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Next budget’s major threat: Electricity

 

As Minister of Finance, Economic Planning and Development Goodall Gondwe prepares the 2017/18 National Budget, what will be the single biggest issue that will have a major bearing on the fiscal blue-print’s planning and execution?

This question is critical because the pressing issue mostly becomes the nerve centre around which the budget is built.

In crafting the 2014/15 budget, Gondwe had Cashgate in mind: A group of civil servants and private sector players had just siphoned out around K24 billion in the preceding budget and, resultantly, more donors had iced budgetary support.

The country later learnt that in fact, up to K236 billion may have been lost in Cashgate style theft in the five years up to December 2014.

Related to Cashgate was that government owed the private sector at least K155 billion in arrears and sat on a domestic debt of roughly K200 billion.

Thus, budget preparation was dominated by the questions of how to cover the Cashgate gap; what the budget should do to win back taxpayers’ and donors’ confidence and how to clear the arrears as well as reduce the public debt.

Two years later—2015/16 and 2016/17—budget preparation had to contend with maize shortages.

In the 2015/16 season, agricultural output dropped by 27 percent before dipping further by 30 percent the following season, according to estimates from the Ministry of Agriculture, Irrigation and Water Development.

Maize output, in particular, dropped by 12.4 percent relative to the output of the previous season estimated at 2.4 million metric tonnes.

Thus, in the current fiscal year, the budget grappled with an estimated maize shortage of about 1.2 million metric tonnes, which was not only a human tragedy, but also a macroeconomic one given food’s dominance in the consumer price index.

And it was a fiscal catastrophe.

To fill the shortage and save an estimated 6.5 million people from starving, the country needed at least $390 million (K292 billion).

That amount was almost 25 percent of the 2016/17 budget. Government could not afford this amount; only allocating K35.5 billion for buying food and begged the international community to fork out the rest.

This year, however, crop output is expected to climb—with maize estimated at 36 percent more than last year—to 3.2 million metric tonnes, which would lessen food pressures on the budget.

And, of course, there is some sort of silence in Cashgate land although fraud in public finances cannot be completely ruled out as there have been pockets of reports showing breaches in the Integrated Finance Management System (Ifmis).

This time, it is energy. So, what is the single biggest issue that should give Gondwe and his team a headache as they prepare for the next budget?

Electricity: That is the consensus from economists Business Review has talked to.

Even a number of non-economists, including ordinary consumers, say the 2017/18 national budget should be built around energy sufficiency, especially electricity. n

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