Budget mismatch

On paper, the Tonse Alliance administration claims to have built its next fiscal plan on sacrifice, but the borrowing-dependent hikes to votes such as State Residences, Foreign Affairs and security agencies tell a different story.

The increases in the budget currently under scrutiny in Parliament come even as allocations as percentages of total spending to crucial social sectors such as health and education have collapsed below international benchmarks Malawi committed itself to.

Crucial governance institutions, notably the Anti-Corruption Bureau (ACB) and Directorate of Public Prosecutions (DPP), have had their allocations raised by just around 15 percent each.

The Nation vote-by-vote analysis of the proposed 2023/24 National Budget also reveal a mismatch between policy pronouncements and resourcing, putting to test the Tonse Alliance’s seriousness to goals in Malawi2063, the country’s long-term development strategy, and its first 10-year implementation plan ending in 2030.

The sacrificial remedies for economic growth promised in both the State of the Nation Address that President Lazarus Chakwera delivered and the Budget Statement that Minister of Finance and Economic Affairs Sosten Gwengwe tabled in Parliament appear to have been lip service, according to opposition Democratic Progressive Party (DPP) in its official response to the budget.

Gwengwe themed the Budget Statement ‘Sacrificing today for a better tomorrow: Regaining macroeconomic stability and growth through collective responsibility for our shared future’ and proceeded to award at least 65 percent increases to State Residences, Judiciary, Foreign Affairs, Malawi Defence Force and its other sister security agencies.

From our analysis, the bulk of the money is consumptive, going to recurrent expenditure lines largely including salaries and allowances.

The national budget, expected to roll out from April 1, is pegged at K3.87 trillion, but faces a deficit of K1.32 trillion or 30 percent of its total. The deficit is to be financed from borrowing, thereby increasing the weight of public debt to unsustainable levels.

As of December 2022, public debt stood at K8.3 trillion, more than double the size of the next budget and government is expected to spend K917 billion just in interest repayments.

More borrowing to finance the deficit not only worsens the debt burden, but its resultant interest payments take up nearly a quarter of total spending in the new budget.

The allocation for interest payment is almost four times government’s own allocation towards development and this, according to an Economics Association of Malawi (Ecama) analysis of the proposed budget, is problematic.

Reads the Ecama analysis: “Of the development expenditure, only a third is under the direct control of the government while two thirds will depend on the whims of development partners. The large debt stock is taking up about a third of the total expenditures. These are resources that could be channelled to productive activities.”

On its part, the Budget and Finance Committee of Parliament also expressed concern with government’s lower allocation towards development, saying it does not inspire confidence.

Reads the report presented in Parliament: “The committee would want to see government steadily increasing the expenditure on development as it shows the commitment to own development agenda and that the development path of the economy should not be hugely affected by partners’ changing priorities.”

Making the DPP’s official response in Parliament last week, spokesperson on Finance Ralph Jooma described the new financial blue-print as “unrealistic”, especially on deficit financing and the fact that the budget is largely dependent on uncertain funds.

He said: “Financing the fiscal deficit of K1.3 trillion, which is equivalent to one third of the K3.87 trillion budget, is very risky because its implementation will solemnly depend on the money that will come.”

Privileged votes

The Department of Human Resource Management and Development has seen its allocation astronomically jump from K33.9 billion in the current budget to K112.1 billion in the next. This represents a 230.6 percent increase on the back of salary increases and the newly-introduced transport allowance for civil servants.

The Budget and Finance Committee is appreciative of this adjustment, but cautioned that the move should not affect implementation of the budget itself.

The committee’s report, presented by chairperson Gladys Ganda, reads: “The committee commends the government’s effort to support civil servants in adjusting to the effects of devaluation and a general rise in cost of living. The committee hopes that these have been carefully considered and will not result in significant revisions in the course of year as was the case at mid-year in the 2022/23 budget.”

Ministry of Local Government, Unity and Culture is another big beneficiary with an estimated K23.5 billion allocation from K12.7 billion at the start of this financial year, a jump of 85 percent. This amount includes K18.1 billion to finance construction of chiefs’ houses, civic offices for Mzuzu City Council, rural roads and water infrastructure.

State Residences, on the other hand, has a K10 billion increase from K14.5 billion to K24.5 billion, an increase of 68.9 percent, largely for personal emolument and other recurrent transactions (ORT), leaving just K4.7 billion for development.

The increase in the State Residences vote is equivalent to the allocation to Ministry of Industry and Trade, a ministry key to Malawi’s wealth creation agenda. The bulk of State Residences’ development budget goes towards maintaining of the lawn and residences.

The Judiciary is almost at par with State Residences with a 66.8 percent increase from K14.4 billion to K24.2 billion. A large part of this funding is for personal emoluments and ORT with a development budget standing at a paltry K3 billion reserved for development purposes out of which 53 percent or K1.6 billion is proposed for designing of the Judiciary complex in Lilongwe. 

Draft estimates in the programme-based budget document number five show that almost K31 billion of the allocation to the Ministry of Foreign Affairs is for international cooperation.

Security trounces governance

Five security institutions, namely National Intelligence Service (NIS), Malawi Police Service (MPS), MDF, Malawi Prisons Service and Department of Immigration and Citizenship Services have a combined average increase of 46 percent.

This is in sharp contrast to the allocation to eight governance bodies which have a combined average of 37.2 percent, but individually some have much lower increases, especially the DPP, ACB and Legal Aid Bureau, which have a huge backlog of cases to deal with.

Leading the pack of security institutions is the NIS with 80 percent increase as the estimates have jumped to K5.4 billion from K3 billion just for salaries, allowances and other recurrent transactions.

MDF has its allocation increased by K42 billion from K108 billion to K150.8 billion or 39.6 percent exclusively for personal emoluments and ORT. This includes on-going procurement of two planes, according to draft programme-based budget document five.

Our source at Treasury said the two planes in reference were procured from China. It is not yet known how government wants to pay for these planes whose bill is estimated at K50 billion.

The Police have an increase of 32 percent while both Prisons Service and Immigration Department have received 38.6 percent and 39.6 percent jumps respectively. 

With all the expectation that the justice system will promptly deal with a huge backlog of cases, the prosecution authority, the DPP, has only been given a 15.7 percent increase as the budget has moved from K1.9 billion to about K2.2 billion. It is the same case with the ACB, which has a 14 percent increase, two percent lower than the increase given to Legal Aid Bureau.

However, the biggest winner among governance institutions is the Independent Complaints Commission which has seen its budget increased by nearly 100 percent from K359 million to K717 million largely to allow for new recruitments and conclusion of ongoing investigations.

The Malawi Human Rights Commission (MHRC) has its estimate at K2 billion from K1.3 billion, representing 49.6 percent.

The Directorate of Public Officers Declaration of Assets has a 29.5 percent increase and the Office of the Ombudsman has been favoured with 25 percent adjustment.

Yesterday, the National Assembly entered into the Committee of Supply which sees the House considering allocations vote by vote ahead of passing the Appropriations Act. The new financial year is expected to roll out on April 1.