At a time the proposed K8 trillion 2025/26 National Budget is undergoing scrutiny, observers have said Treasury will be under pressure to balance funding for social services and productive sectors due to statutory obligations.
The stakeholders expressed the sentiments at a public hearing in Lilongwe on Wednesday on the proposed fiscal plan’s spending on social and productive sectors. The stakeholders and technocrats discussed how the budget responds to the two sectors.
The concerns come against the backdrop of data showing that in the proposed budget, the social services sector allocation has increased to 33 percent from 31 percent of the budget in the proposed fiscal plan.
The European Union and Unicef have commended this development, but highlighted that there are still more funding needs.
On the contrary, development budget allocation has dropped from 30 percent of the total budget in 2024/25 fiscal year to 27 percent of the proposed 2025/26 budget at K2 trillion.
During the discussions, some stakeholders said the social sector, which looks at child welfare, education, health and general social services should not be left out while others favoured the production sector which can generate money.
In his remarks, EU Ambassador Rune Skinnebach said although the production sector is key to fixing the country’s macroeconomic challenges such as balance of payments needs, social protection must not be neglected.
He said: “Social protection, whether it is education, health or social services in general, is necessary. Of course, there are dilemmas that are presented particularly in Malawi where there is limited fiscal space to do all the things right.
“You may say for us to be self-reliant, maybe we need to favour the productive sector, we need to promote exports, we need to limit imports, but to be successful, we need the people and the people are secured by social services.”
Skinnebach underscored the need to ensure the resources are optimally used by ensuring fiscal discipline, especially considering that this is an election year.
National Planning Commission director general Thomas Munthali said while not neglecting the social sector, there is a need for the government to fund production sectors that generate money to ensure sustainable social services.
He said with United States government terminating contracts worth $230.4 million (about K400 billion) under the United States Agency for International Development (USaid), there is a need for Malawi to be self-reliant by investing in productive sectors to generate money to sustain social services.
He said: “We are all here because of the social sector. It is a sector we cannot do without, but the social sector does not finance itself. It needs money that is generated elsewhere if not from donors, so we need to invest in the productive sector to ensure sustainability.
“Currently, 80 percent of the budget is already covering statutory obligations like salaries, wages, interest payment and pension, among others, meaning the fiscal space is already squeezed.”
Speaking during the opening of the meeting, Second Deputy Speaker of Parliament Aisha Adams Mambo urged the experts to have thorough discussions that will ensure the budget resources are equitably distributed and benefit all sectors.
“In most cases, technocrats do not make changes after proposals were given during such budget hearings, but I encourage them to consider taking on board the advice that will be made by various stakeholders to ensure the 2025/26 budget resources are effectively used,” she said.
Various stakeholders, including members of Parliament, officials from Treasury, Reserve Bank of Malawi, government ministries, departments and agencies and non-governmental organisations participated in the meeting.
Legislators are currently discussing the budget in clusters.
