Donors, experts welcome budget with caution

Malawi’s traditional donors and economic commentators yesterday welcomed the presentation of the 2014/15 National Budget as prudent but warned government to walk the talk or risk further economic stagnation.

Donors have further said there will be no immediate return to budgetary support unless government observes fiscal discipline and seriously fight corruption.

In the absence of donors, Finance Minister Goodall Gondwe’s budget projected total revenues and grants amounting to K635.6 billion compared to a budgeted amount of MK603.4 billion in 2013/14, an increase of only 5.3 percent.

In this budget, domestic revenues are estimated at K525.3 billion compared with a final revised estimate of K441.6 billion in the 2013/14 financial year. Tax revenues are estimated to increase to K470.1 billion from K388.4 billion that was registered in the 2013/14 financial year.

Earlier, Gondwe told Parliament that the European Union, the World Bank and the African Development Bank have indicated that they could provide budget support amounting to over K43.0 billion.

Reacting to the delivery of the statement, World Bank country manager Laura Kullenburg described the statement as “prudent and presented in very difficult circumstances.”

But Kullenburg said there were no guarantees on pledged budgetary support in form of grants.

“We welcome the budget, it’s prudent despite being put together with very challenging circumstances. We welcome very much the commitment to be prudent. We remain open to the idea of support but talks are on-going. Improving systems and performances will be crucial. Bold reforms and progress are needed but the budget is full of realism and pragmatism which is the aspect that has impressed me,” said Kullenburg.

German Ambassador Peter Woeste said the budget statement was promising, but prudent implementation will be critical. He said German was waiting for action on several pledges including prosecution of those implicated in the Cashgate.

“We have heard so many wise words from the minister; we will all be looking forward to the implementation. Throughout our meetings with the minister we have been impressed by his commitment to the reforms which have to be done in the public financial management system and we have made our position clear we are not an ATM where you can just cash money. We are looking for certain conditions, including the prosecution of those who were in Cashgate,” said Woeste.

Economist Thomas Munthali singled out the retention of the exchange rate regime and other monetary policies as commendable but said restoration of fiscal discipline will be crucial while former Finance Minister and current Press Corporation Limited group chief executive officer Matthews Chikaonda described the budget as conservative and prudent.

“It’s prudent because of the assumption of lack of donor support exchange rate and the pledges on economic reforms. Restoration of fiscal discipline is going to be a very key issue,” added Munthali.

On the other hand, Chikaonda said: “Resources are very compressed so the reductions in some areas are healthy. There is a financing gap which I am yet to understand how it is going to be filled, but I am yet to study the whole budget statement.”

British High Commissioner Michael Nevin said the moves by Gondwe were predictable due to the post-election economic realities the country is going through following the donor budgetary support pull out.

“Any party which was going to win the elections was expected to go through a tough time. It was always going to be a difficult budget. We welcome the emphasis on fiscal discipline. Even though we are not included in the budget, as donors we remain in support of the Malawi Government and we are funding several programmes,” said Nevin.

Among the key allocations, law enforcement votes have been granted a more than usual expenditure increase that averages at more than 80 percent with the Anti-Corruption Bureau vote has a 167 percent increment which is the highest of all votes. The Director of Public Prosecutions, the Judiciary, the Police and others have also had large increments as the institutions are expected to fight the Cashgate scandal.

Agriculture, Irrigation and Water Development with an allocation MK142 billion is the highest with Farm Input Subsidy Programme (Fisp) estimated at MK50.8 billion targeting 1.5 million beneficiaries.