Govt lacks strategic direction on fiscal policy—Experts

Government’s lack of strategic fiscal policy direction and discipline, its inconsistencies such as constant reversing of its spending cuts and other fiscal measures meant to bring some balance to public finances, is sending wrong signals and eroding confidence in its ability to craft policy and stick by it commentators have said.

The comments come in the wake of President Peter Mutharika’s directive that Treasury release K1 billion ($1.4 million) to cushion University of Malawi fees hike which Mutharika has since ordered be reduced by K50 000 ($68) across the board. Mutharika has also directed Treasury to prioritise Malawi Prisons in its funding plan.

Chairperson of Budget and Finance Committee: Chiphiko
Chairperson of Budget and Finance Committee: Chiphiko

Late last month government backtracked on its earlier proposal to give a 15 percent pay hike to junior civil servants and has since effected an across the board increment, pushing the wage bill up by K22 billion ($30.1 million).

Seeing a worrying trend in government’s economic decisions, head of economics department at the Catholic University (CU), Gilbert Kachamba, said government needs to consult widely before making financial directives even in the wake of pressure to ensure transparency and accountability.

According to Kachamba such inconsistencies are likely to negatively affect other government sections whose funds may end up being directed to other activities.

Kachamba added that government is supposed to spend in accordance with Parliamentary approved budget.

“We are worried with these huge inconsistencies. We do not know where Treasury will be getting the money to spend. We are afraid this trend may put pressure on poor Malawians as government would want to collect more to cover up the gaps,” he said.

But Treasury spokesperson Nations Msowoya brushed aside any fears that the directives may interfere on the already passed budget saying from time to time Treasury reviews performance of various budget lines and votes to identify potential savings and it is such savings that are re-allocated.

Asked how much on average the treasury saves per given period, Msowoya said “our role as Treasury is to monitor budget execution on a daily basis. At the moment we cannot quantify the savings in advance but we will use the midyear review to formalise some of the changes that have been introduced.”

He further added that in the implementation of the budget it is not uncommon to find certain votes underperforming and not utilising all the funds allocated to them due to certain challenges.

Siding with Msowoya, former minister of finance Friday Jumbe said the budget is not dynamic as there can be some changes and where need be, allocations can be moved from less important votes to more important votes.

He backed the recent financial directives by the president saying they are for the good of the nation.

On checks and balances, Jumbe said the Minister of Finance and Economic Development is under obligation to present such changes to Parliament during midyear budget review and members of Parliament will have a chance to scrutinize and understand all the changes.

But Chairperson of Budget and Finance Committee of Parliament Rhino Chiphiko said the inconsistencies signify poor planning on the side of government.

“It is inevitable to have some adjustments in the budgets, but this is only the second month of the budget. This shows that government did not properly allocate resources. There were calls to increase funding on some of these votes they are trying to fire fight on but they did not listen. What will become of the budget at the end of the year if they continue operating like this?” Chiphiko  said.

He highlighted a possibility that continued financial inconsistencies may lead to an increase in the budget thereby putting more pressure on the already struggling Malawi Revenue Authority (MRA) to collect more.

In the just approved 2016/17 K1.2 trillion national budget, government allocated K1.8 billion for unforeseen expenditures (Other Recurrent Transaction).


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