Treasury sees fiscal pressure on budget
Ministry of Finance, Economic Planning and Development says statutory expenditures, especially salary and wages, interest payments and domestic debt, could exert pressure on the 2019/20 National Budget.
The 2019 Economic Fiscal Policy Statement published by Ministry of Finance, Economic Planning and Development says that over the years, statutory expenditures have exerted pressure on the budget, with the growth translating into under-provision for operational expenses for ministries, departments and agencies (MDAs).
For instance, it says in the 2018/19 fiscal year, statutory payments amounted to K658.7 billion or 62.6 percent of domestic revenue and 45.3 percent of total expenditure.
Statutory payments also represented a growth of 12.8 percent from the 2017/18 fiscal year allocation of K584 billion, which was significantly higher than the 7.3 percent growth in payments from the 2016/17 fiscal year.
This fiscal year, wages and salaries bill is at K443.4 billion while interest payment is budgeted at K244 billion, which in total is 48 percent of domestic revenue and 40 percent of the total budget.
As a way of cushioning these expenditures, Treasury says it willcontinue to focus on reducing domestic debt largely by keeping expenditures within targeted levels.
“To achieve this, government will assume that all key services are financed by locally-generated resources as one way of avoiding in-year reallocations due to either delayed or non-disbursement of donor resources.
“Government will also aim at financing a large portion of the development budget through domestic resources,” reads the policy document in part.
According to Treasury’s Medium Term Debt Strategy, domestic debt is projected to decline to 20 percent of gross domestic product (GDP) by 2023.
Economics Association of Malawi (Ecama) executive director MalekaThula, in an interview yesterday, observed that the expenditure pattern means the country will continue to have a limited fiscal space to free up more resources to finance investment.
He said: “Our only hope could be that the debt that we contracted as well as repaying was meant to finance development projects otherwise such huge interest payments on debt would not only affect the current budget implementation, but also the country’s economic performance.
“Unfortunately, statutory expenditures are non-discretionary and by all means they have to be paid. As country, we really need to exercise caution when it comes to borrowing as this has a danger of running the country into debt trap.”
This year’s fiscal plan is formulated on assumptions that the economy will grow by five percent and seven percent in 2019 and 2020, , an average inflation rate of eight percent during this fiscal year, a stable exchange rate of about K750 against the dollar and policy rate of 13.5 percent.
In his budget statement, Minister of Finance, Joseph Mwanamvekha said Treasury plans to reduce domestic borrowing to K45.9 billion in 2019/20 fiscal year.
