‘We need to cut expenditure’

In this exclusive interview with our Assistant Bureau Chief, SUZGO KHUNGA, the Minister of Finance, Economic Planning and Development Goodall Gondwe opens up about government expenditure, plans to reduce wastefulness and the state of the economy. Excerpts:

We have seen expenditure needs growing when revenue in real terms is actually dwindling, but that is not reflected in some of the decisions government has been making. For instance, you restricted salary increases only to junior civil servants, but ended up agreeing to raise salaries for every civil servant. When members of Parliament (MPs) pushed for increases in the Constituency Development Fund (CDF), at first you stood your ground and then gave in. The same was the case with legislators’ general purpose loans. Government approved an increase in university fees, then the President slashed the increase and directed that Treasury provide K1 billion to the University of Malawi to cover the difference. The question is where does all this money you are using to please everybody come from when you know deep down your heart that government cannot afford such things?

I will not hide this from you. We are almost in a blackmail situation because we are told that if we don’t do certain things then they won’t do the things we need to be done. On the students, I was there when the President received them [university students]. When you listen to them and they say [the increase is too high], you begin to be a parent and start to sympathise and I thought that’s what the President did. We were told that if K50 000 is lost the universities will miss K1 billion from the salaries of lecturers, which meant that we would have another strike from lecturers. There are a lot of reasons for the so-called backtracking by government. The rule is that we should not over spend, but the rule doesn’t say that we should under-spend.

If you were to describe the balancing act that you have to do to keep public finances in reasonable shape within a difficult fiscal position like this one, how do you juggle the figures every day and ensure that there is some level of sanity?

We don’t balance because certain things that ought to be done are not done as well as they should and we will need some sort of rationalisation. In this Ministry we are asking the question, what do we do? This is why we are looking at ways of identifying wasteful spending and getting rid of it.

Where does that leave the country now because you know what a big political fight that is going to be, we have seen how difficult it is sometimes to push through an agenda like that one even with the best of interest?

Well, we are winning on Fisp [Farm Input Subsidy Programme]; I didn’t know that colleagues would agree that the K500 contribution should go as high as K7 000 where it is now. Some of the battles we will win, some we will not win. Indeed I think that we would like to emphasize probably productive expenditures. Some of these expenditures are not necessary; we need to cut some of this chaff as Ephraim puts it in his column (laughter)…so that we concentrate on productive expenditures. For example, I ask my colleague that if we were to say that no secondary school pupil will go without a desk, how much would it cost? or that no urban secondary school pupil should learn under a tree, how much would it cost? To me that is a worthwhile expenditure. I don’t want to say much, but there is quite a lot of excessive expenditure that is chaff and could be cut off and we could work effectively as a country without them.

Is there a time frame when you expect this analysis of waste to be implemented?

Some of it will be done quite quickly, may be next year, but a lot of it, because it concerns, the entrenchment of rights, may have to be done later.

Have there been any preliminary projections on what we could be spending on waste?

We think that close to 30 percent can be saved be by cutting off wasteful expenses.

How will you ensure that whatever decisions you are making do not affect social service provision?

There is no time anywhere in the world when people will say that we have enough social services. On the other hand there is also a lot of waste in the social services, the amount that we spend on drugs for example, should be more than enough for drugs, but even from the colonial days there has never been a time when there were enough drugs. Even for teachers, I have never accepted that the reason education quality is low is because the teachers are paid low wages. Teachers will never say that they are paid as well as any civil servant and yet they are. Teachers are paid like any other civil servant in that particular grade, there is no discrimination there. Even in the USA or elsewhere, social services will never be enough; people will always cry for them and yet if you had a linear equation, you would not have a relationship between

provision of quality service and money. Laxity of management also plays a role.

Another issue that has been problematic is the size of the wage bill reaching levels which some have said could be unstable, how are you dealing with that?

We have acceptable ratios of wage to GDP, which is between seven and nine percent of GDP that’s tolerable although you have countries like South Africa which have higher figure like 10 or 12 in Namibia. Our figure is hovering between seven and eight. One would not think that the wage bill is a problem here although the salaries are low, but relative to our wealth we are not doing as badly as people think we are. Zambia’s figure is not as high as ours, but the level of salaries is higher for that reason. Our salaries are a little bit higher than that of Tanzania, but that is because their wage bill ratio is much lower at around 5.5 percent.

We are within the first quota and your macro-economic assumptions seem to have been thrown off-balance already…

We have not had a normal time and the estimates that we have been making were done when we thought that this was going to be a normal year. I think that if the rains next year are going to be normal we would touch seven percent. Don’t forget that in spite of these setbacks we haven’t had a recession yet. Don’t forget that in terms of projections we are taking into account the whole of the year’s projection, which was 5.1 percent. The Treasury and Reserve Bank came together and came up with the figure of 5 point-something and the International Monetary Fund came and said that it is going to three point-something.  I believe that if we had two more consecutive years of normal rainfall we could reach seven percent. If you have a persistent low GDP a lot of resources have not been used because to be used something else has to be there. GDP [growth] means, for example, that a farmer produces more maize than he produced last year and that’s why I am saying that if there will be more rain GDP will be good.

You seem to be putting the fate of the economy on rains. To what extent can we allow weather patterns to keep shocking the economy?

I think about that all the time. I hardly sleep because I think almost all the time about how we can get out of this. We will have to be dividing the situation into two. Things we should be doing right now to avert the situation next year and things that we should be doing in the long-term. In the long term we may have to look for money to do what everyone has been saying that we should do. We may have to get water from the lake upwards and in the process do some irrigation. First it will have to be from Salima to Lilongwe, but we have to do something similar in Karonga and other areas. Don’t forget that socially we will have some problems even if we provided water, the people will have to learn how to produce more than once a year because they are used to producing once, but that’s what we will be doing. I will not be surprised if this will be there by end of next year. Long-term wise it can be done and it will be done. Another thing that we intend to do is that the Minister of Agriculture [Irrigation and Water Development] came to me and said that it is possible to have some very discreet areas of irrigation by using solar energy that can supply probably 1 kilometre radius and you use those places where you think that it will be very productive and I have asked him to give us all the estimates as to how many, where and how much, I think that can be a priority.

You have indicated that you expect budget support from multilateral institutions, is it this or next financial year?

We didn’t do well on conditionality last financial year, this year we have done well according to them, so I think between December and March we are likely to do that. Combined it could be between $110 million and $120 million.

Is the off-budget mechanism working as well as you would have liked?

I thought that they would provide the money not through us, but we would have a budget and they say this we will fund part of this off the budget, therefore, the totality of our requirement will be met. But this is not what they have done, they say you go on with your budget and we will identify the needs. We don’t have a say, we don’t know whether they are doing it or not and nobody can hold them to account for that. I thought that if we were to be doing it the way we thought we were going to be policing each other.

Any last words?

There is a view in Malawi that when you get into government you stop thinking, you have no answers to questions and so forth. I think we are thinking quite hard, in these conditions I don’t think even the crack of brain from Harvard, even if they come I don’t think they would offer something more than we are doing because we have been to them. I really think that I joined the government because at the end of it I could be of some service to the country. We are doing our best. We will do it, the trouble is that as far as the public is concerned it has to be done now, but we will do it. n