Opposition parties and the Budget and Finance Committee of Parliament have urged government to rein in expenditure and manage the rising national debt to restore macroeconomic stability and improve budget performance.
They expressed their sentiments yesterday in official responses to the Mid-Year Budget Review Statement that Minister of Finance and Economic Affairs Simplex Chithyola Banda presented last week.
In his speech, the minister acknowledged that several key budgetary assumptions, including inflation and real economic growth, have not materialised as projected.
Real GDP growth is now forecast to decrease by 1.4 percentage points from 3.2 percent projected in March to 1.8 percent.
Inflation, on the other hand, surged to an average of 33.8 percent as of October 2024, far exceeding the Reserve Bank of Malawi’s five percent target and the 10 percent benchmark outlined in Malawi 2063 (MW2063), the country’s long-term development blueprint.
In his response to the budget, main opposition Democratic Progressive Party (DPP) spokesperson on Finance Joseph Mwanamvekha, an economist, attributed the economic challenges to excessive government spending on recurrent expenditure at the expense of development projects.
He said when government overspends it injects excess money into the economy, fuelling inflation.
United Democratic Front (UDF) spokesperson on Finance Ismail Mkumba echoed the concerns and highlighted the adverse effects of rising debt, inflation and high interest rates on businesses, particularly micro, small, and medium enterprises (MSMEs).
In his Mid-Year Budget Review Statement, Chithyola-Banda revised the total national budget upward from K5.9 trillion to K6.04 trillion.
However, this revision revealed a sharp increase in recurrent expenditure, rising from K4.21 trillion to K4.6 trillion, alongside a decline in development expenditure from K1.77 trillion to K1.58 trillion.
The minister later clarified that the reduction in the development budget did not reflect a retreat from government development plans, but was due to delays in the commencement of some projects in the first half of the fiscal year.
During the first half from April 1, grants stood at K223.4 billion against the expected K584.2 billion.
In her contribution, Budget and Finance Committee of Parliament member Mary Navicha faulted the government’s reliance on donor funding for development projects.
She noted that delays in disbursements by donors and Malawi’s low absorption of such funds continue to hinder development efforts.
Predominant in the Mid-Year Budget Statement debate are calls from opposition parties and parliamentary committees for swift and deliberate measures to stabilise the economy, prioritise fiscal discipline and creation of an environment conducive to private sector-led growth.
