Minister of Finance, Economic Planning and Development Goodall Gondwe has expressed government’s optimism of raising enough domestic resources for its recurrent expenditure for the 2017/18 fiscal year.
In the current fiscal year, Malawi Revenue Authority (MRA) has been tasked to raise K980.3 billion, out of which K946.6 billion will be for recurrent expenditure and K348.8 billion development expenditure.
Speaking in an International Monetary Fund (IMF) podcast, which is a digital audio file, titled Growing Pains: Malawi’s Struggle With Hunger, Climate Change this week, Gondwe said the revenue will be raised despite donors not coming forth with budget support except for multilateral donors such as World Bank, European Union (EU), African Development Bank (AfDB) and IMF balance of payment (BoP) support.
The minister said regardless of some public finance management reforms, most donors are yet to unlock their budget support.
“But I think there has been a general policy in any case that donors, particularly bilateral donors will now no longer provide budgetary support to any country in the world. So, regardless of some successes of our reforms, donors have not come back with donor support,” said Gondwe.
“But, this year we think that we will be able to raise enough domestic resources to cover our recurrent expenditure. I am saying recurrent expenditure not including development expenditure, but the day-to-day government operations now can be funded from our own domestic resources.”
In the 2017/18 budget statement, Gondwe said after a long time, Malawi is expected to generate enough domestic revenue that could exceed recurrent expenditure by about K32 billion.
This is an objective that has been pursued since the 2009/10 zero-deficit budget when the desired objective was to balance recurrent expenditure with the domestic resources.
But the zero-deficit budget got into trouble in the subsequent fiscal year as government had to borrow from commercial banks to present a picture as if the zero-deficit budget is a success.
In an interview on Tuesday, IMF country representative Jack Ree said while the economy is not out of the woods yet, the ambitious plan to meet recurrent expenditures through domestic revenue is attainable.
“The first one is the authorities’ continued focus on taming expenditure, including through dealing with leaks and wastefulness. The other one is the sharp deceleration in interest rates which is going to help contain the runaway costs of domestic borrowing.
“But dealing with leaks was one of the key achievements during the just-ended programme. Now, we know that the broken plumbing for public finance management has been fixed through bank reconciliation which was done first time since independence,” he said.
Ree said wasteful spending is another matter, but government should be given a credit for at least daring to deal with this.
World Bank country director Laura Kullenberg said in the podcast that government failure around public financial management and corruption of a large nature makes it difficult for donors to provide budget support.
She said this also makes it difficult for donors to justify their programmes given the competition for resources which has intensified over the years.