Malawi Government has undertaken to pay K50 billion (about $131m) in the 2014/15 fiscal year as part of the K158 billion (about $415m) unpaid bills or arrears it owes the private sector, Minister of Finance, Economic Planning and Development Goodal Gondwe has said.
Presenting the 2014/15 budget amounting to K742.8 billion (about $1.9bn) at Parliament in Lilongwe on Tuesday, Gondwe said government will first review each claim and will commit to a schedule of payments.
“For the 2014/15 financial year, it has been decided that a payment of K50 billion will be made and that the balance will be paid over a period to be agreed with the claimants. Repayment of arrears has already started and will continue more systematically on the approval of this budget,” he said.
The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) president Newton Kambala last week at the opening of the 11th National Agriculture Fair in Blantyre wondered whether government’s call for the private to grow the economy were genuine when it is owed billions of kwacha in arrears.
He said this in the presence of President Peter Mutharika who officially opened the fair at Chichiri Trade Fair grounds in Blantyre.
“In all your speeches, you rightly highlight the importance of private sector in growing the economy because it is the sector that generates economic value. We are aware that government owes the private sector over K173 billion in arrears for genuinely supplying goods and services,” said Kambala.
He wondered where investment from the private sector touted as the engine of economic growth, will come from when it is owed billions of kwacha by government.
In the wake of the Cashgate—the systematic looting of public funds by government and private sector operatives amounting to K13 billion—the country’s bilateral donors withheld budget support which constituted about 16 percent of the 2013/14 recurrent budget and 11 percent of the total budget.
Gondwe said as a consequence, the ability of the government to function was crippled and unbudgeted domestic borrowing of K121 billion was incurred and the stock of domestic debt as at May 31 2014 climbed to K340 billion.
“Over and above, this large domestic borrowing was the accumulation of unpaid bills (arrears) that amounted to K158 billion as at end of financial year 2013/14. Again, as a consequence of these events, and loss of funds from the ‘Cashgate’ scandal, the government drastically reduced budget allocations to ministries and a number of them became dysfunctional,” he said.
Looking into the future, Gondwe said government will make the restoration of fiscal discipline a cornerstone of its administration in which no controlling officer will be expected to accumulate arrears without suffering the punitive consequences of the Public Finance Management Act.