State House has blown its 2012/13 annual budget less than five months into the financial year even as priority sectors such as health struggle for funding.
We understand that by mid-November 2012, State House had spent K2.6 billion (about $7.9 million)—K800 million (about $2.4 million) more than its K1.8 billion annual allocation for the financial year ending June 2013.
Three well-placed sources—two from the Ministry of Finance and one from the National Audit Office (NAO)—independently corroborated this information last week and this week.
One of the Treasury sources said: “It is true that the annual allocation for State Residences has been exhausted—they have spent K2.6 billion.
Because of this over-expenditure, the sources said, Treasury is under pressure to find more money to fund State House until June 2013. This means that the vote’s above budget spending may only get worse.
“The budget division is under pressure to provide more resources. But I cannot give you any specific details because we have been strictly warned against leaking this to the media.”
The other source, a NAO auditor who also corroborated the information, wondered how so much money could be spent in so little time.
“I think people who are calling for a slow down on presidential travels are justified because if the budget can be exhausted in five months, how much will be spent by the end of the year if the trend is not reversed? What are our priorities?” wondered the source.
The latest Ministry of Finance quarterly budget performance report shows that government spent roughly three times more than what was approved as the travel budget for the period covering July-October 2012.
The report, posted on the ministry’s website, says its expenditure analysis was done by comparing expenditures in the first quarter of the 2011/12 fiscal year against those of this financial year because the figures had not changed in the 2012/13 fiscal year.
The report shows that in the last quarter, internal travel budget was overspent by 82 percent; external travel jumped 262 percent whereas motor vehicle running expenses leaped 115 percent.
According to the report, government spent K2.3 billion ($6.8 million) on internal travel in the first quarter of 2012/13 fiscal year against the planned K1.24 billion ($3.6 million), which is almost double the budget.
External travel budget jumped from a targeted K216 million ($635 000) to K782 million ($2.3 million), thrice the targeted amount whereas motor vehicle maintenance costs moved from K641 million ($218 000) to K1.4 billion ($4.1 million), twice the quartely budget.
Clearly, even if the devaluation of the kwacha and the rising inflation were factored in, the travel budget remains higher than planned when converted into US dollars, which is the store of value and, therefore, roughly represents costs in real terms.
“Considering that these are largely internal travel allowances, it reflects the adjustments that were done on subsistence allowances in government. But also it could be a reflection of increased travel activities in this financial year as compared to same period last year,” it says.
This over-expenditure—set to be confirmed during the mid-year budget review meeting of Parliament scheduled for early 2013 when Finance Minister Dr. Ken Lipenga is expected to report back to the House—could be a mockery to the administration’s austerity talk and the few measures announced last week to curb spending.
It also raises questions of where the administration’s priorities lie, given how key social sectors—health and education, for example—are not being adequately funded in the name of austerity that only seems to be applied selectively.
Currently, the country’s public colleges such as Chancellor College, College of Medicine and those under the Christian Health Association of Malawi (Cham) are closing prematurely due to lack of government subsidies. Medical equipment and drugs are also in short supply nationwide yet, noted observers, so much money is being spent on non-productive areas. Government is also struggling to pay civil servants their salaries, with The Nation disclosing this week that more than half of them have not been paid December salaries.
In an e-mailed response to our questionnaire last week, the Ministry of Finance neither denied nor confirmed that State Residences have not only exhausted the 2012/13 allocation but also overspent the vote even before the financial year ends.
When asked how Treasury was managing the situation, the ministry’s spokesperson Nations Msowoya said it was difficult to comment on the performance of an individual vote, including that of State Residence.
“The Ministry of Finance is currently reviewing government budget performance for the last six months. This process is at an advanced stage. As required by the Public Finance Management Act of 2003, the Minister of Finance is required to report all government expenditure to the National Assembly at mid-year and at the end of the financial year,” he said.
Added Msowoya: “The mid-year budget review, which will be presented to Parliament, will give a comprehensive picture on government expenditure vote by vote. During that time, if it emerges that certain votes have overspent, government will seek appropriate Parliament approval.”
Presidential press secretary Steven Nhlane also said the issue of State Residences’ national budget allocation and other votes would be addressed by the Minister of Finance during the mid-year budget review.
Malawi Economic Justice Network (Mejn) executive director Dalitso Kubalasa said such excess expenditure, including that of State House, were likely to affect other budget lines to cover them up.
“The irony and quite an unfortunate thing is that, because of such perhaps needless, inadvertent and inefficient excesses, some other votes will now have to give off through budget cuts. Such a huge over-expenditure is probably at the expense of service delivery, either for any of the critical social sectors of education or health affecting women and children’s livelihoods, or the productive sector of agriculture,” said Kubalasa.
He said considering opportunity cost, the worthiness of the expenditure was questionable when considered in light of the tough times of austerity the country was supposed to endure across the board.
Consumers Association of Malawi (Cama) executive director John Kapito, who has called for nation-wide protests against the rising cost of living and what he calls poor economic management, said in an interview last week that it was not surprising that State Residences budget was depleted.
“This current abuse of resources has demonstrated that what the President says is totally different from what she does. She keeps on urging Malawians to go through the pains of the austerity measures but look at how she has behaved herself. If her office cannot be prudent, what is happening in the other public offices?” he wondered.
After months of defiance, the President appears to have listened to the voices as evidenced by the Office of the President and Cabinet’s (OPC) last week announcement of new spending control measures that largely involved curtailing travel costs.
Government unveiled nine expenditure control measures, including suspension of all government-funded foreign trips and procurement of capital assets until the end of the financial year, according to a circular signed by Chief Secretary to government Bright Msaka.
Other measures include limiting pool vehicles for ministries or departments to three while others remain parked, buying of stationery and drugs from Central Government Stores and Central Medical Stores Trust respectively and that all purchases should be accompanied by a Local Purchase Order signed by a senior officer.
Ministerial delegation on external trips that are essential has also been limited to three, including the minister, while OPC say all tickets that are bought by government funds have to be purchased straight from airliners and not through travel agents.
In addition, on Thursday this week, Information and Civic Education Minister Moses Kunkuyu also announced that President Joyce Banda has trimmed the size of her convoy from around 30 to 12 and announced that government will also sell expensive ministerial vehicles in favour of less costly ones.