Winners, losers in budget cuts

While Malawi Government has sugar-coated the budget cuts as fruits of tight expenditure controls that have yielded savings, the truth is that most of the chops are from activities it no longer has the money for.

In fact, an analysis of the revised budget shows that the real amount of cuts from the 2011/12 expenditure plan is not the K4 billion (about $24 million) that Finance and Development Planning Minister Dr Ken Lipenga announced in the revised zero-deficit budget statement on Friday.

The real cost of the austerity is K16.5 billion (about $98.8 million) since that is the money missing between the approved 2011/12 spending plan of K304 billion or about $1.8 billion (now revised to K300 billion or about $1.79 billion) and the adjusted revenue projection of K287.5 billion (about $1.72 million) from the approved revenue estimate of K308 billion (about $1.84 million).

Note that the 2011/12 budget, as originally tabled last year, was not supposed to have any revenue gaps, but rather a surplus of K4 billion, which was set aside for public debt repayments.

The more than balanced approved estimates meant that government would not borrow to fund the budget, as it is set to do in the revised plan which has a K12.5 billion (about $74.85 million) deficit.

But it is that K16.5 billion gap between approved expenditures and revised revenue that has turned some sectors into instant austerity casualties although others have seen their fortunes rise.

Most of these cuts are because revenues have now been revised downwards by K20.2 billion (about $120.5 million), most of which is frozen budget support that Capital Hill has written off when in fact there were planned activities the money was supposed to finance.

The health sector is the biggest casualty in Lipenga’s 2011/12 revised zero-deficit budget, losing K5.8 billion (about $34.7 million) from its approved allocation of K26.8 billion (about $160.5 million) to a revised K21 billion (about $125.7 million).

Of the approved estimates, K21.4 billion (about $128.14 million) was planned for recurrent expenditure, which includes buying of drugs that have been in short supply in public health establishments nationwide.

But authorities have now cut the approved recurrent estimate to K18.7 billion (about $111.97 million).

The approved health development budget stood at K5.35 billion (about $32.04 million), but has now been revised to K2.35 billion (about $14.07 million), translating into a K3 billion (about $17.96 million) slash in capital spending.

Ironically, the whole health development budget was classified as Part II, meaning that it should have been funded from government’s own resources, according to a Ministry of Finance and Development Planning 2011/12 Mid-Year Budget Review Report made available to The Nation.

These cuts have automatically resulted in sharp reductions to the health budget at the district level where health is one of the 14 devolved sectors.

Our analysis shows that councils such as M’mbelwa District Council (Mzimba) have lost up to nine percent of their health allocations.

In his budget review statement, Lipenga’s statistics-free explanation for the slashes to the health budget left a lot to be desired.

He said: “First, some of the donors supporting the SWAp [Sector Wide Approach] pool account have used part of their resources to procure directly primary health care drugs which are being given to various government hospitals free of charge across the country.

“Secondly, the Global Fund, one of the major donors in the SWAp account, has also become discrete and is financing some of the programmes under SWAp discretely.”

Late last year, SWAp donors announced that they would take K1.6 billion (about $9.58 million) from the health basket to buy basic essential drugs, an amount that is well short of the cuts to the recurrent estimates.

Then there is the question of how to account for the K3 billion government has removed from the sector’s development budget which Capital Hill—not donors—was supposed to provide.

In an interview on Saturday, lobby group Malawi Health Equity Network’s (Mehn) national coordinator Martha Kwataine would have none of Lipenga’s explanation.

“Government should just admit that their arrogance towards donors is having devastating effects on the health sector. This is a sector that is largely funded by donors. The administration just has to learn to quickly swallow its pride and normalise relations with development partners,” she said.

Describing the cuts to health as “a shame”, “cruel” and “pathetic”, Kwataine warned that Malawi will see more people dying than ever before because of the austerity measures slapped on the sector.

She also said there are cases in which contractors are refusing to release keys to health staff houses because government has not paid them, making it difficult for district health officers to send personnel to such rural health establishments. Projects such as construction of health workers’ houses fall under the development budget.

“If health is not a priority, then what is our priority as a country? In education, one can drop out of school if the learning environment is terrible and start again next year.

“But when you are sick, you cannot postpone treatment to another year. Chances are that you may die. There are no second chances in health,” she said.

In fact, Kwataine added, an unhealthy person can neither pursue an education nor work on farms.

But with the revised budget adding K3.8 billion to education and K2.4 billion to agriculture, it is clear government does not share Kwataine’s thinking that a healthy nation is more crucial than an educated and food-secure country—the age old chicken and egg debate among development practitioners.

The revised budget has also allocated K459 million more to the Office of the President and Cabinet (OPC), bringing the new figure to K4 billion from the approved K3.5 billion.

Allocation to the Presidency remains at K43.3 million, but the Office of the Vice-President is K44.7 million richer, having jumped from the approved K129 million to K173.5 million.

The politically popular Local Development Fund (LDF) has seen an increase of K3.5 billion from the approved K4.9 billion to a revised K8.4 billion.

Other major losers include Road Fund Administration (-K3.3 billion) as fuel levies and donor disbursements dry up; Finance and Development Planning (K-1.8 billion), the Department of Public Service Management (-K3.3 billion) as well as Compensation and Refunds (-K1.2 billion).

The Judiciary, where support staff are currently on strike for about a month demanding K1.2 billion in arrears and a salary increase, only has a K39.4 million increase in personal emoluments.

Its recurrent budget is down K27.6 million but overall, K2.4 million has been added to the Judiciary vote thanks to an addition of K30 million to the development account.