Treasury figures show that off-budget support in the 2023/24 fiscal year is projected to decline to about K40.4 billion from the K217 billion in the 2022/23 financial year.
In its 2023/24 Draft Financial Statement, the Ministry of Finance and Economic Affairs said only a number of development partners provided estimates because they are yet to get confirmations from their headquarters.
Reads the statement in part: “This amount is lower than the actual amount to be provided due to lack of data from partners on projected off-budget support.”
The statement says since off-budget support, project support from development partners whose finances are not directly managed by government, partially uses or does not use country systems at all, it violates the aid effectiveness principles of the Paris Declaration 2005, the Accra Agenda for Action, 2008, the Busan Outcome Document (the Global Partnership for Effective Development Cooperation 2011) and the 2022 Agreement for Global Partnership for Effective Development Cooperation.
Treasury data shows that most of the off-budget support is being directed towards agriculture and health sectors with some being channelled to economic and gender, education, research and development, trade, energy and transport sectors.
“To this effect, government and development partners need to collaborate to increase support delivered through government systems and reduce off-budget support without necessarily reducing the volume of resources while at the same time maintaining the same level of accountability,” reads the financial statement.
The statement further calls on government to strengthen the financial management and accountability systems while development partners should support the initiative and use the system as a first option.
Donors, including the European Union, the World Bank and the United Kingdom under what was called the Common Approach to Budget Support stopped providing direct budgetary support to Malawi in September 2013 following revelations of Cashgate, the plunder of public resources at Capital Hill through inflated invoices, payment for goods and services not delivered and fraud.
The move left Malawi with an estimated 40 percent hole in the recurrent budget and about 80 percent in the development budget as the donors opted to channel money in form of off-budget support through international non-governmental organisations.
Data shows that domestic revenue collection has also suffered largely due to the economic impact of the Covid-19 pandemic that slowed down economic activity as industries scaled down production on the back of travel restrictions and supply chain disruptions.
In his 2023/24 Budget Statement presented in Parliament in Lilongwe on Thursday, Minister of Finance and Economic Affairs Sosten Gwengwe said the Malawi Government is also engaging the World Bank and the European Union (EU) for possible budget support.
He said, among others, the World Bank has committed about $160 million (about K164.8 billion) for a Development Policy Operation budget support while the EU will announce its committed amount as discussions continue.
In the K3.87 trillion fiscal plan, total revenue and grants are estimated at K2.55 trillion, representing 16.8 percent of gross domestic product (GDP) with domestic revenue projected at K2.24 trillion or 14.7 percent of GDP.
Gwengwe projects the overall deficit at K1.32 trillion, which is 8.7 percent of GDP, a rise from the previous financial year’s K884.04 billion.
University of Malawi economics lecturer Lucius Cassim in an interview last Thursday advised Treasury to forgo things that are unnecessary and only ensure that it prioritises expenditures that grow the economy.
