Treasury told to balance funding

National Planning Commission (NPC) has urged Treasury to rebalance its funding pattern to build long-term productive capacities by pumping resources into the development budget as well.

Minister of Finance and Economic Affairs Sosten Gwengwe announced in the 2022/23 Mid-Year Budget Review Statement in Parliament in Lilongwe two weeks ago that the development budget has been cut by K189.3 billion from the approved provision of K818.9 billion.

The development budget for this fiscal year is now at K629.6 billion.

Gwengwe explained that the reduction in development budget was largely because of a cut in foreign as well as domestically financed projects due to slow disbursements from donors and government’s slow implementation progress.

But NPC director general Thomas Chataghalala Munthali in an interview on Tuesday said minimal concentration on the development budget will cost government.

He observed that this will lead to continued borrowing to support the recurrent expenditure, which is not sustainable.

He said: “Development budget is key to building medium and long-term productive capacities of the nation because this is where wealth for supporting the recurrent expenditures will come from.

“It is, therefore, concerning that development expenditure is narrowing and that there is also slow implementation progress by some government departments.”

Munthali said the challenge of low implementation rate by government ministries, departments and agencies needs to be addressed to keep pace with the country’s development agenda.

“If it is an issue of implementation and absorptive capacity challenges, then authorities need to build the capacities with urgency. If it is negligence, then those responsible need to be held accountable,” he said.

National Construction Industry Council corporate affairs officer Lyford Gideon last week said that the reduction in development budget affects production and infrastructure development.

He said infrastructure development requires considerable amounts of financial investment to acquire the factors of production ranging from materials, machinery to labour.

Said Gideon: “In that case, any cut in financial investment will mean a cut in these factors of production.

“We thus expect to see slowed down activity in the construction sector to reflect the extent that the development budget has affected it.”

In an interview on Tuesday, Gwengwe welcomed the views from stakeholders, adding that the issues raised will be addressed at committee stage in Parliament.

In the approved 2022/23 fiscal plan, actual expenditure outturn was K1.463 trillion, consisting K1.150 trillion in recurrent expenditure and K313 billion in development expenditure.

The total expenditure at mid-year registered an over-spending of K31.2 billion emanating from compensations of employees, public debt interest, use of goods and services and grants.

According to the Treasury figures, development spending under-performed during the first half of the 2022/23 fiscal year at K313 billion with K63.9 billion emanating from the domestically financed component and K249.1 billion from foreign financed component.

These underperformed by 40.1 percent and 20.2 percent, respectively.

In the second half of this financial year, recurrent expenditure is projected at K1.069 trillion.

Malawi’s public investment in infrastructure has been negligible in the past two decades, averaging about 4.18 percent over a 20-year period (1998–2017), according to the World Bank. At 4.18 percent, this is lower than in Mozambique at 10.7 percent, Zambia at 4.82 percent and Tanzania4.21 percent.