Despite steady economic forecasts the mid year budget review confirms that the Malawi country’s economy is stressed with the looming shortage of food and Finance Minister Goodall Gondwe has indicated that he will propose some budget cuts when he presents the 2017/18 Mid-Year Budget Statement next week Friday.
Minister of Agriculture, Irrigation and Water Development Joseph Mwanamvekha told Parliament on Monday that 1.9 million families face the likelihood of food shortage as dry spells and fall army worm attacks in the country may destroy 645 000 hectares of crops which will affect the 6.1 percent economic growth that the government has been projecting for the year under review.
The depressing figures Mwanamvekha read in Parliament call for government to put the national response in order in readiness for the forecast food crisis.
Reacting to the ministerial statement, Parliamentary Agriculture Committee chairperson Joseph Chidanti Malunga advised government to give the correct numbers of those affected to avoid the 2015/16 situation when the government overestimated the figures.
The overestimation led to Agricultural Development and Marketing Corporation (Admarc) incurring loans to buy more maize to avert hunger which also led to ‘Maizegate’- the misprocurement of maize in Zambia that led to the dismissal of former Minister of Agriculture George Chaponda and prosecution is under way.
Malunga also faulted the Farm Input Subsidy Programme (Fisp), arguing that billions of kwacha have gone into the programme with little impact while more billions are also invested in bailing out the same people in times of crises.
“We need to talk about where we put our resources. Otherwise, we keep putting ourselves at the mercy of nature,” he said.
Meanwhile, Finance Minister Gondwe has outlined cautious spending plans to a nation bracing food shortages .
He points out that Malawi’ fiscal position is under pressure from a weakening domestic revenue collection and high interest rates on Admarc loans.
Government had projected a K980 billion domestic revenue collection by June 30 2018 but the Malawi Revenue Authority (MRA) has not performed as expected.
From a target of K451 billion for the first half, July to December, MRA has only collected K410 billion, according to MRA’s revenue report issued last month.
Gondwe said as government ponders on early purchases of maize, he is expected to move money around to allocate funds that can be used to address the dry spell .
Budget and Finance Committee of Parliament chairperson Rhino Chiphiko said there is need to preserve state coffers, saying too much domestic borrowing is harming Malawi’s economy.
He said as quoted by the local press that the domestic debt has largely been fuelled by the government’s use of promissory notes that, apparently, attract some contractors to initially fund major projects, usually in the construction sector, on their own before they recoup their investments.
Chiphiko said when the contractors finally demand their payments, the interest and other add-ons tend to be exorbitant, saying a project that may have been estimated at K39 billion could later see the government paying as much as K80 billion.
He said: “This trend of issuing out-of-budget zero coupon bonds [the promissory notes] became popular some three years ago. Unfortunately, this is continuing and it is draining the country’s cash flow.
“This will kill this country economically. It means we will not have a balanced budget for a long time and it will mean us committing all our future revenue to only paying interest rates to our debts.”
Opposition Peoples Party (PP) parliamentary leader Ralph Mhone said many in this country are struggling.
He said the country is marked by growing inequality and people have been let down.
Minister of Finance, Economic Planning and Development Goodall Gondwe is next week Friday expected to table a statement summarising observations on the economic trends and activities that prevailed during the first half of the budget implementation.
Parliament will then consider and adopt revised estimates on the recurrent and development accounts of the budget.
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