Budget and Finance Committee of Parliament and economic analysts say the implementation of the 2017/18 budget would face some hurdles following government’s move to bail out Admarc of its K23 billion loan.
Last year, Treasury released money to repay debts that Agricultural Development and Marketing Corporation (Admarc) owed three local banks after the State produce trader failed to recover the money from the sale of maize in the 2016/17 financial year.
In an interview on Tuesday, Minister of Finance, Economic Planning and Development Goodall Gondwe agreed Admarc bailout would leave Treasury with no choice but to revise allocations during the forthcoming Mid-year Budget Review in February.
But he noted that in borrowing the funds, Admarc was acting on government orders following the Malawi Vulnerability Assessment Committee (Mvac) report that about 6.3 million people faced hunger due to reduced maize harvest after the combined effects of drought and floods.
Budget and Finance Committee of Parliament chairperson Rhino Chiphiko noted the move will leave government with no choice but to borrow from commercial banks, a development which will likely increase public debt.
“For a long time, we have been complaining about huge public debts,” he said.
Economics Association of Malawi (Ecama) president Chikumbutso Kalilombe cautioned that in shifting the allocations, government should ensure that items to suffer budget cuts are non-essential.
Treasury spokesperson Davis Sado admitted the bailout will complicate 2017/18 budget implementation.