Economic analysts have expressed doubt over the effectiveness of austerity measures the Minister of Finance and Economic Affairs Simplex Chithyola-Banda is expected to introduce in the Mid-Year Budget Review, citing a lack of fiscal discipline to enable meaningful saving in government.
President Lazarus Chakwera in his public address on Wednesday directed the minister to include austerity measures in the budget review to mitigate the economic imbalances that have plagued the 2024/25 National Budget.
However, the impending austerity measures, the third announced by Chakwera in his four-year tenure of office, have been met with skepticism from local economic analysts.
In an interview, Scotland-based Malawian economist Velli Nyirongo said local authorities lack the fiscal discipline to successfully implement the austerity measures.
“Despite austerity announcements, significant leakages through corruption, mismanagement, and inefficiencies have undermined efforts to stabilise the budget,” he said in a WhatsApp response.
“Additionally, the public sector remains heavily bloated, with recurrent expenditure outpacing development spending, limiting the impact of any cost-cutting measures.”
Nyirongo urged the government to prioritise implementing robust systems for monitoring and evaluating the outcomes of austerity measures, ensuring that any financial savings translate into tangible benefits.
Speaking separately, Economics Association of Malawi (Ecama) president Bertha Bangara-Chikadza, also an economics lecturer at the University of Malawi, noted that the concentration of statutory obligations may undermine the government’s capacity to save.
She said: “These obligations, which include debt servicing, public sector wages, pensions, and transfers to statutory bodies, often consume a large share of the national budget, leaving limited room for discretionary spending cuts.
“Furthermore, as statutory obligations typically escalate due to factors such as inflation, rising debt levels, and demographic pressures, they can exacerbate fiscal imbalances.”
On his part, National Working Group on Trade Policy chairperson Fredrick Changaya urged the government to realign its fiscal and monetary policies to address the structural issues and economic imbalances that have plagued the nation.
In the last round of austerity measures announced last November, the President imposed a ban on foreign travel for himself and all ministers from that month to March.
However, the extensive foreign and domestic travels that followed the President’s austerity measures diminished public confidence, which the Head of State acknowledged were perceived as a waste by the public but, he maintains, were necessary to secure much-needed resources to alleviate the current humanitarian crisis.
However, in an interview Chithyola Banda, who will present the Mid-Term Budget Statement next Wednesday lauded the previous round of reforms, saying they had allowed the government to save, live within its means, and by extension, restored donor confidence.
When contacted, presidential adviser on economic affairs Chancellor Kaferapanjira declined to comment, saying what he says is meant for the President only.
Efforts to solicit views from the Budget and Finance Committee of Parliament also proved futile, as committee chairperson Gladys Ganda could not be reached on her number, while her deputy Ismail Mkumba said it would be inappropriate to comment before the committee has met and reviewed the proposal.
This is not the first time the Chakwera administration has introduced austerity measures. On May 31 2022, the President unveiled austerity measures to stabilise the shaky economy that forced the government to devalue the kwacha by 25 percent.
The austerity measures included cutting by 20 percent fuel allowances for Cabinet, restrictions on foreign travel and no movement of government vehicles after 6pm.
However, by August of the same year, the government had already started breaking its own measures, with the President travelling to Zambia and the Democratic Republic of Congo in that month, and later to Egypt in November.
