Time for tough choices

By the time you read this, Finance, Economic Planning and Development Minister Goodall Gondwe would have already tabled before Parliament the Mid-year Budget Review report yesterday.

Whatever he said in that speech could have far reaching consequences on the country’s economic growth, poverty levels and its macro-fiscal environment.

Gondwe entered that august House bearing in mind that he has been operating under a very tight macroeconomic and fiscal framework.

And without the discretion that general budgetary support (GBS) used to provide when government was receiving it from development partners, Gondwe and his team at Treasury have very little fiscal space to do any creative book keeping.

In fact, I want to believe that the Democratic Progressive Party (DPP) administration will not be foolish enough to shove through new policy and strategic initiatives that will only hurt the fiscus more.

Indeed, some of the politically driven initiatives such as the Cement and Malata Housing initiative as well as the Farm Input Subsidy Programme (Fisp) should be drastically scaled back. Those resources, mostly applied inefficiently, can do a better job elsewhere.

What surprises me is why the folks at Treasury-which houses some of the best brains this country has ever seen-did not see this fiscal contraction coming and kept coming up with budgets that were larger than the last.

I mean, Cashgate should have made it clear that government would have a difficult fiscal position down the road. It should also have been clear after Cashgate that donors, who had frozen aid, would not be returning in the short to medium term.

Most importantly, it should have dawned on our economists at Treasury that the budgetary support windfall in 2012/13 was temporary not just because of donor excitement with Joyce Banda as the first female president in the region and that she naively embraced wholesale free market policies; but also because most of the GBS was a carryover from the previous year that donors had withheld from her arrogant, dictatorial and wasteful predecessor, the late president Bingu wa Mutharika.

But maybe it was not that these folks did not see it coming. I suspect they foresaw this, but it could be that politicians could not stomach drastic fiscal adjustments and decided to kick the cane down the road.

In fact, my research shows that government should have reduced overall expenditure by 3.5 percent of gross domestic product (GDP) between 2013 and 2016.

But authorities never got round to doing it. Now that the economy is almost drowning, will they do it?

They must because they have no choice. To achieve fiscal sustainability, the criticality of strengthening revenue collection while containing expenditure growth cannot be overemphasized.

Among areas that could help bring fiscal balance, I propose the following, apart from slashing or scraping Fisp and President Peter Mutharika’s housing misadventure:

• Freeze the wage bill: During the days of plenty-when there was an overflow of direct budget support and high domestic revenue mobilization, government entertained silly salary increase demands from the public sector. The result has been a public sector wage bill that cannot be sustained. That should be frozen for the next three years.
• Reduce travel costs: This business of dragging the President to open this project, ground break that little anti-hill and launch this should be limited to the barest of minimums. It worsens expenditure.
• Exorcise government of ghosts: Even if it means summoning all the witchdoctors and sangomas from all corners of Malawi, government should speed up the civil service head count so that we get rid of ghost workers who are sucking billions out of Capital Hill.
• Cut welfare: There is also need to rationaliSe fiscal transfers and subsidies. There is too much welfare in our country.
• Strengthen PFM: The public finance management system remains very susceptible to fraud and corruption.

As the administration and Parliament consider these, they must also critically look at the other problems that complicate Malawi’s fiscal management. I can only cite a few, including the parasitic nature of our parastatals on government; expensive interest payments that emanating from huge, mostly egoistic spending appetites; commodity price fluctuations, floods and droughts.What I have written here is not exhaustive, but I hope that it can provide the much needed contextual framework in which our legislators can objectively and clearly discuss the Mid-year Budget Review using cold, hard facts.