Effectiveness of pre-budget consultations

Minister of Finance and Economic Affairs Simplex Chithyola Banda has this week orthodoxly conducted pre-budget consultation meetings in Blantyre, Lilongwe and Mzuzu in preparation for the 2024-25 National Budget.

A prodigious team of technocrats from various departments such as the Ministry of Finance (MoF), Malawi Revenue Authority (MRA), Reserve Bank of Malawi (RBM), National Planning Commission (NPC), accompanied the minister. Travel of such a team comes with a hefty bill, which, of course, befits the purpose. The aim of the consultations is to solicit views, contributions and inputs from all stakeholders in the country on the 2024-25 Budget.

I keenly followed, through media platform, the proceedings for the consultations. MoF officials urged participants to make submissions in line with Malawi 2063 and promised to pay attention to the inputs. The minister touted his attainment of the IMF programme, and resultant direct budget support which, according to him, is recipe for economic recovery.

He hinted that the next budget would focus on economic recovery and cushioning the poor. It was then a turn for participants to present same old things and same old nothings in areas of prudent public debt management, tax policy adjustments aimed at cushioning cost of living and boost investments and exports and other economic growth initiatives.

These consultations are important. They afford stakeholders an opportunity to influence policy direction to some extent. For example, during 2022-23 pre-budget consultations, Malawi Health Equity Network (Mhen) and Minibus Owners Association (Moam) proposed the removal of VAT [value-added tax] on solar equipment and vehicle tyres, respectively. MoF implemented the proposals.

The Public Finance Management Act 2022 obliges the Minister of Finance and Economic Affairs to conduct these pre-budget consultations and it prescribes its procedure. Section 27 (5) stipulates as follows, ‘the minister shall, no later than January 15 in each year, conduct public consultations on the Economic and Fiscal Policy Statement (EFPS) and ensure public participation in the development of the budget policy statement laid before the National Assembly.’

EFPS is provided for under Section 27 (1) and the minister is supposed to produce and publish it not later than November 30 of each year. The statement should postulate the broad strategic priorities and significant assumptions, which shall guide the government in preparing the estimates for the upcoming financial year and two outer years. It intends to highlight actual fiscal performance in the previous year, outline macro-economic developments and medium term economic policies government will adopt.

This is supposed to form the basis for the stakeholder presentations and inputs not just telling them that the budget will be recovery and pro-poor oriented and submissions should align with Malawi 2063. Otherwise, consultations are merely a forum for lobbying according to stakeholders’ area of advocacy and investment rather than being forum for concretising our strategic policy choices for national development.

MoF is not ignorant about it. They once produced EFPS Statement in 2019. Since then, they only fulfill the travelling part of the mandate, depriving themselves rich and relevant inputs.

In other countries such as Kenya, where financial year starts on July 1, the National Treasury submits the Budget Policy Statement to Parliament by February 15 each year. The Budget Committee of Parliament also meets various stakeholders, including chairpersons of departmental committees, CSOs, investors and receive submissions to inform their numerous engagements with MoF.

In Malawi’s case, Parliamentary Budget Committee’s role is only reactive and rubber-stamping. They are engaged when budget framework is already decided rather than being an alternative brain during the budget preparation process.

When the budget committee is not vigilant, MoF tends to be selective with implementation of public finance management laws, which affects accountability. Ultimately, Malawi operates with very weak and vulnerable public finance management system.