Malawi outlines budget challenges
Secretary to the Treasury Newby Kumwembe has outlined challenges and risks to the smooth implementation of the 2013/14 budget and the International Monetary Fund (IMF)-supported programme, the Extended Credit Facility (ECF).
Kumwembe, speaking when he appeared before the Budget and Finance Committee last week, said there is evidence that ministries and departments are creating arrears as evidenced by pressures from suppliers and utility companies to be paid.
He said such arrears have dated back to last financial year although the arrears have not yet been reported.
Kumwembe explained that government also has a contractual obligation with suppliers of security equipment for the Malawi Police Service, the Malawi Defence Force (MDF) and Toyota Malawi whom he said supplied vehicles to government on an understanding that payment will be done in instalments in the course of the financial year.
“This also applies to contractors and supervising consultants who have already done their work. Most of these were unbudgeted for in the current fiscal year and therefore are putting pressure on the already tight budget,” he said.
The Secretary to the Treasury also told the committee that sustaining high monthly collections for tax and non-tax revenues to match the revised revenue projections may also be a challenge to budget execution.
Kumwembe said there is an urgent need to swiftly implement the Action Plan on Improving Public Financial Management System and to sustain the ECF programme so that donors can resume budget support disbursements.
He admitted that there is a risk to the implementation of the 2013/14 financial year as well as the ECF programme with the IMF unless the proposed expenditure control measures are adhered to.
“In the wake of significant fiscal deterioration in the first quarter, it is proposed that government implements measures in line with the revised framework to generate more revenue while reducing expenditures where possible,” he said.
He cited the efforts by the Malawi Revenue Authority (MRA) to improve in tax collection by implementing the voluntary compliance window (VCW) which he said is expected to generate additional revenues, intensify use of electronic fiscal devices on border ports by the end of March 2014 ad also intensify auditing of taxpayer’s accounts.
Kumwembe also said Treasury will ensure there are no accumulation of arrears by ministries and departments and agencies.
He also said government will establish budget committees where they do not exist in ministries, departments and agencies and ensure that where they exists, they are fully functional.
“These measures are expected to translate into K41 billion [about $102m] savings for the year while raising total revenues and grants by K12 billion [about $30m] mostly from domestic revenues,” he said.
