Malawi’s developing partners have put their foot down refusing to bail out the country on its bid to raise a K200 billion 2014/2015 budget deficit which is aimed to support the troubled health sector.
The country’s Minister of Finance, Economic Planning and Development Goodall Gondwe recently announced that the 2014/2015 budget is expected to be pegged at K743 Billion (US$1 790 361 446) but admitted that the budget is likely to face challenges in several sectors due to a likely huge deficit.
Although Gondwe could not outline the sectors to be affected Capital Hill sources disclosed that the Ministry of Health is one of them and the ministry alone needs an additional K200 billion (almost US$500 Million) during the fiscal year.
Diplomatic sources in Lilongwe have revealed that in view of the situation Gondwe has of late been meeting key donors with a proposal of supporting the health sector with the shortfall but his efforts have not been successful with most of the donors including Britain and German turning down the proposal.
“The feeling amongst the donor countries is that if Malawi has resources to subsidize iron sheets and cement for the construction industry as promised by Professor Peter Mutharika, it could as well channel those resources towards the ailing health sector,” said the source to Nyasa Times.
In his statement during the first pre-budget consultative meeting in Blantyre, Gondwe admitted that the challenges in coming up with a feasible budget were mainly due to the suspension of aid by some of the country’s partners.
“We hope that some of the donors will support us. We are also looking at donors providing some support to some of the activities without directly supporting the budget. If the resources are tight we will have to select some activities that will not be carried out,” said Gondwe.
He said following the hiccups government will this year trim down the cost of the Farm Input Subsidy Programme (Fisp) from last year’s K60 billion to K50 billion.
The 2014/2015 budget figures means a 16 percent jump from last year’s budget which was at K640 billion (US$1 542 168 675).
Gondwe said apart from the aid suspension government is grappling with other issues, including a domestic debt of K340 billion (US$819 277 108) and payment of arrears of K173 billion (US$416 867 469).
He said the initial budget figures provide for K665 billion with donor support from some partners including the European Union (EU), the World Bank and the African Development Bank (AfDB) of about K43 billion.
The Minister also admitted that the 2015/2016 would lean more towards external borrowing to cover the looming fiscal deficit.
However, he did not say whether Malawians should expect an increase in taxes or introduction of new ones, arguing the budget figures have not been presented to Cabinet.
During the meeting Gondwe also announced that the Fisp will no longer be directly administered by government through the Ministry of Agriculture but will be moved to the Smallholder Farmers Fertiliser Revolving Fund of Malawi (SFFRFM).
“The administration of Fisp will be moved to the SFFRFM which will lead into an expenditure of K50 billion, a cut from the previous K60 billion,” said Gondwe
He, however, insisted that Malawians should expect a normal budget with a development budget of about K162 billion.
Most analysts have argued that subsidizing iron sheets and cement is not feasible for the economy of the country and that government would better work out better options that could drive infrastructure development at national level.Follow and Subscribe Nyasa TV :