Goodall admits Malawi economy in ‘turbulence’: Budget reduced by K32.7bn
Nobody should underestimate the economic crisis facing Malawi; Finance Minister Goodall Gondwe has admitted in parliament that the country is still passing through “turbulent times.”
Gondwe said when he tabled his mid-term budget review statement, announcing a reduction of a financial plan by K23.7 billion from an approved figure of K929.7 billion to K906.0 billion
“Our economy is still passing through turbulent times. I regret that we have not yet established a stable macroeconomic environment,” Gondwe told the House, adding: “A stable macroeconomic environment also provides conditions for attainment of high quality economic growth rates.”
Activist Rafique Hajat reacted in Twitter that: “An unstable economic environment breeds despair, uncertainty, shrinkage and anger against the government.”
In his statement Gondwe noted the rising prices of goods from 11% in 2012 to 23% and that inflation has “stubbornly remained high” at 24.9% to be the highest in SADC.
Gondwe said government is determined that the macroeconomic stability be achieved, in particular, that interest rates should be low enough.
The Finance Minister also dispelled assertions that the Malawi financial plan is ‘Zero-aid’ budget.
“This is not a Zero-Aid budget. At no point did we say so. We’ve appropriated grants from donors,” he explained.
He said bilateral donors only formally withdrew from budgetary support but in parallel, donors are increasing their “off budget” support massively.
The Minister noted disbursement of other types of grants is also diminishing.
Turning to the budget review, Gondwe said budgetary performance, total revenue and grants that were targeted at K386.1 billion at the end of the first half of the 2015/16 financial year were under-collected by K50.8 billion.
Domestic revenues that were targeted at K312.4 billion fell short of this amount by K12.7 billion down to K299.7 billion.
He said although a number of taxes performed well, the VAT underperformed by an amount of K5.6 billion.
In parallel, grants performed even worse where the target of K75.3 billion was under performed by K36.5 billion, less than half the targeted amount.
He said the recurrent expenditure that was targeted at K358 billion has underperformed by K20.9 billion down to K337.2 billion.
According to Gondwe the reduction is by the fact that half of the targeted expenditure on Farm Income Subsidy Programme (FISP) of K35.7 billion was not paid for, a sizeable amount of just under K3.0 billion was in fact saved due to fiscal measures that were taken to ensure the needed fiscal prudence.
“In all, the performance of the budget this year has been better than before except for the projected expenditure on FISP. As the house is aware the bulk of expenditure on FISP relates to the imports of fertilizers and in view of the deep depreciation of the currency, the cost of procuring fertilizers has escalated.
“ However, this year, instead of shouldering all the escalated costs, the suppliers of fertilizers have had to shoulder some of the costs and the Government as shown in table 2 has accepted only K14.9 billion of the total escalated costs of approximately K30 billion”, Gondwe said
Farm Input programme will be redesigned next year, according to Gondwe.
But observers said the program should be abandoned altogether as it breeds corruption, benefitting politicians and corrupt Asian business persons.
Gondwe said then said there is need to strengthen effort at raising domestic revenues and to down play all donor grants in general and only expect to focus more on development loans from donors as a reliable mode of donor aid delivery.
As regards this year’s food shortage, Gondwe said the matter is “under control.”
Hajat observed through a tweet that: “The evidence on the ground suggests otherwise.”
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