Goodall eyes 30% spending cuts

Facing a dark fiscal outlook on the back of dwindling domestic revenue, budgetary support freeze and Cashgate-linked fleecing, Treasury targets to cut spending by at least 30 percent over the medium-term.

In an exclusive interview at his office in Lilongwe yesterday, Minister of Finance, Economic Planning and Development Goodall Gondwe said he has commissioned an exercise to identify what he called “wasteful spending” areas.

He said government could then redirect such savings towards productive areas such as irrigation farming, energy generation and social investments in education and health while gradually reducing the domestic debt stock and private sector arrears.

Government owes the private sector at least K155 billion (or 15 percent of the current K1.2 trillion budget) for goods and services procured, but which have remained unpaid for years.

To ease the pressure, Capital Hill has been issuing promissory notes to suppliers who then cash it in commercial banks at a discount of around 30 percent of the value, attracting groans of being short-changed.

The domestic debt pile stands at around $800 million (K576 billion at current exchange rates) or 15 percent of gross domestic product (GDP).

Critics say the high domestic debt overhung has crowded out private sector investment and taken away money for capital and social investments to service loans.

A Treasury source said the minister could even look at whether Capital Hill needs such a huge fleet of vehicles and their attendant sophistry as well as abolish certain agencies and positions in government ministries, departments and agencies (MDAs).

But Gondwe refused to go into specifics of what he believes are unnecessary budget lines.

Said the minister: “I have [someone] currently trying to identify waste in government. By next year, we should start implementing some of the recommendations. Others may take longer because they may concern entrenchment of rights of individuals.”

Gondwe confirmed that he is not able to balance and manage the fiscal position against expenditure. He said tough decisions will have to be made.

“There is quite a lot of expenditure which is chaff and can be cut off and we can continue working very efficiently without it,” he said, adding that the analysis would identify these areas for possible action.

A 2012/13 assessment of the budget by Economics Association of Malawi (Ecama) found that government spent a whopping K17 billion servicing close to 3 000 vehicles, half of which was spent on fuel and maintenance and the remainder on allowances for drivers.

The 2012 Ecama analysis also found that the public service had 706 officers entitled to government vehicles for personal use of which 94 had each fuel allocation of 500 litres per month while the remaining officers were each entitled to 250 litres of fuel per month.

In the Public Service Reforms Programme, government has found and started acting on reducing the number of chief directors who continue to get benefits of 500 litres of fuel, a vehicle and a salary of over K800 000 per month.

Government has reduced the number of principal secretaries (PSs) by not renewing contracts of those who have reached retirement age and promoting chief directors to the vacant positions.

Government has also started cutting down on subsidies with the reduction of the Farm Input Subsidy Programme (Fisp) budget from K63 billion in the previous year to K31.4 billion, reducing the number of beneficiaries to 900 000 from 1.5 million while increasing farmer contribution from K500 to K3 500 per 50 kilogramme (kg) bag of fertiliser.

Ben Kaluwa, an economics professor at the University of Malawi’s Chancellor College, yesterday eagerly welcomed the planned review, describing it as “long overdue”.

He said: “We have been talking about such a review for a long time. There is just too much unnecessary expenditure on fuel, allowances, vehicles for public service officers which we can do without and make a lot of savings.

“But I doubt such an exercise will be welcome considering that they are people with vested interests.”

Kaluwa said government would do well to hire an external consultant, who would not be easily influenced by the political machinery in the civil service, to analyse and rationalise government systems to benefit Malawi in the long-term.