When Minister of Finance and Economic Affairs Simplex Chithyola- Banda deferred to yesterday the 2024/25 Mid-Year Budget Review Statement, the expectation was that he wanted to incorporate austerity measures as per President Lazarus Chakwera’s promise.
But cometh the day, cometh the man, the minister read out in Parliament in Lilongwe a somehow dry statement that fell short of giving inspiration an the President had directed and promised the nation in his televised speech last Wednesday.
Instead of outlining the measures which the President gave an impression that they were in place, Chithyola-Banda said: “Therefore, to manage the fiscal deficit, there will be fiscal tightening measures that will shortly be announced through a government circular.
“Let me mention from the onset Madam Speaker that this Mid-Year Budget is in itself an austerity budget.”
But economic analysts have described the lack of actual austerity measures as a missed opportunity by government to demonstrate seriousness in cutting down public expenditure, especially with the underperformance of revenue coupled with unsustainable public debt.
In his national address on November 27, the President directed the Minister of Finance would announce expenditure control measures in his Mid- Year Budget Review Statement, forcing the minister to shift the presentation from Friday last week to yesterday.
Said the President: “I have instructed the Minister of Finance to announce additional austerity measures when he appears before Parliament to present the Mid-Year Budget Review Statement.”
Ironically, in his opening statement, the minister created an impression that he would present an “austerity budget” only to highlight one or two measures, leaving people guessing what more was in stock.
Reacting to the statement, Economi c s Assoc i a t ion of Malawi (Ecama) acting president Bertha Bangala- Chikadza said government has missed an opportunity to demonstrate its seriousness in containing these expenditures.
She observed that the revised budget that was presented does not represent any austerity measures.
Said Bangala-Chikadza: “The President mentioned that the minister will actually present expenditure control measures in the budget and, as economists, we expected to see these to reflect the government’s commitment to controlling expenditures and all the fiscal slippages that we have been complaining about.”
The minister touted the removal of value-added tax waiver on motor vehicle imports for privileged individuals and organisations, including the President, Vice-President, ministers and members of Parliament as one of the sacrifices.
And speaking during a media briefing after the minister’s delivery of the statement, Secretary to the Treasury Betchani Tchereni stressed that one of the things that attracts people to work in the public sector are such privileges and therefore, removal of this benefit is a sacrifice worth noting.
But Bangara-Chikadza said it would help a great deal to have the minister outline all the measures in the statement for the public to appreciate how much will be saved.
She said the measures should have been at the centre of the presentation, considering the budget’s underperformance.
Said Bangala-Chikadza: “We have seen that the budget outturn at mid-year is significantly higher than the budgeted.
“If we do not cut expenditures now, then when are we going to contain these expenditures, considering that we are entering into an election year and the government will be in an overdrive in terms of expenditures.”
She said there is more to be done in terms of revenue mobilisation and safeguarding domestic revenue already mobilised, noting there is also need to contain tax revenue leakage.
Both Chithyola-Banda and Tchereni, during the briefing, said part of the sacrifice is the minimal increase in the budget as government wants to live within its means.
According to Tchereni, if government was careless, the revised budget would jump up to K10 trillion.
The revised budget has increased by about K500 billion or 0.7 percent.
In a telephone interview, economist Dalitso Kubalasa said he needed more details to fully appreciate how the minimal increase is a sacrifice, arguing that the underperformance of revenue would not really support an increased budget.
He said: “I have skimmed through the statement, but I have not really seen much of those sacrificial elements, they are not coming out.”
Chithyola-Banda also acknowledged the debt burden facing the country saying to contain it government will enhance its efforts to mobilise domestic resources to finance the budget.
But Bankers Association of Malawi (BAM) president Phillip Madinga said while they appreciate efforts to negotiate debt repayments with bilateral creditors, details are not coming out clearly on how the overall debt overhang will be resolved.
He said: “The current pace of debt restructuring is clearly not consistent with the need to speedily resolve Malawi’s debt burden.
“Fast-tracking the debt restructuring process should help free up the fiscal space and give the government much needed momentum and leverage to achieve fiscal stability, find resources to finance short-to-medium c r i t i c a l d e v e l o p m e n t expenditure, and stabilise supply of critical imports such as fuel.”
Madinga, who is also Standard Bank Malawi plc chief executive, further argued that lack of fiscal space will mean “that prevailing supply-side constraints will continue to manifest” and “will affect the private sector and negatively d e c ima t e p r o d u c t i o n , especially in agriculture”.
As at December, of Malawi’s total external public debt of K6.62 trillion, K4.4 trillion is owed to multilateral creditors.
The World Bank is the country’s largest creditor with K2.2 trillion or 33 percent of Malawi’s total external public debt.
Malawi’s fiscal year starts on April 1 and ends on March 31.
