Economists and some members of Parliament (MPs) have warned that the Ministry of Finance and Economic Affairs’ decision to revise the public sector wage bill by 18.7 percent may have dire consequences on Malawians.
In his Mid-Year Budget Review Statement presented before Parliament in Lilongwe on Wednesday, Minister of Finance and Economic Affairs Simplex Chithyola-Banda announced an upward revision of the wage bill by K201.2 billion from K1.08 trillion to K1.28 trillion.
He said: “This is on account of full impact of the salary adjustments that took place in November 2023 to cushion public officers from the effect of the realignment of the kwacha and recruitment of health workers and other officers in various MDAs [ministries department and agencies], which took effect after the 2024-25 budget was approved.”
During the second half of the financial year ending March 31 2025, the government expects to spend K647.3 billion on salaries and wages due to an expenditure overrun of 24.9 percent in the first half covering April to September this year.
Based on the current projections, wages and salaries will account for 21.1 percent of total expenditures. This means the government will cough up about 27 percent of its revenues, estimated at K4.63 trillion on wages and salaries.
In a written response yesterday, Ministry of Finance and Economic Affairs spokesperson Williams Banda said the shortfall arose because the government budgeted for a six percent adjustment, but ended up with an average of 10 percent adjustment on average.
He said: “Normal recruitments are budgeted for in the budget annually so its effect on the budget depends on when it materialises.”
This means that wages and salaries have grown more than 481.3 percent of the total budget adjustment (K41.8 billion), a development some MPs and economic analysts have said could cause further economic distress.
Growing concerns
During the Mid-Year Budget Review Consultative Meeting with the Budget and Finance Committee of Parliament, Michael Kabaghe, a consultant commissioned to develop a mid-year budget report for Oxfam in Malawi, noted that the variance indicated a strong probability that the government recruited more staff than was disclosed in the budget statement.
Chiradzulu South MP Joseph Mwanamvekha, a former minister of Finance during the Democratic Progressive Party-led administration, said in a plenary session that it was “obvious” that the government had recruited other people.
He said: “The government has been recruiting. Look at the number of principal secretaries [PSs] and directors who have been recruited in various ministries. Some of those are on a contract basis. There are probably more appointments that we are not aware of.”
Sinc e Pa r l i ament approved the 2024/25 National Budget in March, the government approved a 12 percent salary adjustment for civil servants which would push the wage bill up by K100 billion.
A few months later, government also approved a 40 percent increase in salaries for the Judiciary support staff from April 1 2024, pushing up the arm’s wage bill by K2.6 billion and additional benefits for judicial staff.
There was also an additional salaries and benefits review for judicial officers, including judges and magistrates effective 18 September.
Potential risks
In an interview on the sidelines of the budget meeting, Budget and Finance Committee of Parliament chairperson Gladys Ganda cautioned that the increased expenditure on consumption and statutory expenses could hurt poor Malawians.
She said: “We are concerned that it is ordinary Malawians that will feel the pinch. Government should have prioritised on cuttin’ on the President’s domestic and foreign travels to share the burden all around.”
Economic analyst and researcher Exley Silumbu agreed that raising consumptive expenses could further derail the Malawi 2063 (MW2063) and its First 10-Year Implementation Plan (MIP- 1), which the National Planning Commission said mid this year had gone off-track.
“So, the economy is growing at 1.8 percent per annum, but we need to consistently hit six percent to achieve that target,” he said in a telephone interview.
“It will be a miracle to get the vision on track. And we should also note that it is growing below the population growth rate of 2.5 percent, which means that real per capita incomes are declining.”
On her part, Oxfam in Malawi country director Lingalireni Mihowa said it was critical for government to maintain its expenditures on critical sectors such as agriculture, tourism, mining and manufacturing to stimulate growth and restore macro-economic stability.
She said: “We should prioritise the sectors that were earmarked to inspire growth. Let’s direct investment to these areas to boost our revenue. The more we make, the more we have to invest in development.”
NPC set agricultural p r o d u c t i v i t y a n d commerc i a l i s a t i o n , industrialisation and urbanisation as the key pillars to anchor Malawi’s growth into a middle-income and inclusively wealthy society.
But Silumbu observed that it would be difficult for the government to recalibrate its policy considering that Malawi is heading to an election period.
