Economics Association of Malawi (Ecama) says there is likelihood that projected low revenue collection in the 2020/21 fiscal year could result in further cuts in development expenditure.
Ecama president Lauryn Nyasulu said in an interview on Monday that development expenditure is projected at 25.6 percent of the 2020/21 K2.02 trillion fiscal plan, but the Covid-19 pandemic will subdue economic activities in 2021 with the country’s limited resources financing consumption.
She said: “With already low allocation towards development expenditure, there is a huge concern that in the event of low revenue realisation, which is more probable, development budget is more likely to suffer expenditure cuts.
“This means that the country’s economic growth will be more stifled as the country’s limited resources will continue to finance consumption.”
In the 2020/21 fiscal plan, Treasury projects development expenditure at K517.7 billion or 7.2 percent of the gross domestic product (GDP) and 25.6 percent of the 2020/21 trillion budget.
In the current financial year, development expenditure is projected to close at K506.8 billion or 8.1 percent of GDP and 26.5 percent of K1.911 trillion of total budget which will be financed using K173.2 billion from domestic resources and K332.5 billion of foreign resources.
Since 2015/16 fiscal year, Malawi’s development expenditure has averaged 5.2 percent of GDP, according to the World Bank.
This is, however, shy of the 30 percent of GDP recommended for countries to meet United Nations Sustainable Development Goals (SDGs).
Minister of Finance, Economic Planning and Development Joseph Mwanamvekha admitted in the 2020/21 Budget Statement presented on Friday that government will face further challenges in its revenue mobilisation efforts due to the Covid-19 pandemic and the political impasse.
He said this will make it much more difficult to finance the budget during the 2020/2021 fiscal year.
“Therefore, budget funding will be dependent upon availability of resources. Should it become necessary, cuts to the recurrent and development budget lines will be inevitable,” said Mwanamvekha.
He said the resource allocations in the 2020/21 fiscal plan are in line with priorities the National Development Plan and the Malawi Growth and Development Strategy (MGDS) III.