From November 13 to December 8, Parliament will be meeting in Lilongwe for the 2023/24 Mid-Year Budget Review, a critical stage of the national budget that ideally provides a reality check.
The meeting is coming at a time when implementation of the K3.87 trillion 2023/24 National Budget is rocked with widening deficit and reports of over-expenditure in some votes.
In the fiscal plan that rolled out on April 1 and is expected to end on March 31 2024, Treasury projected a fiscal deficit of K1.3 trillion, which is equivalent to one-third of the K3.87 trillion national budget. In fact, the deficit is 8.7 percent of the country’s gross domestic product.
Tax revenue, on the other hand, is pegged at K2.13 trillion and non-tax revenue at K114.34 billion in this fiscal year that ends on March 31 2024.
High inflation rate, currently at 28 percent as of September 2023 against an end of year target of 18 percent, further complicates the ability of Ministry of Finance and Economic Affairs to deliver on all the assumptions.
Minister of Finance and Economic Affairs Simplex Chithyola Banda, who swapped Cabinet posts with Sosten Gwengwe now at Ministry of Trade and Industry, faces the task of making tough decisions. These include either trimming allocations to some budget lines or raising more revenue to achieve all planned deliverables.
Not an easy task, I must say. Even cutting down on expenditure is usually easier said than done, at least from experience.
I note the minister is on record as having said that he will focus on introducing expenditure controls during the Mid-Year Budget Review in a bid to reclaim lost direct budget support. Well, that has been the tune by his predecessors as well ever since donors withdrew their direct budget support in September 2013 amid concerns of revelations of Cashgate, the plunder of public resources at Capital Hill.
In terms of budget implementation, fiscal discipline has been our weakness over the years with successive administrations having a penchant for spending beyond their means. This has led to the government living a borrowed life through borrowing to fill the holes.
Fiscal discipline should be seen to be done, not mere lip-service as has often been the case.
Expectations are high on how Chithyola Banda plans to salvage the fiscal plan, but the minister can ease his burden by reviewing recommendations Public Accounts Committee (PAC) of Parliament has been making over the years regarding instilling fiscal discipline in government ministries, departments and agencies (MDAs).
In recent years, it has become a trend for the Minister of Finance to table supplementary budget which essentially has tended to dismantle the initial fiscal plan gone off-track during the first six months of implementation.
It is normal to make adjustments, either downwards or upwards, during the Mid-Year Budget Review, but my point is that it becomes a matter of concern when the trend is normalised. Public service delivery suffers due to massive cuts in allocations or under-allocation.
Many times, the derailment of the fiscal plans often emanates from over ambitious assumptions at budget formulation. To an extent, these scenarios can be avoided by being realistic when making the assumptions.
National budgets or the expenditure plan play a critical role in fostering economic prosperity and eradicating or reducing poverty. Through the national budgets, governments implement their development plans. This is the more reason budgets should be realistic and based on economic realities.
When revising the budget during the Mid-Year Budget Review, the Minister of Finance, as a key player, should strive to strike a balance and ensure focus is more on economic growth, job creation, economic empowerment and social protection.
Hard choices and trade-offs as well as making credible revenue projections and sustainable expenditure will be critical to salvaging the budget.
For a change, the Minister of Finance should do business unusual by taking seriously budget implementation and holding to account public officers who flout the Appropriations Act because they are giving people a dish they did not order.