Minister of Finance and Economic Affairs Simplex Chithyola Banda says slower-than-expected implementation of some projects, delays in contract price adjustments and foreign exchange shortages influenced cuts in the development budget.
The explanation comes after the minister announced the trimming of the development budget from K1.77 trillion to K1.58 trillion in the Mid-Year Budget Review Statement presented in Parliament on Wednesday. During the first half, K438.8 billion was spent on development.
The minister said both domestically and foreign-financed components have reduced by K110.5 billion and K76.8 billion, respectively.
Said Chithyola-Banda: “I wish to emphasise that the reduced development budget does not entail scaling down of implementation of projects but reflects contractual bottlenecks.
“The august House is, therefore, being assured that implementation of projects will continue and that all completed works will be prioritised for payment.”
When queried yesterday, the minister, in a written response, hoped that the situation will improve in the second half of the year, as government expects to manage inflation and ensure fiscal discipline.
He said: “We have also had to adjust our budget projections to ensure that we can manage the fiscal deficit and balance our accounts. However, we remain committed to our infrastructure projects, and many critical developments will continue.
“While there may be some delays in certain projects, we are confident that we will continue to make progress on critical infrastructure that will support economic growth in the long term.”
Re a c t i n g t o t h e development, Malawi Economic Justice Network executive director Bertha Phiri said the cut was uncalled for, indicating that Malawians would love to see budget cuts on the recurrent side and not development budget.
She said: “Development expenditure will continue to deteriorate so much that next year 2025 we will see more election consumption expenditures. Development is a catalyst to economic growth because in it there are infrastructures. And we have not seen this growth lately.
“The mid-year report shows no evidence in sectoral growth-mining, agriculture, trade sectors that have potential to trigger the improvement of resource mobilisation and later trigger growth and development.”
Mzuzu University-based economist Christopher Mbukwa noted inefficiencies or delays in project execution or management.
He said: “It’s so unfortunate that our slow implementation emanating from delayed conclusion of contract price, scarcity of forex and other contractual bottlenecks is making us lose resources more, especially those already committed by development partners.”
On his part, former minister of Finance Joseph Mwanamvekha said at least 86 percent of the country ’s budget goes towards consumption, with just 14 percent left for development, which means that there can be no development.
He said: “Almost 50 percent of taxes collected go towards interest payments, while the rest goes towards statutory expenditures, with very little left for development to have an impact.
“This means there will be no development and that’s why economic growth has come down. Production will not be there, there shall be no employment and no economic growth.”
Malawi’s public investment in infrastructure has been negligible in the past two decades, averaging about 4.18 percent over a 20- year period between 1998 and 2017, according to the World Bank.
