Hit by poor revenue performance and increasing fiscal deficit, Treasury says it will review options on funding the presidential election scheduled for July 2020.
In an interview with Business News on Tuesday, Minister of Finance, Economic Planning and Development Joseph Mwanamvekha said while it is too early to outline funding sources for the coming election, Treasury will have to dangle between cutting expenditure, seeking assistance from donors as well as borrowing.
He said: “We are yet to receive the actual costs of the election from the commission [Malawi Electoral 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 to finance the election.
“But for now, it is too early to say which option will work best in this scenario. So, we will wait and see.”
The sentiments follow the decision by the Constitutional Court on Monday to nullify President Peter Mutharika’s victory in the presidential race in the May 21 2019 Tripartite Elections over serious irregularities and, subsequently, ordering fresh elections in 150 days.
In the 2019/20 National Budget, domestic revenue is projected to increase by 22 percent, being K1.369 trillion in tax revenue and K55.8 billion in non-tax revenue.
However, ahead of the 2019/20 Mid-Year Budget Review next week, economic commentators argued that a considerable downward revision of the total budget is expected due to underperformance of revenues.
Already, Treasury figures indicate that in the first five months of the financial year, Treasury recorded a deficit of K132 billion, which is K23 billion shy of the estimated K155.9 billion or 2.5 percent of gross domestic product (GDP) projected deficit for the year.
Catholic University head of social sciences department Gilbert Kachamba said looking at how revenues have performed in the country, mobilising financial resources will be a tall order.
“My hope is that we have donors coming in to assist. Otherwise, we may end up getting a loan to finance the election, which is bad for an economy with a swelling debts but democracy has a cost. This is a test of our financial prowess,” he said.
Economics Association of Malawi (Ecama) president Lauryn Nyasulu feared that fresh election will exert enormous pressure on the economy in view of the revenue challenges which can worsen the deficit position.
“The expenditure on elections is significant and was not anticipated or planned for in the current financial year. This will necessitate a reallocation of resources in the current budget.
“Our hope is that the cuts should not affect provision of essential services such as health and education,” she said.
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. He said: “As long as there are some resources, we can work on allocating resources according to priorities and the current is the election. Parliament has the duty to review the budget and find a way of making sure that the fiscal plan involves election resources”.