Minister of Finance and Economic Affairs Simplex Chithyola Banda has admitted that Treasury is facing spending pressure because of mandatory
expenditure obligations, but it is now prioritising funding for essential needs only.
The minister said this yesterday in Mangochi on the sidelines of the Economics Association of Malawi (Ecama) Annual Lakeshore Conference at a time government continues to chalk budget deficits and piling public debt, which is hovering at K15 trillion or 81 percent of the country’s gross domestic product.
to control expenditure
The spending pressure is coming on the back of economists faulting fiscal policy for frustrating efforts to stabilise the economy when monetary policy continues to be tight.
While admitting the precarious situation, Chithyola Banda said Treasury is trying to control spending, but cannot forgo mandatory expenditures such as wages and salaries, debt servicing and payment of pension.
He said: “We have committed to control expenditure, but we need to know that we have overwhelming demand for social services that exert pressure on fiscal space because of social demand.
“For instance, government cannot do without procurement of medical supplies, government cannot do without procurement of fuel and government has to respond to emergencies.”
But Chithyola Banda said substantive measures are being taken to ensure that only essential needs get the funding and also that Treasury is conducting monthly expenditure analysis to track what it funded and what needs funding.
“Also note that we are coming from a period where government borrowed a lot of funds not for production, but for consumption so we decided not to default and this also means we are also using some funds to service the said debt,” he said.
In her remarks, Ecama acting president Bertha Bangara Chikadza said government over-expenditure does not look good as over 80 percent of the revenues generated cover recurrent expenditures meaning that less than 20 percent of expenditure goes towards development projects.
She said the conference will deliberate on these issues and how to reconfigure the country’s development model and the urgency of addressing multifaceted challenges.
Said Bangara-Chikadza: “We will thoroughly discuss the frameworks for internal and external stabilisation, taking a deep dive into the current problems of foreign exchange scarcity and whether there are other models that we can adopt to stabilise the exchange rate, price and the whole economy.”
In her input during deliberations, Press Trust economist Madalitso Kazembe said to fix the economy, there is need for fiscal policy implementers to operate within the framework set by monetary policy.
“We have always observed that monetary policy holders are doing their part in trying to tighten because that is the only thing they can do, but at the same time their efforts are frustrated by the fiscal policy, which is always expansionary in terms of expenditure,” she said.
In the first-half of this fiscal year, government recorded a K679 billion deficit as revenue fell short of expenditures, a development analysts warned could result in a ballooned deficit considering that government usually spends more in the second half of the fiscal year.
In the first six months of this fiscal year from April to September, expenditures which increased to K2.947 trillion outweighed revenues recorded at K2.25 trillion.
The Ecama conference, which ends today has attracted 250 economists from both public and private sectors, including the academia
