The World Bank has advised Treasury to carefully manage increased expenditure pressures ahead of the fresh presidential election this year to avoid incurring a huge deficit.
The bank’s country manager Greg Toulmin said this in a written response on Monday ahead of the planned fresh presidential election in 150 days from February 3 when a five-judge panel of the High Court of Malawi sitting as the Constitutional Court nullified the May 21 2019 presidential election due to irregularities.
He said, already, achieving the budgeted fiscal deficit of K155.9 billion or 2.5 percent of gross domestic product (GDP) for the 2019/20 financial year will be a challenge; hence, the need to strengthen fiscal discipline.
Said Toulmin: “Government has regularly faced various unexpected shocks, which have impacted on fiscal policy.
“To prepare for such inevitable shocks, it is important to
strengthen fiscal discipline, particularly during budget formulation, in order to reduce debt and to help build up fiscal buffers.”
Malawi Electoral Commission’s estimated budget for the fresh presidential election is pegged at K43 billion.
In the 2019/20 National Budget, domestic revenue, which comprises tax and non-tax revenue, is projected to increase by 22 percent, with tax revenue at K1.369 trillion and K55.8 billion non-tax revenue.
Figures indicate that in the first five months of this fiscal year, Treasury has recorded a deficit of K132 billion, largely due to lower-than-expected tax revenue.
In an earlier interview, Minister of Finance, Economic Planning and Development Joseph Mwanamvekha said it is too early to outline funding for the election, but said Treasury will have to decide whether to cut expenditure, seek assistance from donors or borrow domestically.
He said: “We are yet to receive the actual cost of the elections from the commission, but looking at our resource envelope, we will have to either cut expenditure or seek donor assistance.
“But if this doesn’t work, the last option will be to borrow money [domestically] to finance the elections.”
Mwanamvekha said for now, it is too early to say which option will work best in the present scenario. Parliament’s Budget and Finance Committee chairperson Sosten Gwengwe said the court ruling presents an urgent priority, which must be financed by reviewing the current fiscal plan to free up some resources.