Analysts have said the effectiveness of the fiscal discipline measures that government announced recently will depend on strict implementation and the highest level oversight of their enforcement.
The experts were responding to the fiscal austerity measures that Minister of Finance, Economic Planning and Decentralisation Joseph Mwanamvekha set in the Mid-Year Budget Statement that include minimising travel, limiting procurement of high-value assets, managing the wage bill and significant cut on fuel allocation to senior government officials.
Mwanamvekha said government will implement strict expenditure controls and to minimise the gap between revenue and expenditure requirements, it will fully adopt a cash budgeting approach that strictly aligns funding with available resources rather than projected cash flows.
He said: “Recruitments have been suspended, including non-established posts until further notice. On a case-by-case basis, recruitment in essential and critical government services will be considered.
“Fuel entitlements for public officers including ministers, deputy ministers and senior government officials shall be reduced by 30 percent with immediate effect.”
In addition, Mwanamvekha said ministries departments and agencies (MDAs) are encouraged to hold physical meetings within their office premises and conduct virtual meetings, conferences, workshops, board meetings, among others, to save resources on travel.
In separate interviews, analysts have said if implemented consistently, the measures have the potential to help stabilise the economy while stressing that it needs seriousness to effectively implement them.
University of Malawi economics lecturer Edward Malunga said with government revenues already constrained and current debt levels making external borrowing difficult government must implement such measures.
Malunga said: “In this context, government has little choice but to use the available resources more efficiently, and this includes cutting non-essential expenditure as proposed.
“The adoption of a cash-budgeting approach is particularly important because it ensures that spending is aligned strictly with actual revenue inflows, reducing the risk of accumulating arrears or committing to obligations that cannot be honoured.”
However, Malunga stressed that the effectiveness of these measures will depend on strict implementation.
“The measures need to be enforced at the highest levels of government and cascaded down to all MDAs and councils.
“One sector likely to feel the impact is hospitality because government is a major client for conferences, workshops and meetings, and reduced travel and events could affect revenues in hotels and related services. Even so, in the current fiscal environment, prioritising stability is unavoidable,” he added.
In a separate interview, economist Gowokani Chijere Chirwa said the government has taken a good path in ensuring fiscal management.
He said on paper, the [Mid-Year Budget Statement] is commendable but its impact rests on how the government implements the fiscal discipline measures spelled out.
“We have seen good initiatives being undertaken in this budget. The problem is that they look good on paper but sometimes it is the same controllers who start working against the measures they set,” said Chirwa.
In its immediate response after Mwanamvekha presented his statement, World Bank country manager Firaz Raad commended government for the key policy reforms aimed at restoring macro-economic stability.
Said Raad: “We look forward to assessing the budget with much greater detail in the days ahead. But we are encouraged by the reforms that were outlined by the minister, especially around debt management, civil service reforms. We also were encouraged by the ideas that the minister mentioned around how to grow the economy and he mentioned certain growth sectors.
“And so we look forward to assessing the statement very carefully and then making further statements later on.”
Recently, the World Bank provided government with a $45 million (K78.7 billion) emergency food security funding grant to purchase maize from Zambia for the Lean Season Hunger Response programme.
