Finance, Economic Planning and Development Minister Goodall Gondwe on Friday announced that government has made unprecedented cut to the national budget for K30 billion from the K1.3 trillion 2017/18 National Budget amid falling revenue and a retreating donor community.
Gondwe told Parliament that the “needed adjustments” have been made in response to the obstacles that the budget has encountered during the first half of the financial year and which could have deflected the attainment of the budgetary targets that underlied the macroeconomic stability that has been maintained.
International Monetary Fund (IMF) Malawi mission Chief Pritha Mitra on Thursday urged government to, among other things, foster revenue growth while spending wisely and focusing on priority areas in social and infrastructure development
In his financial report of the mid-term budget review , Gondwe said the slashes will be across a majority of government ministries, departments and agencies (MDAs) in areas considered non-essential such as travel related budgetary lines.
Gondwe pointed out Malawi’s plan has suffered two main traumas, the first being the excess in expenditure as a result of Agricultural Development and Marketing Corporation (ADMARC) bailout of K45.2 billion and the second is the domestic revenue shortfall of around K45.9 billion owing to the gross underperformance of the Malawi Revenue Authority (MRA) in the first half of the year that would also have derailed the budget if the trauma continued into second half of 2017/18.
Finance Minister said the measures that will anchor the reductions are being discussed and confirmed by the Chief Secretary and Secretary to the Treasury.
’They are likely to include a reduction of 10 to 20 percent of fuel allowances across the board. This should also help to reduce Malawi’s overall demand for fuel,” said Gondwe.
He said the purpose of the exercise is to retain financial targets that will maintain macroeconomic stability and the economic rebound that has been achieved is assured.
Gondwe announced a 20 percent cut to fuel allowances and a drop in the number of officials enjoying vehicle benefits, saying “Government will not pay for the maintenance of such motor vehicles.”
He also disclosed that the business class air tickets for civil servants could be curtailed as limited number will use it among them, ministers, the Chief Secretary, Speaker and the Chief Justice but majority `will be restricted to economy class tickets only.
“In general, these measures merely supplement the fact that responsible controlling officers, in response to the cuts in travel budgetary lines, will reduce the number of official missions in response to the cuts that have been made to their votes,” Gondwe said.
Outlining the measures to reduce the budget deficit, Gondwe said government has revised the development budget pegged at K346 billion and only prioritise about 25 projects that will be completed by June this year, including those wholly funded by donors.
“In terms of overall budget, after these budgetary adjustments, it will be seen that the budget deficit is programmed to improve from K195.6 billion down to (K183.6 billion). The domestic borrowing will move a minimal figure from K27.8 billion to K33.7 billion,” Gondwe said.
He assured that the review exercise has succeeded to retain the essence of the budget and will not lead to macroeconomic instability.
Gondwe said “the purpose of the exercise to retain financial targets that will maintain macroeconomic stability and the economic rebound that has been achieved is assured.”
The IMF, in its statement seen by Nyasa Tines , forecasts an economic growth rate of six to seven percent over the medium-term buoyed by enhanced infrastructure investment and social services as well as an improved business environment.Follow and Subscribe Nyasa TV :