold their funds (based on their own opinions or wishes and interests), contributed by their taxpayers, then all our plans fall by the wayside. Remember, he who pays the piper calls the tune!
Therefore, it is refreshing to note that in recent years there have been steps towards a national budget financed by local resources, especially on the recurrent side. It is an indication of coming of age such that, as a nation, we are able to generate and manage our finances and not depend on taxpayers in “rich” countries to be paying salaries and other expenses in our public service.
However, my reservation has been the fact that we seem to be undertaking such steps out of frustration, mostly after donors have withheld their resources.
Despite this, however, I feel implementing a successful ZAB, ZDB or GBS is possible with some level of fiscal discipline and restructuring of some of our expenditure lines. Here, what comes to mind is the scenario where some top public officers have been replaced but are still drawing salaries from government coffers until they see off their contracts as well as the bloated number of principal secretaries pegged at over 65 against 20 ministries.
Besides, government should also strive to spend within its available resources. What is required is perfect planning, not the reactionary approach we seem to be obsessed with. We will need to move gradually from the current 40 percent of donor support to 30 percent, then 20 percent and eventually zero percent.
This is possible with political will and fiscal discipline, more so given the fact that about 30 percent of resources allocated in our previous budgets are stolen. Surely, if all loopholes are sealed, spending within our means is not asking for too much.
