Tread carefully on demands for allocation hikes

Finance, Economic Planning and Development Minister Goodall Gondwe must not give in to the pressure for more funding to ministries, departments and agencies (MDAs). The demand for more allocations in the 2015/16 National Budget is so unprecedented that you wonder whether these government officials think every problem—including their own inefficiencies and mismanagement—can be cured by throwing more money at them.

In fact, most of the funding problems dogging the MDAs are self-inflicted—controlling officers allowed billions of kwachas to be siphoned out of their institutions through the K92 billion and K24 billion Cashgates as well as other fraudulent activities.

Some of them, like the Ministry of Agriculture and Food Security, squandered their money by giving each other hefty fake allowances—to the extent that some officers got allowances for 1000 days in a year that has 365 days.

Then there is the matter of ghost workers who have flooded MDAs and defrauding government of huge amounts of money under the watch of controlling officers who control nothing but their own pockets.

What is even more worrying is that members of Parliament (MPs) sitting in cluster committees to scrutinise the budget are providing a listening ear and turning themselves into lobbying platforms for the MDAs.

Do the MPs and their MDA bedfellows know what they are asking for or they just do not care?

Just in case they did not get the memo, I will break it down for them, especially on how precarious the government’s fiscal position is.

Proposed total expenditures in the 2015/16 national budget are projected at K902 billion against revenues of K763 billion.

This leaves a deficit of K138 billion, which will be financed by borrowing—most likely through a combination of domestic and foreign borrowing.

Either way, the loans will squeeze out the private sector from the money market while saddling our children with debt burdens that are already nearing pre-debt relief unsustainable levels.

On top of such a huge deficit, do the MDAs and MPs want to pile more, which will only lead to more borrowing with catastrophic macroeconomic consequencies on inflation and interest rates, for example?

We already have a ballooning public sector wage bill that jumped by 25 percent (it could rise even further if civil servants have their way again), interest payments that rose by around 13 percent and increasing private sector arrears.

As I write this, the Malawi Revenue Authority (MRA) cannot even meet tax collection targets.

Donors—who traditionally finance 40 percent of our national budget—have mostly stayed away, especially bilateral partners, leaving us in a fiscal conundrum no one has a clear idea of how to get out of it.

Economic growth—the very source of revenue everyone is clamouring for—is not expanding at a pace that would generate the kind of revenue that would help the country meet even its prioritised spending needs.

According to Nico Asset Managers Limited, Malawi’s gross domestic product (GDP) growth is expected to be between 3.6 percent and 5.5 percent in 2015 as agricultural production falls due to the damage caused by the heavy rains and floods as well as owing to the continued suspension of production at Kayelekera Uranium Mine.

In 2016, Gondwe expects the economy to expand by seven percent. I like the optimism. Unfortunately, no respected economist and forecaster I know agrees with this wild estimate given the adverse weather conditions that have knocked nearly 30 percent off national agricultural output.

Note that agriculture is the single largest source of economic growth for Malawi, responsible for at least 30 percent of GDP.

Its influence on macroeconomic variables such as inflation, interest rates and even the budget deficit points to a much more expansive influence on economic output that cannot just be wished away.

This country has serious problems desperate for serious people to solve them. I cannot see those serious people in MDAs and in Parliament, let alone that bunch of hand-clappers passing for Cabinet.

All I see are jokers who want to worsen the problems, not solve them. Why we end up with such people running the affairs of this country is a question I always find hard to answer.